Nexteer Automotive Gp Ord

Ladies and gentlemen, welcome to the next year Automotive Group Limited 2025 first quarter investor communication call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note the call is being recorded. I would now like to turn the conference over to Investor Relations Director, Mr. Tony Wong. Please go ahead.

Thank you, Drew. Good day, everyone. Welcome to Next Year Automotive 2025 First Quarter Global Investor Communication Call. On the call today, we have our Executive Board Director, President, CTO, and Chief Strategy Officer, Robby Milovic. Senior Vice President and COO, Irvi Boyer. Senior Vice President and CFO, Mike Bialan. Today's call will be relatively quick, taking around 30 minutes covering a few latest updates from company 4Q1. First, we will have Robin to provide an update of the concept's business development, and then Mike will go through the latest operating environment status, including the view on Taurus. Beyond that, we will take some questions. I would remind you of today's communication package as being posted on our company's website. And the safe harbor statement governs today's communication. Now, I will hand it over to Robin.

Okay. Thank you, Tony, and good day to everyone on the call. So, I'm pleased to provide a business update for the first quarter. But before getting started, I'd like to thank and recognize our One Next Year global team. 2025 so far has brought with it ongoing challenges, including a very dynamic tariff environment, rare earth mineral supply chain restrictions, and other uncertainties. Not only is the team effectively managing these challenges, but we also continue to roll out innovative new technology to meet the needs of the global vehicle marketplace. Shortly, I'll highlight some of the announcements made during the Shanghai Auto Show. Our theme for that show is was pioneering motion control globally at China's speed through vision, velocity, and value. I'm very excited to summarize these new technology introductions here in just a few minutes. After that, Mike will focus more on the latest operating environment we're experiencing and our considerations for the balance of this year. Let's start out with new program launches. So during the first quarter of 2025, we achieved another record of 23 new program launches, including 14 representing battery electric vehicle platforms supported by our products, and 19 programs representing new or conquest business. We also had successful program launches globally across all regions, with three in North America, five in EMEA-SA, and 15 in APAC. In our EMEA SA division, we launched several single-pinion and column-based EPS programs for major European customers. And in APAC, we had several new half-set programs that launched to deliver advanced comfort, durability, and power in new energy vehicles, mainly for Chinese OEMs. Considering the balance of the year, we expect another very heavy EPS launch cycle, including our first dual-pinion EPS in the China market. we're well on track to achieve another record launch year for the full year. Moving into new business wins, I'd like to highlight three accomplishments in terms of new bookings secured in the first quarter. Our strong bookings momentum continues with leading China OEMs, both domestically in China as well as in support of their global strategies covering both export and localizations. Notably, the bookings secured in Q1 with COEMs include high-end and new products we just recently announced. Those include rear-wheel steering, rack EPS, and dual pinion EPS. Second, we successfully re-secured an important column business with a North American customer. This business was re-won after having lost it to a competitor several years ago when our customer wanted to diversify its supply panel for full-size trucks. You may remember the financial impact of this program loss had to our North American performance back in 2018 and 19. Today, we're very excited to win this business back and it's a good example of the benefits of our manufacturing strategy for North American columns that has now enabled us to improve our competitiveness and scale in Mexico. Lastly, as next year has unveiled our latest motion control innovations at the Shanghai Auto Show, Our motion-by-wire portfolio strategically expanded into steer-by-wire, rear-wheel steering, brake-by-wire, and software. We're very confident to secure more by-wire-related bookings throughout the year and accelerating that trend as we enter the second half of this decade. The middle part of this slide indicates our quarterly bookings, followed by our forecasted order bookings for the full year. We booked $0.8 billion in Q1 and we're forecasting $5 billion of bookings for the full calendar year. The right-hand side shows the year-to-date bookings composition. You can see within the year-to-date new business bookings, electric-powered steering accounted for 36%, while columns accounted for 45%, reflecting the significant booking we gained from a North America customer. This new win also drives high booking rate in terms of divisional and new versus conquest bookings breakdown. And finally, nearly 40% of the total bookings are China OEMs. The strong China OEMs exposed bookings indicate how we are fully aligned with the growth mega trend in China. Next slide is our motion by wire chassis portfolio expansion. So we have built a comprehensive motion by wire chassis portfolio that includes steer-by-wire, rear-wheel steering, brake-by-wire, and software. The interactive chassis display shown on this slide demonstrates how we simulate driving experience and three-cabin design. And I'll elaborate a little on each of them. First, steer-by-wire and rear-wheel steering, including software and systems integration, hand-wheel actuators and road-wheel actuators for both the front and rear of the vehicle. We have made great progress to secure several significant steer-by-wire bookings in the past couple of years, including one enabled Level 4 and Mobility as a Service vehicle with a global EV leader, and another win with a leading Chinese NEV OM. We are expecting additional steer-by-wire opportunities in the near term, especially in the China market. In terms of rear-wheel steering, Nextgear strategically designed our rear-wheel steering to solve industry challenges and leverage our existing technology leadership and building blocks. We earned two rear-wheel steering contracts with the leading Chinese OEM and expect to start production in 2026. Next, brake-by-wire. Nextgear's new electromechanical braking system officially debuted at the 2025 Shanghai Auto Show. We leverage our technology building blocks to create a modular, high-precision braking system to strategically expand into motion-by-wire chassis control. We are expecting to secure our first EMV booking with the Chinese OEM later this year and plan to start production within the next two years. Braking technology is experiencing a shift from hydraulic brakes to electrical-based brakes. This technology shift aligns well with next year's core competencies. Future electric braking systems will leverage electric motors, electronic controllers, mechanical actuators, and software. These are all natural extensions of next year's current steering technology. Combined with our competitive global supply chain and manufacturing excellence and expertise, next year is well positioned to aggressively compete in this new market. Next is software. That drives next year's bi-wire technologies. and enables software-defined chassis, such as advanced vehicle dynamics functions like steer-by-brake and hands-off detection, vehicle health management, and tools for accelerating vehicle development and integration. And finally, dry-glide, which delivers advanced comfort, durability, and power through a portfolio of premium, low-mass, compact half-shafts, and high-efficiency tri-glide joints, especially important in any of these e-drive powertrains with increased torque and regenerative braking demand. As a proven global innovator of safety-critical motion control, Mextier is a trusted partner across global markets. We have been growing alongside leading Chinese OEMs, enabling them, as well as legacy OEMs, to anticipate, adapt, and get to market quickly with the latest technologies with built-in quality and value. OEMs choose next year because of our vision, velocity, and value that's critical to succeed in these hypercompetitive and quickly shifting markets.

