Magna International, Inc.

Good morning, ladies and gentlemen, and thank you for standing by. My name is Calvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Magna International Third 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, please press star one again. Thank you. I would now like to turn the call over to Luis Tinelli, Vice President of Investor Relations. Please go ahead.

Thanks, operator. Hello, everyone, and welcome to our conference call covering our third quarter of 2025 results. Joining me today are Swami Kodagiri and Phil Fricasa, our CFO. Yesterday, our board of directors met and approved our financial results for the third quarter of 2025 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 NAGDA.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements in 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 reminder 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 appreciate you joining our call today. Let's get started. I'm pleased to share a few key highlights from our strong third quarter. Our financial performance reflects continued solid execution across the business and meaningful progress on our performance improvement initiatives. Quarterly results exceeded expectations and showed year-over-year improvements. Sales grew 2 percent. Adjusted EBIT increased 3 percent. Adjusted EBIT margin expanded by 10 basis points, despite a 35 basis point headwind from unrecovered tariffs. Adjusted diluted EPS rose 4 percent, driven by stronger earnings and a lower share count. Free cash flow improved by nearly 400 million. Looking ahead, we are raising our full-year outlook, including higher sales supported by improved light vehicle production and continued launch execution. An increase in the low end and midpoint of our adjusted EBIT margin range, reflecting strong pull-through on higher sales and benefits from cost savings initiatives. Higher adjusted net income primarily driven by increased adjusted EBIT and a lower effective tax rate. We remain focused on generating robust free cash flow and maintaining a disciplined approach to capital allocation. You can see this in our reduced capital spending outlook, now approximately 1.5 billion, or 3.6 percent of sales. below our prior range and well below our initial outlook of $1.8 billion. With higher earnings and lower capital spend, we have increased our full-year free cash flow outlook by $200 million. This positions us to reduce our leverage ratio to below 1.7 by year-end. We also continue working with customers to mitigate tariff impacts. During the quarter, we reached agreements with additional OEMs for recovery of 2025 net tariff exposures. Negotiations with remaining customers are ongoing, and we expect to substantially complete this by year end. Our outlook assumes less than a 10 basis point impact to 2025 adjusted EBIT margin from tariffs. Overall, these results reinforce our confidence in the strategy and our ability to deliver sustainable value for shareholders. I would like to take a moment to highlight some recent business awards and technology program launches. First, we were awarded complete vehicle assembly business with a Chinese-based OEM, Xiaopang. This is a significant milestone. It marks the first time a Chinese automaker has chosen Magna's complete vehicle operations in Austria to serve the European market. Serial production began this past quarter on two electric vehicle models for this customer. In addition, we launched production in the third quarter on a vehicle program for a second China-based OEM with another program for that customer's schedule to start next year. These wins reinforce Magna's strong position in vehicle manufacturing, and demonstrate the value of our flexible, state-of-the-art production process, which enables fast-to-market, high-quality vehicles for the European market. As we have for decades, we continue to launch innovative technologies that support our customers. This past quarter, we began launching a dedicated hybrid drive with a leading China-based . Our 800-volt solution delivers a winning combination of efficiency, versatility, and comfort for consumers. Our driveline portfolio spans all powertrain configurations from ICE and mild hybrids to high-voltage hybrids and full battery electric vehicles. This success underscores the strength of our building block strategy in powertrain. And in advanced safety, our mirror-integrated driver and occupant monitoring system is meeting growing global demand for DMS technology. As you may recall, this product earned a 2024 Automotive News PACE Award for its innovation and safety impact. We are launching this system with multiple customers worldwide, and volumes are expected to reach several million units annually. Next, let me cover our improved outlook. While the current environment makes forecasting more challenging than usual, we remain focused on what we can control and continue to adapt to evolving conditions. Compared to our previous outlook, We have increased our North American production forecast to 15 million units, up about 300,000 units. Roughly two-thirds of this increase reflects expected outperformance in the second half, with the remainder tied to adjustments to first-half estimates. We are holding Europe production relatively unchanged. For China, we have raised our estimate to 31.5 million units. About half of this increase reflects second-half outperformance, and the other half relates to adjustments to first-half estimates. We have also updated our foreign exchange assumptions to reflect recent rates, now expecting a slightly stronger Euro, Canadian dollar, and Chinese RMB for 2025 compared to our prior outlook. We have increased our sales estimate range largely as a result of the expected higher light vehicle production, particularly in North America. We also raised the low end and midpoint of our adjusted EBIT margin range and now expect margins between 5.4 and 5.6%, reflecting our solid Q3 results supported by continued execution in the fourth quarter. Looking sequentially, We expect fourth quarter margins to improve from the third quarter, driven primarily by commercial and net tariff recoveries from customers. And as of today, we are on track to achieve those. We updated our interest outlook due to some expense booked in the third quarter related to a discrete prior year tax settlement. We lowered our assumptions for taxes to approximately 24% from 25 percent mainly due to better utilization of tax attributes and a favorable change in equity income. Factoring all that in, we increased adjusted net income to a range of $1.45 to $1.55 billion, largely reflecting increases in adjusted EBIT and the lower effective tax rate. We are reducing our capital spending outlook to approximately $1.5 billion, reflecting our continued efforts to optimize investment without compromising growth. As a result of higher earnings and lower capital spending, we have raised our free cash flow range by about $200 million to $1.0 to $1.2 billion, representing more than 70 percent of adjusted net income at the midpoints. To summarize, we remain confident in our fourth quarter outlook, supported by strong year-to-date execution and ongoing operational discipline despite industry challenges. We are on track to deliver the full year outlook we shared in February, a testament to the resilience of our business and the capability of our global team. Before I turn the call over, I would like to welcome Phil Procasa, who joined Magna as our new CFO in September. He brings extensive public company CFO, automotive and industrial sector experience, as well as a proven track record of driving profitable growth and shareholder value creation through disciplined capital allocation. Phil succeeds Pat McCann, who stepped down from the CFO role and is serving in an advisory capacity until his retirement in February 2026. I would like to thank Pat for his many contributions to Magna over his distinguished 26-year career. With that, I'll pass the call over to Phil.