Magna International, Inc.

Hello and thank you for standing by. My name is Lacey and I will be your conference operator today. At this time, I would like to welcome everyone to the Magna International Second Quarter 2025 Results Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Louis Tonelli. You may begin.

Thanks, operator. Hello, everyone, and welcome to our conference call covering our second quarter of 2025 results. 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 2025 and their 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, 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 the reminders slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swami.

Thank you, Luis. Good morning, everyone. I hope you're all enjoying the summer so far, and I appreciate you joining our call today. So let's get started. I'm happy to share a few notable takeaways from the quarter that underscore our strong execution in spite of industry headwinds. We are pleased with our strong Q2 results driven by consistent execution across our business and progress against our performance initiatives. I'm proud of our team's focus and ongoing efforts. Despite lower production in our two largest markets, North America and Europe, negatively impacting year-over-year sales, we delivered solid financial results and notable improvements from last year. Adjusted EBIT increased 1%, and EBIT margin was 20 basis points better, despite a 40 basis point negative impact from tariffs not yet recovered from customers. Adjusted value to EPS was up 7%, and free cash flow improved by 178 million. Relative to our expectations, our results for the quarter were better, reflecting strong incremental margins on higher sales. We are also raising our outlook for the year. Stronger sales, supported largely by foreign currency translation, and also better than expected second quarter program mix. Raising the lower end of our adjusted EBIT margin range, despite lower expected vehicle production in North America, as we realize on our cost saving initiatives and an increase in adjusted net income attributable to Magna, mainly reflecting higher expected adjusted EBIT on higher sales and a lower effective income tax rate. We continue to work closely with our customers to mitigate the impact of tariffs. Based on our actions taken and recent updates to tariff rates up to mid-July, we have lowered our estimated annualized tariff exposure to $200 million from $250 million when we reported in Q1. We have settled with multiple OEMs for substantially all of our 2025 net tariff exposure with them. And we are working with our other customers and suppliers to mitigate substantially all of our remaining exposure, including through recoveries. Lastly, we returned $137 million to shareholders in dividends in the second quarter, bringing our year-to-date return of capital to $324 million. We continue to assess industry conditions, as well as the macroeconomic and trade environment, and remain committed to our long-stated capital allocation strategy, including share repurchases once conditions become less uncertain. Under our normal course issuer bid, initiated last November, they have purchased about 5.7 million shares today, representing 2% of our shares outstanding. At Magna, we place a premium on delivering innovation and high quality to our customers to differentiate ourselves in the industry. And we have enjoyed some success recently. In Jerry Power's 39th annual initial quality study, their platinum plant quality award was recently given to our complete vehicle assembly operation in Graz, Austria. The award acknowledges quality and precision in producing the BMW Z4. Based solely on defects and malfunctions reported by customers, only one plant in the world receives this platinum distinction each year, making it an exceptionally rare and elite achievement. We also earned the Volkswagen Group Award for 2025 in the product category recognizing Magna's technical ingenuity, flexibility, and persistence in developing and launching an innovative battery cover for VW's MEB all-electric platform. Even during this period of uncertainty for our industry, we continue to execute to win new business and advance automotive technologies. We were recently awarded a dedicated hybrid transmission program with a North American-based global OEM for PHEV models launching in 2028. We are also coding a similar hybrid product with an additional global OEM. This award is a testament to the building block and platform strategy that we have been speaking about for some time, demonstrating our ability to support our customers to bring power to the wheels across a wide range of powertrain configurations from ICE through different hybrid variants all the way to pure BEVs. With the increased industry focus on hybrid technologies, we continue to add to our business in this area. And we are advancing vehicle safety innovation with integrated interior sensing systems, including through our child presence detection technology which has been recognized recently with business awards from OEMs in Asia and North America. The industry continues to face a high degree of uncertainty as a result of the tariff and trade environment. Despite this uncertainty, we continue to execute against our plan as we have through a variety of challenges in recent years. In terms of recent updates impacting Magna, our estimate of annualized tariff exposure is reduced to approximately 200 million from approximately 250 million when we reported in Q1. We have settled with multiple OEMs for substantially all of our 2025 net tariff exposure with them. And in our current 2025 outlook, we expect a less than 10 basis point impact to our EBIT margin, as well as a modest increase in working capital based on the timing of recoveries for expected tariff costs late in 2025. We remain highly focused on utilizing government remission programs where appropriate, continuing cost reduction programs already in place, and being disciplined with capital spent. and working with our other customers and suppliers to mitigate substantially all of our remaining exposure, including through recoveries. Next, I'll cover our updated outlook. While the current environment makes forecasting more challenging than normal, we remain focused on what we can control and continue to adapt to an evolving situation. Relative to our previous outlook, we have adjusted our North American production forecast to 14.7 million units. While this reflects a reduction of about 300,000 units, the majority of the adjustment relates to a refinement in backward-looking data around first quarter production. These changes help align our outlook with current market dynamics. We are holding Europe production unchanged. we are raising our China production to 30.8 million units, all of which relate to an adjustment to estimated Q1 production and our Q2 production outperformance. We also assume exchange rates in our outlook with approximate recent rates. We now expect a higher euro and slightly higher Canadian dollar and RMB for 2025 relative to our previous outlook. We increased our sales range as a result of foreign exchange translation due to the higher Euro relative to the U.S. dollar, as well as better than anticipated program mix, particularly this past quarter. We raised the low end of our adjusted EBIT margin range and now expect to be between 5.2 to 5.6 percent, reflecting our strong Q2 results supported by continued execution around our cost-saving programs. Recall that we indicated over the past two reports that we expected approximately 40 percent of our EBIT to be generated in the first half of 2025, and we are forecast to end up slightly ahead of that. We also said we expected our 2025 earnings to be lowest in the first quarter of 2025 and to improve meaningfully in the second quarter which we have also delivered on. Looking forward to H2, based on some timing updates and revised vehicle volumes, we now expect to generate approximately 35 percent of our full-year EBIT in the fourth quarter of this year. The most significant margin drivers sequentially from H1 to H2 are expected to be commercial recoveries lower engineering spend, net tariff recoveries, lower warranty expense, and a step up in the benefits from our operational excellence activities. We are excited about our progress in operational excellence, and while there is more work ahead, we continue to see additional potential upside to margin from these initiatives over time. We reduced our tax rate to approximately 25% from approximately 26 percent, mainly due to favorable FX adjustments recognized for U.S. GAAP purposes in Q2 and changes in our reserves for uncertain tax positions. We modestly increased our net income attributable to MAGNA, reflecting higher expected EBIT and the lower effective income tax rate. We are reducing our capital spending range by $100 million compared to our May outlook, reflecting our continuing efforts to defer or reduce capital wherever possible. Offsetting this CapEx reduction are modest increases in working capital related to tariffs and in other asset spending, resulting in an unchanged free cash flow range. Lastly, our interest expense range is unchanged from our last outlook. To summarize, we are confident in our outlook for the remainder of the year, supported by strong Q2 execution and ongoing operational discipline, despite ongoing industry challenges. We remain on track to deliver the outlook shared in February, which is a testament to strong execution throughout the organization. With that, I pass the call over to Pat.