Magna International, Inc.

Greetings and welcome to your third quarter 2021 results. During the presentation, participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session. At the time, if you have a question, please press the 1 or the 4 on your telephone. If at any time in the conference you need to reach an operator, you can press the star or the 0. As a reminder, this conference is being recorded today, Friday, November 5, 2021. Now, I would like to turn the conference over to Luis Tonelli, VP of Investor Relations. Please go right ahead.

Thanks, Tommy. Hello, everyone, and welcome to our third quarter 21 results conference call. Joining me today are Swami Kodagiri and Vince Galiffi. Yesterday, our board of directors met and approved our results for the third quarter. We issued a press release this morning outlining our results. You'll find the press release, today's conference call webcast, the slide presentation to go along with the call, and our updated quarterly financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions, and uncertainties, which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. As we review financial information today, please note that all figures discussed are in U.S. dollars. We've included in the appendix a reconciliation of certain key financial statement lines for Q3 2021 and Q3 2020 between reported results and results excluding unusual items. The quarterly earnings discussion today excludes the impact of the unusual items. Please note that when we use the term organic in the context of sales movements, we mean excluding the impact of foreign exchange acquisitions, and divestitures. And with that, I'll pass it over to Swami.

Thanks, Luis, and good morning, everyone. We are happy to be here to provide you with a general update on Magna and also our Q3 results. The industry pressures we have been experiencing through 2021 intensified in Q3, leading to a very volatile operating environment. All things considered, we had a solid operating performance in the quarter. Production for the quarter was much lower than we had anticipated back in August, particularly in Europe. As a result, our sales came in well below our expectations. And this, together with a number of additional factors, negatively impacted our Q3 earnings. The industry challenges are expected to continue this quarter, although to a lesser degree. We remain focused on managing our costs through this volatile production period. This includes ongoing activities to enhance operational excellence, as well as fully realizing savings from restructuring initiatives announced last year. We are also not losing sight of investing for our future. Longer term, our portfolio positions us to continue driving sales growth over market, as well as strong free cash flow generation. I will highlight a few awards in key technologies that will contribute to future growth. And we remain excited about Magna's future, particularly given our systems and complete vehicle know-how and approach. The key market dynamics that are affecting our industry currently are relatively well known. The ongoing global semiconductor chip shortage remains the most significant headwind to global industry production. There have been some signs of improvement recently. However, it remains to be seen when the industry will return to a more stable rate of production. As a result of the chip shortages, our customers' production schedules are unpredictable, causing labor and other operational inefficiencies at our facilities. On top of these factors, we have experienced inflationary cost increases in production inputs, including freight, commodities, and to a lesser degree, labor and energy costs. Market tailwinds are largely unchanged from last quarter. The industry continues to experience strong auto demand that exceeds available supply. This has led to historically low dealer inventory levels in certain markets. These two factors, together with indications from OEMs that they intend to run strong production once additional semi-chips are available, continues to point to a positive and sustained mid-term production environment for auto suppliers, assuming other factors don't hamper supply or demand. Despite our strong efforts to manage day-to-day, the challenging operating environment took its toll on our quarter. Consolidated sales were $7.9 billion, down 13% year over year. EBIT margin declined to 2.9%. Our adjusted EPS was $0.56 for the quarter. And free cash flow was slightly negative in Q3. Regardless of the short-term challenges, we remain confident in our underlying earnings power and cash flow generation capability that will create value over the longer term. Before I move on to talk about a few of our technologies and recent program awards, I would like to point out two recognitions received by Magna that we are very proud of. Magna was recently recognized as a top performing global supplier at the 23rd Annual Ford World Excellence Awards. This award is a testament to our team's commitment to foster trusted relationships with our customers. Strong relationships like this are fundamental to our mutual success in these transformative times. We were also just named to the Forbes World's Best Employers list for 2021. This marks the fifth straight year of making this list, a great accomplishment. In the past, we have highlighted the development of our free form seeding technology, which provides OEMs with a wide variety of seed design possibilities. We are currently launching this technology on a complete seed program for a global OEM customer. We have also been awarded free form on three other programs, including for a new entrant that are launching in 2022. And the pipeline of interest remains strong in the technology from various customers. Recently, we have been showcasing our Mezzo panel technology, a first to market, large format, decorated front integration panel that we believe will change the face of electric vehicles. The front panel enables integrated ADAS and lighting and features hidden until lit functionality. It's a good example of Magna's integration capabilities that enable us to provide unique products to our customers. We have been awarded a program from a European OEM using this core technology. Our Mezzo panel technology provides design distinction possibilities to OEMs for their front ends, something that is getting good traction with our customers. Lastly, we were awarded new business recently in a couple of important technology areas. We won business with Daimler on a family of transmissions for the next generation compact and midsize vehicles launching in 2025. This includes our traditional DCTs, which we have been producing for Daimler since 2018, as well as hybrid DCTs. It represents the third high volume hybrid DCT program we have been awarded. We begin launching the other two programs this quarter. The shift to hybrid electric DCTs for such high volume platforms provides long-term stability in our transmission business. It also allows us to continue to utilize our asset base while the transition to full EVs continues. This award supports our book business and growth in powertrain electrification. You may recall that we are targeting over 2 billion in managed powertrain electrification sales by 2023 and over 4 billion by 2027. We also won new front camera business with a European-based global OEM. The program will include our latest advanced camera technology. This award is based on a core platform of ours that has applications already in production, which allows us to leverage the technology investments we have been making in this area. The award further bolsters Magna's leading ADAS position in cameras and supports our above-market expected sales growth in this emerging area. By now, many of you know that Qualcomm made a higher bid for VNier than the one we announced back in July. and as a result, VNIR's board agreed to move forward with Qualcomm. Although this transaction was expected to accelerate our position in ADAS and provide for the scale, we remained disciplined on price based on our valuation. We have been investing in ADAS over the last number of years, and we have the building blocks in place to address the requirements for ADAS. namely sensor suite, compute, and software capabilities. We will continue to invest internally as we have been. As always, we will consider external investments that would add to or complement our ADAS portfolio. We continue to expect a sales CAGR in our ADAS business of around 20% from 2020 to 2023, and 15% to 20% out to 2027 lastly as we work through our succession planning process i'm pleased to announce that our board of directors have approved a few management changes that are effective january 1st 2022. vince galifi our current cfo has been appointed as president for magna international in this role Vince will continue to support me on corporate strategy, capital markets, stakeholder relations, and other matters. Pat McCann has been promoted to Executive Vice President and Chief Financial Officer, reporting to me. In his 22 plus year career at Magna, Pat has served in a variety of senior finance roles at Magna's corporate head office including most recently as Senior Vice President Finance. Pat also served as Vice President Finance for Cosma, our largest operating unit between 2016 and 2019. And Anton Meyer has been promoted to Executive Vice President and Chief Technology Officer, having most recently served as Executive Vice President R&D. Anton has held various other roles in his 35 plus years career at Magna. I'm very confident in each of these role changes together with the strength of Magna's overall management team. With that, I'll hand it over to Vince to take you through the third quarter financials in more detail. Vince?