Lear Corporation

Good morning, everyone, and welcome to the Lear Corporation first quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Tim Brumbaugh. Vice President, Investor Relations, please go ahead.

Thanks, Jamie. Good morning, everyone, and thank you for joining us for Lear's first quarter 2026 earnings call. Presenting today are Ray Scott, Lear President and CEO, and Jason Cardew, Senior Vice President and CFO. Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I'd like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding LEAR's expectations for the future. As detailed in our safe harbor statement on slide two, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-K and other periodic reports. I also want to remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on slide three. First, Ray will review highlights from the quarter and provide a business update. Jason will then review our first quarter results and provide an update on the full year. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now, I'd like to invite Ray to begin.

Thanks, Tim. Now, please turn to slide five, which highlights key financial metrics for the first quarter. They're starting the year strong, delivering significant increases in both revenue and earnings in the first quarter compared to last year. Sales increased 5% to $5.8 billion, and core operating earnings grew by 10% to $297 million. Adjusted earnings per share was $3.87, a 24% increase from the first quarter of 2025, and our highest quarterly EPS since Q1 2019. Operating cash flow improved significantly to $98 million for the first quarter. Slide six summarizes some of the key business and financial highlights from the first quarter. Our strategic priorities remain focused on four key areas, extending our global leadership in seeding, expanding e-systems margins, growing our competitive advantage in operational excellence through IDEA by Lear, and supporting sustainable value creation with disciplined capital allocations. During the quarter, we continued our momentum of winning key awards in both seating and eSystems. Our most significant eSystems award, which we announced in March, was with General Motors, where we will supply wire harnesses for the full-size SUV program starting late 2027. This is a major new win for Lear on a key GM platform. Our execution track record and automation capabilities gave GM the confidence to award a portion of this program mid-cycle. This award positions Lear to win additional content on subsequent generations of GM's full-size SUV platform. During the quarter, our eSystems team was also awarded the power distribution module for the next generation electrical architecture with a key North American automaker. Our power distribution module proactively detects electrical issues to help ensure critical systems continue to operate. This capability is essential across all powertrains, particularly as new vehicles adopt software-defined architectures, electrification, and advanced driver assistance technologies. This award leverages our PACE award-winning technology and establishes Lear as an industry benchmark and trusted leader in this fast-growing strategic segment. Another key award in the quarter was for a high voltage power distribution unit with Audi for a new program in North America, continuing our momentum in power electronics. These awards build on the reputation that we have been developing across our customer base. As these new programs launch, our eSystems revenue will improve customer diversification. We are accelerating our growth with Chinese automakers in both segments. In these systems, our collaboration with Seeding to leverage key relationships as well as investments designed to strengthen our local engineering capabilities enabled us to secure wire harness awards that will generate consolidated average annual revenue of $140 million, surpassing our new business awards with Chinese automakers for all of 2025 in just the first quarter. Key wins include conquest awards with Dongfang and SAIC. as well as new business with Geely. These programs launch as early as mid-2026 and are accretive to our two-year backlog we announced in February. In seeding, we secured complete seed awards with BAIC, Dongfang, and Geely in China that will also generate average annual revenue of approximately $140 million, a portion of which is in our non-consolidated joint ventures. In addition, we are in a strong position to secure business with two Chinese automakers expanding their production in Brazil. We also continue to see additional opportunities with Japanese automakers. In the first quarter, we were awarded a new program to supply complete seats for FAW Toyota in China through one of our non-consolidated joint ventures. In seating more broadly, the pace of awards for our thermal comfort modularity is accelerating. In the quarter, we won four new awards for Comfort Flex and Comfort Max seat solutions, bringing the total to 38 for these innovative products. Two awards are with BMW in Asia, one combining lumbar and massage, and another combining heat, ventilation, and seatbelt reminders. We also won our first module awards with Audi in Europe, combining lumbar and massage. and our Comfort Max Seat solution with Geely in Asia. Two programs launched during the quarter, with 12 additional programs launching through the rest of this year. These awards extend our leadership in seating and also customer adoption of these modular solutions. We expect adoption rates will continue to accelerate as these solutions become more pervasive. Many of these new business awards launch this year and next. particularly those in China, where the time from sourcing to launch has significantly accelerated. This increase in our 2026 and 2027 two-year backlog is approximately $250 million, improving our near-term growth outlook in both business segments. We are accelerating the capabilities we are developing under our idea by layer framework, particularly in automation and the use of digital tools. Progress is being made at our Rochester Hills Advanced Manufacturing Integration Center, where we will showcase some of our key product and process innovations, and we continue to implement these capabilities into our current manufacturing processes. The Orient facility, supporting GM's expanded full-size SUV and pickup truck production, is utilizing Idea from Lear from the start. Leveraging our process-related acquisitions, approximately 80% of our capital is being developed and deployed in-house. including 100% of our advanced robotics and vision systems. This demonstrates how we are using IDEA to reduce manufacturing costs and improve profitability from day one, rather than implementing cost savings initiatives over the life of the program. In these systems, we validated and launched two differentiated wire automation solutions internally developed by our most recent acquisition, StoneShield, These solutions deliver Lear-specific competitive advantages by improving cycle time and productivity