Magna International, Inc.

Greetings and welcome to the Q2 2023 results conference call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference, you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Friday, August 4th, 2023. I would now like to turn the conference over to Louis Tennelli, Vice President, Investor Relations. Please go ahead.

Thanks, Rita. Hello, everyone, and welcome to our conference call covering our second quarter of 2023. Joining me today are Swami Kodagiri and Pat McCann. Yesterday, our board of directors met and approved our financial results for the second quarter of 23, as well as our 23 outlook, our updated 23 outlook. 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 nagla.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. Please also refer to our reminder slide included in the presentation that relates to our commentary today. And with that, I'll pass it over to Swami.

Thank you, Luis. Good morning, everyone. I appreciate you joining our call today, and I'm happy to kick off today's call with an update on our progress. And following a financial update from Pat, I look forward to answering your questions. Before diving into the details, let me walk you through some key highlights. We successfully completed the acquisition of V&E Active Safety during the second quarter, solidifying our position as a global leader in active safety. There is a lot of excitement and energy around Magna as a result of this acquisition. Our organic sales grew by 17% year-over-year, surpassing weighted production by 5% excluding complete vehicles and 3% including complete vehicles. Our second quarter showcased strong Q2 operating performance with high organic sales contributing to robust earnings. These results represent a significant improvement both year-over-year and compared to the first quarter of this year. We have raised our 2023 sales adjusted EBIT margin, and adjusted net income outlook ranges for 2023. This upward revision in our EBIT margin range demonstrates solid operating performance, even with the inclusion of V&A Active Safety, which is launching significant new business over the next 18 months. We are highly committed to executing our strategy and remain confident in our ability to achieve our long-term growth and margin outlook. And we continue to win business across all product areas which supports our go-forward strategy. It is important to note that the industry has seen some positive developments, including reduced supply constraints, stronger and more stable production schedules, and resilient auto sales in a number of markets. However, the global economy continues to face some interlocking challenges, including continuing elevated inflation, high interest rates, geopolitical risks, and slowing economic growth. These challenges are impacting our entire industry. In North America, there are concerns about upcoming OEM labor negotiations when union contracts expire in September, which may have short-term impacts on production. Rest assured, efforts to contain costs and improve our margins remains a top priority for us. This is being achieved through ongoing operational improvement initiatives recovering costs from our customers, and executing flawless launches across Magna. Earlier this year, we estimated about 100 million of incremental input costs, net of recoveries over 2022. Based on our initiatives, together with improvements in market prices for energy and certain commodities, we now expect to mitigate about half of the incremental net input costs. We also continue to take proactive measures in various other areas. We have executed or initiated consolidation, restructuring, and cost containment activities at different levels across the company. We are engaged in ongoing commercial negotiations with our customers to recover costs, transitioning to various index programs, and address pricing on challenging programs. At the same time, we continue to intensify our efforts in areas that are core to our daily business, including hedging activities and our enterprise-wide global purchasing initiative. Automation installations and smart factory initiatives with the digital ecosystem implementation are also well underway. Lastly, I am pleased to report that our underperforming European BES facility is tracking to our expectations supported by a number of these initiatives. All these efforts are yielding positive results, enabling us to generate strong earnings on our sales growth and reinforcing our confidence in delivering on our expectations for margin expansion in the coming years. In early June, we successfully completed the VNIR active safety transaction, and I would like to thank all those involved for their efforts. This transaction has expanded our active safety portfolio by incorporating complementary products, customers, geographies, engineering, and software resources. The response from both the acquired business and our existing active safety unit has been overwhelmingly positive. There is a great deal of excitement surrounding the immense potential of the combined business. The business is on track with the expectations as outlined when we announced the acquisition, including being neutral to earnings before purchase price amortization in 2024. We hit the ground running and are fully dedicated to ensuring a smooth integration and realizing the 70 million in synergies identified at the outset. We are excited to share more insights about our combined active safety business and to update our 2025 outlook to reflect the acquisition during our upcoming virtual investor event in early September. We continue to execute our strategy aimed at accelerating our growth in megatrend areas. Recently, we were awarded the battery enclosure for Ford's next-generation F-150 Lightning EV pickup truck. To support this exciting new program, we are adding capacity in Tennessee. This award further strengthens our competitive position in the rapidly growing market for battery enclosures. In powertrain electrification, we are actively supporting our customers with a combination of components and systems. We are proud to have recently won an award for our first to market modular standalone decoupling unit for electric vehicles. The innovative unit contributes to an increase in electric drive range by up to 9%. We have already begun launching this product on multiple vehicles of a German-based premium OEM. We recently announced a long-term supply agreement with Onsemi. This agreement allows Magna to integrate silicon carbide-based technology into our future eDrive systems. The advanced technology will enhance our ability to deliver better cooling performance as well as faster acceleration and charging rates, which contribute to improved efficiency and increased EV range. These activities highlight our commitment to driving innovation and positioning ourselves as a leader in the rapidly evolving field of electric mobility. Our success in winning business across all product lines continues to drive growth. In addition to securing the contract for the battery enclosure, we were pleased to announce that we have also recently been awarded the frame and seats for the next generation F-150 Lightning. The Seating Award represents yet another Seat Complete program for pickup trucks in North America, following our previous Seat Award for GM's pickup trucks to be produced at Lake Orian. We were also recently awarded the Replacement Vehicle Assembly Business for the iconic Mercedes-Benz G-Class. This award allows us to maintain our 40-plus year history as the exclusive producer of this off-road vehicle. We produced over 45,000 G-Class vehicles in our Graz, Austria facility in 2022, bringing our lifetime total to over half a million. The next generation G-Class is expected to launch in 2024 and continue to run towards the end of the decade. And we were awarded significant new facial business on multiple programs from a Europe-based global OEM. We will supply the OEM's assembly plant in North America from an existing exterior facility beginning in 2026. With that, I'll pass the call over to Pat.