Magna International, Inc.

Ladies and gentlemen, thank you for standing by. My name is Kriska, and I will be your conference operator today. At this time, I would like to welcome you to MAGNA International Second Quarter 2026 Results Conference Call and 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, simply press star, then the number one on your telephone keypad. and if you'd like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to Louis Tonelli, Vice President of Investor Relations. You may begin.

Thanks, operator. Hello, everyone, and welcome to our conference call covering our Q2 2026 results. Joining me today are Swami Kotagiri and Philip Fracassa. Yesterday, our Board of Directors met and approved our financial results for the second quarter of 2026 and our updated outlook. We issued a press release this morning outlining both of these. You will find today's press release, conference call webcast, the slide presentations 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 Harbors 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, Louis. Good morning, everyone, and thank you for joining us today. We appreciate your time and interest as always. Let's get started. Overall, I was very pleased with our strong Q2 2026 results with continued margin expansion momentum driven by discipline and execution. In the quarter, Sales increased 3% with weighted organic growth over market of 3%. Adjusted EBIT was up 16% while adjusted EBIT margin expanded 70 basis points to 6.2%. And adjusted EPS rose 29% to $1.86, a record for the second quarter. These results demonstrate Thank you. Thank you. in free cash flow. We were also pleased that S&P recently reaffirmed Magna's A minus credit rating and improved the outlook to stable. This comes on the heels of a similar action by Moody's earlier this year. And we ended the quarter with a 1.4 times rating agency leverage ratio ahead of our expectations and 1.4 billion in cash on hand, which further enhances our financial flexibility. Supported by our strong first half performance, we raised our full year 2026 outlook, reflecting confidence in our margin, earnings and cash flow trajectory. For the year, we expected weighted sales growth over market of about 1% at the midpoint. We narrowed and raised our outlook ranges for adjusted EBIT margin, adjusted EPS, and free cash flow. Again, reflecting our first half momentum and expectations for solid execution over the remainder of the year. Our business pipeline continues to grow with over 90% of our 2028 business already booked. While macroeconomic and Geopolitical Conditions remain somewhat uncertain, including recent developments in the Middle East and with respect to trade policy, our outlook reflects our best estimates and confidence in our ability to mitigate headwinds and execute on what is within our control. We remain steadfast in executing our proven capital allocation framework. We continue to invest in our business to support further profitable organic growth while returning significant capital to shareholders. During the quarter, we returned $598 million to shareholders, including $465 million through share repurchases. At the end of June, we had about 9 million shares remaining under our NCIB and we plan to repurchase those shares in the second half. We also closed on the sale of our European lighting business at the end of June and expect to complete the remaining lighting and rooftop divestitures sooner than originally anticipated. As a result of our team's strong execution and focus on innovation, we continue to have success winning new business to drive organic growth into the future. We were recently awarded a Driver and Occupant Monitoring System program with a European OEM, positioning Magna's technology as a foundational platform-level solution across the customer's vehicle architecture. Our mirror-integrated hardware and software supports scalable, software-defined vehicle architectures and reinforces our leadership in driver awareness and Interior Sensing Integration. We see additional opportunities to expand this technology across other customers and vehicle programs. Our recently awarded 800-volt two-speed eDrive program with Cherry Automotive further demonstrates Magna's advanced electrification capabilities. This award builds on our existing momentum with Cherry, following the launch of our dedicated hybrid drive system, which is now in series production for the G Tour G700. This recent award further strengthens Magna's market position in high-voltage e-drives. Our commitment to innovation, quality, and execution continues to be recognized by our customers. Most recently, Magna earned five General Motors Supplier of the Year awards spanning five different product categories. These awards bring our total GM Supplier of the Year recognitions over the past decade to more than 40, underscoring the strength of our partnership with GM and our consistent ability to deliver for our customers. Lastly, I want to address the topic that has come up in several recent discussions with investors and analysts, whether Magna is looking at opportunities beyond automotive, including areas such as robotics, automation, data centers, and other adjacent markets. We are actively evaluating these opportunities, and we have already some initial project wins where we can leverage Magna's existing capabilities manufacturing footprint, technical expertise, and automotive grade standards for quality and reliability. The key point is that we are not pursuing diversification for its own sake. Any opportunity must meet clear returns-based criteria, fit with our capabilities, and give Magna a credible right to win. Where those conditions are met, we believe these adjacent markets can provide Thank you, Swami. And good morning, everyone. I'm going to begin on slide 16.