in seal insertion and heavy gauge crimping. It was a strong quarter, both commercially and financially. Revenue in the quarter increased 5% year over year, with growth in both segments even after the reduction in revenue resulting from changes in tariff policy, as well as the impact from the end of production of the Ford Escape focused in Lincoln Corsair. Stronger conversion on higher volume and continued momentum in our underlying net performance drove improved margins in both segments and for the total company. Free cash flow improved by $205 million in the quarter, allowing us to take advantage of the attractive stock price and accelerate our share repurchase program. In the first quarter, we repurchased $75 million of shares and continued to repurchase shares throughout the quiet period. putting us on pace to buy back over $300 million in the year. This combination of strong financial results and our disciplined capital allocation plan has driven consistent earnings per share growth. Our first quarter EPS increased by 24% year over year, a truly remarkable accomplishment by the team and a clear indicator of the value we are generating for our shareholders. Slide seven provides an update on key metrics to track our progress on expanding margins and generating long-term revenue growth. The pace of awards is normalizing after several years of delays as customers adjusted their production portfolio strategies. This gives us a much better visibility into our pipeline of future opportunities. In the quarter, we secured several conquest awards for C components such as surface materials. The pipeline for complete seats awards is concentrated in the back half of the year, very similar to the pattern we saw in 2025. For eSystems, we're seeing increased conquest opportunities in wire harnesses, particularly as competitive landscapes have shifted significantly due to strategic actions and operational performance of key competitors. In the quarter, we won three conquest awards for wire programs, two in Asia and one in North America. Two of these awards were for wire harnesses previously supplied by a key competitor. We also won a small conquest award in electronics for a second North American automaker. These wins will generate approximately $200 million in average annual revenue and represent about a third of our increased two-year backlog. We see additional conquest opportunities expected to be sourced throughout the remainder of the year. Awards for our thermal comfort modular solutions are accelerating. New wins with Audi and Geely bring us to 17 unique customers for Comfort Flex and Comfort Max seat solutions. Notably, approximately half of the revenue from this quarter's thermal comfort awards will come from modular solutions. The collaboration between seating and these systems, combined with the strength of our local teams, continues to drive new business with Chinese oil makers. In the quarter, we won new business in both segments with the same customers like Dongfang and Geely, clearly illustrating the synergies between our two business units. Our continued investments in idea and automation are expected to generate an additional $75 million in savings this year. The first quarter delivered approximately $17 million in savings, putting us well on track to achieve our target. with savings expected to build throughout the year. Our teams continue developing innovative methods to drive efficiency. For example, our seeding team held a global inventory workshop during the quarter to leverage digital tools that will improve supply chain and inventory efficiencies, ultimately enhancing future free cash flow generation. We also held our Lear AI Olympics in North America. Over 400 hourly and salary to operation employees participated. generating more than 100 AI projects with solutions throughout our manufacturing value stream. This grassroots event exemplifies Lear's innovative culture, empowering employees to identify and drive the efficiency improvements in all facets of the business. As IDEA continues to mature, we see our employees developing and participating in new and innovative future events. Restructuring savings from last year's investments combined with actions planned for this year are expected to total $80 million. In the first quarter, we generated $26 million in savings, giving us a strong start towards our full-year target. Our first quarter net performance puts us on track to achieve our full-year margin expansion targets, 40 basis points for seeding and 80 basis points for e-systems. Despite higher engineering and launch costs to support our growing backlog and a challenging year-over-year comparison, our Q1 net performance exceeded expectations. Slide 8 illustrates the significant shift in our customer mix in China. In the first quarter, we secured $280 million in business awards with Chinese automakers across both seating and e-systems. ranging from complete seats and thermal comfort solutions to wire harnesses. The speed to market with the Chinese automakers is significantly faster than in other regions. We are seeing a request for quote to sourcing to launch cycles completed within the same calendar year. This accelerated pace drove a portion of our $250 million increase in our 2026 and 2027 backlog from recent business wins. Strategically, these wins validate the organizational changes we made in 2023 to bring Seeding and E-Systems under the same leadership and better align how we serve Chinese automakers. The collaboration between our Seeding and E-Systems teams in that region combined with strengthening our local engineering capabilities is helping us win across both segments, often with the same customer. Our ongoing rigorous review of the Chinese automakers' competitive positions and product strategies both inside and outside the country is a cornerstone of our strategy. We are focusing our resources on the customers that have the greatest long-term potential for market success and pursuing programs with the highest risk adjusted returns and strongest margin potential. As Chinese automakers expand both within China and globally, we believe this integrated leadership model positions leader to capture a large share of that growth with a broader, more competitive product offering. Chinese automakers continue to expand production outside of China, particularly in Europe and South America. We are in a strong position to secure business with two Chinese automakers expanding their production in Brazil, which we expect to be awarded within the next coming months. We're actively pursuing additional opportunities globally with BYD, Leap Motors, among other Chinese automakers. While we maintain a strong, profitable business with multinational customers in China, our new awards with Chinese automakers are aligning our customers' revenue mix with the country's market share dynamics. We expect China automakers to represent more than half of our 2027 China revenue. And with that, I'll turn the call over to Jason for a financial review.