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Ladies and gentlemen, welcome to Next Year Audubon Group Limited 2025 Interim Results Conference Call. All participants will be in a 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. I would now like to turn the conference over to Investor Relations Director, Mr. Tony Wang. Please go ahead.

Thank you, Betsy. Welcome, everyone, to our 2025 Interim Earnings Call. We made the announcement of our interim results this evening, Hong Kong time. Before we begin today's call, I would like to remind you that this presentation contains a safe harbor statement. For additional information, please refer to the content on the second page. The presentation accompanying today's call are available on our company's website. Please visit nextgears.com to download slides if you have not done yet. Joining us today are Robin Milovic, Executive Board Director, President, CTO, and Chief Strategy Officer. Mike Bierlein, Senior Vice President and CFO. Irvi Boyer, Senior Vice President and COO. Starting the presentation, Robin and Mike will provide business and financial highlights respectively, and then we will open a line for your questions. Please follow the limit of two questions per person. With that, let me turn the call over to our President, Robin.

Thanks, Tony, and thanks, everyone, for joining this call for the next year 2025 interim results announcement. So to start off, I'll provide a brief business overview for the first half of this year. Then I'll hand it over to Mike and he will go through the financial assessment as well as some operating considerations for 2025. So on this next slide, the first half of 2025 is off to a very strong start. In just six months, we launched a record of 31 programs across all regions. 23 were new or conquest awards, including our first dual-pinning EPS launch with the Chinese OEM, which is a milestone achievement for us. We also successfully secured $1.5 billion in new business bookings during the first half of the year. These included a major power column win in North America with a full-size truck platform, which we previously reported in the first quarter. Since then, we expanded business into Indonesia and Brazil with a leading Chinese OEM, and we booked our first rear-wheel steering program with a European customer, securing a strategic foothold in that growing segment. These notable bookings are a direct result of our technology leadership and megatrend alignment. In the first half, we successfully expanded motion-by-wire chassis control, including stair-by-wire, rear-wheel steering, electromechanical brake, or EMB, and Motion IQ software suite to pioneer the future of motion control. Our technology leadership also supports our continued growth among Chinese NEB customers. I'd like to also highlight how our technology pipeline is timed to anticipate and meet industry megatrends. while we are also simultaneously invading within existing product lines to drive competitiveness. Lastly, our operational efficiency and flawless execution remains the most critical focus area. We continue to balance the optimization and expansion of our manufacturing footprints regionally, improve material, supply chain, and manufacturing efficiencies, and accelerate our digital transformation. Furthermore, we continue to strengthen regional engineering competencies and improve supply chain cost and resiliency to further capitalize on growth opportunities. This combination of launches, bookings, technology leadership, and operational discipline positions us well for the next phase of growth. This next slide summarizes our program launches for the first half of the year. These launches reflect the diversity of our customer base as it continues to evolve with market opportunities. During the first half, we launched 31 new programs, including 23 representing new or conquest businesses and 22 representing new energy platforms supported by next-year products. As opposed to providing a detailed launch list line by line as we've done in the past, Starting from last year, we began highlighting significant milestone programs to reflect how new business bookings successfully convert to revenue growth. With that approach in mind, here are several notable launches from the first half. Our first dual-pinion EPS program launch with the leading Chinese OEM. Following our first dual-pinion launch with Stellantis in their light commercial van platform, we are seeing further dual-pinion launch opportunities with multiple Chinese domestic OEMs and other European OEMs. Next, our first modular columnist EPS or MCEPS has been successfully launched in EMEA SA. Next year's MCEPS was announced in October of 2021, which was first introduced in the China market. It leveraged our existing industry-leading EPS building blocks. Now, the successful launch in EMEA SA market shows that both global and China domestic OEMs desire this cost and speed-to-market product solution, along with outstanding steering reliability and performance. Out of 31 program launches, 24 program launches were in APAC. supporting both Chinese and global customers, which is another proof point of next year's strategic targeting and capitalizing on the growth opportunities in the region. Notably, one of our