Magna International, Inc.

Thank you. And as a reminder, this call is being recorded. I would like to hand the call over to Louis Tonali, VP of Investor Relations. Louis, please go ahead.

Thanks, operator. Hello, everyone, and welcome to our conference call covering our first quarter 2025 results. Joining me today are Swami Kodagiri and Pat McCann. Yesterday, our board of directors met and approved our financial results for the first quarter of 25 and our updated 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 magna.com. Before we get started, just as a reminder, 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 the reminders slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swami.

Thank you, Louis. Good morning, everyone. I appreciate you joining our call today. Before we start, I want to express our deep sadness here at Magna with the passing of our former CFO, Vince Gallipi. Vince was not only a remarkable leader, but also a cherished colleague, mentor, and a friend to me and many of us. Vince's contributions to Magna over his 30 plus year career were invaluable including playing a crucial role in shaping our financial strategies providing stability and ensuring our disciplined profitable growth many of you listening in today benefited from his knowledge wisdom and insight as we mourn his loss we also celebrate his life and the profound influence he had on magna There are some notable takeaways from the quarter that I would like to highlight before getting into some of the details. We are pleased that our Q1 results came in ahead of our quarterly planning cadence, mainly reflecting strong incremental margin on higher sales. You may recall that in our February call, I mentioned that the first half of 2025 would be weaker than the second half and of the first two quarters, Q1 would be weaker. We returned $187 million to shareholders in the first quarter in the form of dividends and share repurchases. Despite increased uncertainty due to the current tariff environment, we have updated our outlook, which includes higher sales largely due to foreign currency translation partially offset by slightly lower vehicle production in North America. And a modest reduction in margin, mainly due to the higher euro and incremental margins related to the North American volume reduction. We continue to work closely with our customers to mitigate the tariff impacts and adjust in this rapidly evolving environment. focusing on what is under our control, including cost containment efforts. And we have clearly communicated to our customers our intention to pass on any unmitigated incremental tariff costs. We continue to win new business and advance automotive technologies. We are collaborating with NVIDIA for next generation scalable active safety and autonomous driving systems, as well as other applications. We have been awarded a new complete ADAS system with a North American-based global OEM. And we are supplying a two-speed dual-motor eDrive with advanced off-road technology for Mercedes-Benz. Our customers and the industry continue to recognize Magna for excellence in launch and innovation. We recently won GM supplier of the year and overdrive awards and automotive news recently selected our AI based thermal sensing technology as a 2025 pace pilot innovation to watch. As I said earlier, the industry is facing a high degree of uncertainty as a result of the tariff and trade environment. Let me frame tariffs in the context of Magna. Last year, our North American business was about $20 billion, or less than half of our global sales. In 2024, we imported roughly $2 billion of goods from countries, including Canada and Mexico, that are subject to tariffs, which would result in roughly $500 million in gross tariff costs. Based on our analysis to date, 75 to 80% of our parts crossing the border are already USMCA compliant, which puts our 2025 annualized direct tariff impact estimate at about $250 million. We continue to evaluate options that will further increase USMCA compliance to mitigate tariff impacts. In some instances, it will require design modifications, validation, and or customer approvals. We will continue to evaluate the full scope of these opportunities. As a result, we are highly focused on working with customers to consider further mitigation opportunities, utilizing government remission programs where appropriate, continuing cost reduction programs already in place, and remaining disciplined with capital spent. As I said at the outset, we expect 100% of unmitigated incremental direct tariff costs to be recovered from customers. Next, I will cover our updated outlook. Uncertainty in the current business environment caused by tariffs and other trade measures has made forecasting more challenging than normal. Our outlook reflects our strong first quarter performance and near-term OEM production release information including announced production downtime at certain OEM assembly facilities. Our production assumptions do not contemplate the potential impacts of tariffs and other trade measures on vehicle costs, vehicle affordability, or consumer demand, nor the impact of these on vehicle production. Relative to our previous outlook, we have reduced North American production by about 100,000 units to 15 million, held Europe production unchanged, and have raised our China production assumptions by roughly our Q1 outperformance to 30.2 million units. We also assume exchange rates in our outlook will approximate recent rates. We now expect a higher Euro and Canadian dollar for 2025 relative to our previous outlook. The increase in our sales range is predominantly associated with foreign exchange translation due to the higher Euro relative to the U.S. dollar, partially offset by lower vehicle production in North America, particularly with respect to certain programs with high magna content. The lowering our EBIT margin range reflects the margin dilutive impact of Euro-US dollar translation, as well as decremental margin on the lower sales associated with the volume reductions in North America. We increased our tax rate to approximately 26% from approximately 25%, mainly due to mix of earnings. We expect capital spending to be in the $1.7 to $1.8 billion range, down slightly from $1.8 billion previously, reflecting our continuing efforts to defer or reduce capital wherever possible. And our interest expense, net income, and free cash flow ranges are all unchanged from our last outlook. In addition, we are providing some helpful financial modeling guidance with respect to Magna. Our average content per vehicle in North America is approximately $1,300. And we would estimate incremental and decremental margins in North America to be in the 15 to 20% range at the Magna level under normal conditions. We have also seen relatively volatile foreign exchange rate swings over the past few months. As you model sales, keep in mind that a one cent change in the euro USD rate has about a $110 million impact on annual sales with a margin below our corporate average. And a one cent change in the Canadian to US dollar is about 50 million in annual sales with a margin at about our corporate average. Lastly, we are proactively evaluating costs and capital. I would like to reiterate that our guiding principles remain the cornerstone of Magna, a long-term ownership mentality that starts with our culture of accountability and alignment of interests at all levels of the company. Managing our portfolio under a consistent set of criteria and dispassionately assessed our product lines in terms of their markets, market positions, and returns. Maintaining a strong balance sheet to have the financial flexibility to manage through the cyclicality of our industry and a capital allocation strategy that entails a long-term balance of investing for profitable growth together with returning capital to shareholders. Regardless of where we are in the cycle, or challenges we are facing, these overarching principles govern the way we manage Magna for long-term success. With that, I'll pass the call over to Pat.