With that, I'll hand it over to Mike. Thanks, Robin, and good day to everyone. I'll provide an update on the latest key tariff impacts in next year's position relative to tariffs and the initiatives we are driving to mitigate the exposure. Currently, the main tariffs that we are impacted by include non-USMCA compliance shipments from Mexico to the US, auto parts tariffs on imports to the US, reciprocal tariffs on US imports, and tariffs on shipments between the US and China. To frame up our exposure to tariffs, during 2024, North America operations had 2.2 billion of revenue, including 1.3 billion from U.S. operations and 0.9 billion from Mexico operations. We have set up our supply chain and manufacturing operations with a strategy to support our customers within region. This strategy has served us well to mitigate our exposure to tariffs and other risk factors. Our U.S. operations only import approximately 15% of material from outside of the North America region. In addition, we have minimal trade exposures between the U.S. and China. Our Mexico operation is the importer of record for approximately 0.5 billion of finished goods to the U.S. The majority is already U.S. MCA compliant. which allows for the goods to be imported to the U.S. without additional tariffs. We are actively working with our customers and suppliers to mitigate tariff costs through changing sourcing locations and our ongoing dual sourcing initiative. To the extent that tariffs cannot be avoided, we are negotiating recoveries with our customers to pass along the remaining costs. Turning to 2025 considerations, we are on track to deliver above market revenue growth of 200 to 300 basis points year over year. APAC is the key driver as we continue to grow with the China OEMs. We are seeing the benefits of our initiatives to reduce fixed costs, optimize footprint, and improve supply chain efficiency. These initiatives are driving continued margin expansion in our results to date. We are closely monitoring tariff developments and potential implications on North America production volumes. We are confident that we are well positioned to navigate this challenging environment by partnering with our suppliers and customers to reduce tariff costs, then negotiating the remaining tariff costs as pass-throughs to our customers. I'm excited by our motion by wire technology and strategy as it is central to our long-term growth. This shift from hydraulic to electric to by wire control unlocks precision, efficiency, and compatibility with autonomous and EV platforms. Our leadership position in steer-by-wire technology and our recent announced entry into electromechanical brake systems which is an advanced break-by-wire solution, are a testament to our expansion strategy into motion-by-wire chassis control. We have made great progress to secure several significant steer-by-wire bookings in the past couple of years, including a program with a global ED leader and another win with a leading Chinese NEB OEM. We are seeing demand for by-wire technology increasing, We expect to secure more by wire bookings throughout the year, especially in the China market. Our strategy for profitable growth is the key enabler to our success at driving the business forward with above market revenue growth and increasing profit margins. This concludes our Q1 business update, and I'll turn the call back to Drew to open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Rebecca Wen with JP Morgan. Please go ahead.