programs, Mi Auto YU7, is expected to be one of the best-selling EV models in China based on its strong pre-order performance. Building on strong performance in column EPS programs, Our industry-leading RAC EPS and newly launched dual-pinning EPS are set to drive growth in the near to mid-term. On the next slide, we'll be moving from launches to bookings. This slide shows that next year's new business awards in the first half totaled $1.5 billion. The contribution from Chinese OEMs is nearly 40% in the first half. Our strong booking momentum remained with leading Chinese OEMs, both domestically in China, including rack EPS, rear wheel steering, and dual pinion EPS, as well as in support of their globalization strategies, expanding into Indonesia and Brazil with a leading Chinese customer. As I mentioned earlier, we also secured a significant power column business with a key North America full-size truck program that further improves our competitiveness and scale in that market. Nextier secured the first rear wheel steer program and additional dual pinion EPS with a global customer in Europe. With the addition of rear wheel steer and dual pinion, our capabilities provide a portfolio expansion of various EPS solutions with this specific customer. Lastly, as next year has unveiled its latest motion control innovations at the Shanghai Auto Show this past April, our motion by wire suite includes steer by wire, rear wheel steering, brake by wire, and software. We're becoming increasingly confident to secure more by-wire related bookings throughout this year and accelerate this trend as we enter the second half of the decade. As we examine how we're tracking towards our 2025 full-year booking target, our $1.5 billion of bookings in the first half is on track with our plan to achieve the $5 billion for the full calendar year. Looking at bookings across our product lines and regions, overall 69% of our bookings were in our EPS product line and nearly half or 47% of our bookings were secured in the APAC region. The diversified portfolio indicates that our technology is becoming the product of choice by many Chinese as well as global OEMs alike. On the next slide, in early this year at the Shanghai Auto Show, we unveiled our latest motion control innovations and multiple technology announcements that reinforce our commitment to pioneering the future of motion control through vision, velocity and value. Our motion by wire chassis portfolio is a great example of this commitment. So let's elaborate a bit more on each of these core products. First, steer-by-wire and rear-wheel steering, including hand-wheel actuators, road-wheel actuators for both the front and rear of the vehicle, software and systems integration. We made great progress to secure several significant steer-by-wire bookings in the past couple of years, including one that enables level four automation for a mobility as a service application with a global EV leader. and another win with the leading Chinese NBD OM. We are expecting additional steer-by-wire opportunities in the near term, especially driven by the China market. In terms of rear-wheel steering, next year strategically designed our rear-wheel steer to solve industry challenges by leveraging our existing technology leadership and building blocks. We had earned two rear-wheel steering contracts with the leading Chinese OEM, and we expect to start production with this product next year. Next is brake-by-wire. Our electromechanical braking system was publicly debuted in the 2025 Shanghai Auto Show. We leveraged our technology building blocks again to create a modular, high-precision braking system strategically expand into motion by wire casting control. We're looking to secure our first EMB, electromechanical braking, with the Chinese OEM later this year. Braking technology is experiencing a shift from hydraulic-based to electrical-based braking. This technology shift aligns very well with next year's core competencies. including our electric motor design, our electronics, our mechanical actuators, and software integration. These are natural extensions of our current steering technology. Combined with our competitive goal supply chain, plus our manufacturing excellence and expertise, we are well positioned to aggressively compete in this new market segment. Next is software. which is the intelligence that powers bi-wire motion control and the software-defined chassis. Just this week, we announced our latest development in software with our new MotionIQ software suite. I'll talk more about that on the next slide. But beyond our motion bi-wire chassis portfolio, we're also dedicated to enhancing competitiveness and performance of our existing products that ultimately give our customers even greater options to balance their wide ranging price and performance requirements. We have high output column EPS. Now compared to standard column EPS, which is used to steer smaller vehicles, typically with 40 to 95 newton meters of steering loads, our high output column EPS further expands steering assist capacity up to 110 newton meters. This supports even larger and heavier vehicles, including vehicles that would typically require dual pinion or even entry-level rack EPS systems. It can also maintain steering precision, battery