Hi, Annie. Hi. Thank you for taking my question. So, the first question is, do you have any updates on the latest trend in North America, especially the U.S. market? I understand that IHF had cut the North America production number 9% decline for this year. But I think so far, we have not yet really seen that impact coming through in the monthly sales numbers yet because we have these rush purchases ahead of the type of increases. So what is the latest trend like in terms of U.S. OEMs production orders so far? How are you seeing the opener address, especially in the U.S. market in the next few months?

Thanks for the question, Rebecca. This is Mike. I'll try to give you an answer on that one. So, so far, year to date, we've seen the volumes within North America performing according to our expectations. The market is performing quite well so far. And we see strong continued customer schedules in the near term. I think the uncertainty that IHS had projected in their prior forecast is really related to this dynamic tariff environment that we're facing. And certainly we look to IHS as one input as we think about the forecast from our side as well. And I do know that based on some of the negotiations over this past weekend between the US and China, Some of the, certainly the tariff environment has improved since then, and that also means that the assumptions within the IHS forecast likely have improved as well from there. So I think that the back half of the year remains volatile at this point, and I'd say it's really largely related to how this tariff situation plays out in North America. Now, we certainly remain optimistic. We have, year to date, very strong results both from a top line and we're really seeing continued momentum on our profit margins increasing as well, as we talked about with you as well in the March timeframe. Again, we'll have to see how the volumes play out, and we're prepared to react on our side to any environment.

Thank you, Mike. Maybe just quickly follow up on that. So because the auto tariffs just came effective from, I think, 3rd of May, the auto parts tariffs, so are we seeing any changes in terms of our customers order trend or guidance for May, June, like how does it compare with March, April versus our previous budgets?

So generally our customers give us near-term production schedules for the next couple of months. And, you know, what we're seeing, those schedules are remaining strong, really no change related to these incremental tariffs. Again, we'll have to see how this plays out over time, but so far we continue to see that volumes, at least in the near term, are remaining strong.

Okay, thank you. And my last question is relating to the USMCA tariffs. So my understanding is, like, even if for USMCA-compliant auto parts, there is still a 25% tariff on the non-US contents. Is this still the case? And, like, has the US set up, establish a system to track this, and what is our percentage of content that are non-U.S., and that would be charged by this 25% for the U.S. NCAA compliance box.

Yeah, so in order to be USMCA compliant for shipments from Mexico to the U.S., there needs to be currently 75% content coming from North America. And to the extent that the goods are compliant, then they're able to be imported from Mexico to the U.S., in fact, with zero tariffs. That was true before these new tariffs came into play, and that's been true so far since the incremental tariffs have been put in place. To the extent that parts are not USMCA compliant, now they are facing an incremental 25% tariff. So the majority of our parts that we import from Mexico into the US are already are already USMCA compliant, and we are working actively with our customers and suppliers to continue to make sure that our future products as well as our current production that is not USMCA compliant reaches this USMCA compliant threshold.

Yeah, Mike, actually, I was asking about even for the USMCA compliance products, my understanding is there will be still a 25% tariff on the non-US content of the USMCA compliant product. I'm not sure if my understanding is correct or if that policy has changed over time already.

Yeah, so so so far there is it's either USMCA compliant for shipments from say Mexico to the US. If it's USMCA compliant, that's a zero tariff. If it is not USMCA compliant, that's an incremental 25% tariff. So far there's no additional. A tariff if there's depending on if there's a non-U.S. content.

Okay. Understood. Okay. Thank you. Thank you. That's all my questions. Thank you.

Again, if you have a question, please press star then 1. Thank you so much for all of the questions and today's participation. If there are any further queries, please contact us at investors at nextyear.com. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.