and fuel efficiency, and cost effectiveness without requiring more complex premium underhood EPS solutions. With the addition of modular column EPS, we now offer a complete full suite of high output EPS architectures, delivering a scalable, cost-efficient platform that offers OEMs greater design flexibility, faster program launches, and enhanced steering feel and NVH performance. Lastly, we also featured some driveline innovations, including a new face spline wheel hub interface eight ball constant velocity joints, and premium double offset joints, focusing on reducing weight, enhancing NVH performance, and improving long-term durability. As a proven global innovator of safety-critical motion control, Next Year is a trusted partner across global markets. We've 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 that have built-in quality and value. Automotive OEMs are choosing next year because of vision, velocity, and value that are critical to succeed in this hyper-competitive and quickly shifting market. So building on our stronger staff announcements, This week, we unveiled our latest development in software, which is our new MotionIQ software suite. MotionIQ is designed to help our customers move faster, reduce cost, and seamlessly adopt the latest bi-wire technologies by streamlining bi-wire chassis control development and vehicle health monitoring workflows into one single software suite. The MotionIQ suite comprises three product groups that provide advanced vehicle dynamics functions for superior driving experiences, prognostic software for smarter data-driven maintenance, and software development tools and expertise to help our customers seamlessly integrate new features. This software suite reinforces our commitment to helping vehicle automakers bring their software-defined vehicle platforms to market faster, enhancing quality and cost efficiencies, all while simplifying and accelerating the path from concept into production. With MotionIQ, next year is positioned to become the trusted motion control partner for our customers, not just by delivering smarter software, but by transforming the way chassis systems are engineered, integrated, and scaled globally. Finally, transitioning from innovations that drive efficiencies, I'll talk a bit about two strategic footprint expansions that further capitalize on growth momentum across China and the broader APEC region, as well as driving operational efficiencies. First is Changshu. Next year's state-of-the-art Changshu facility opened only in January of this year, with over 90,000 square meters of total land area. To meet growing demand from both global and domestic customers in APAC, Changshu's new plant will offer a comprehensive product portfolio, including gear-based EPS, like pinion EPS and rack EPS, steer-by-wire, rear-wheel steering, as well as electromechanical braking. The site will also support engineering. collaborating with our APAC Technical Center in Suzhou to meet the growing customer demands in the region. The new facility is also aligned with China's New Quality Productive Forces Initiative, which emphasizes high-end, intelligent, and sustainable manufacturing. This expansion reinforces next year's commitment to advancing mobility solutions in step with local economic and technological development priorities. Now let's cover our second expansion in Liuzhou. We held a groundbreaking ceremony for a new smart manufacturing facility that will replace the existing operation and is expected to be fully operational by the first half of 2026. The new facility will span more than 40,000 square meters, 130% bigger than the current facility, and it will include advanced laboratories and a test track. The new Yojo facility increases our production capacity on column assist EPS systems, as well as modular power packs that enhance safety, serviceability, packaging, and integration for intelligent vehicle platforms. These two expansions represent a strategic step to scale our capacity and meet the growing demand for our technologies across China and the broader APEC region. By investing in smart, sustainable, high-quality manufacturing, we can better anticipate and meet the evolving needs of our customers while supporting the future of intelligent mobility. With that, I will pause and hand it over for Mike for the financial report. Mike?

Thanks, Robin, and good day, everyone. Next year achieved record first half 2025 revenue of 2.2 billion, increasing by 6.8% compared to prior year. The increase was driven by our continued growth in APAC with the China OEMs. EBITDA grew year over year by 16.8% and margins expanded by 90 basis points. The improvements were driven by increased revenue and enhanced operational efficiency and performance. Partially offset by net tariff costs and troubled suppliers impacting North America. Our balance sheet remained strong as we finished the first half with $365 million of net cash. We achieved customer program bookings totaling $1.5 billion during the first half of 2025. And we are on track to achieve our $5 billion bookings goal for the year, which will enable our continued revenue growth. This slide highlights our key financial metrics, revenue, EBITDA, net profit, and free cash flow. All of our key financial metrics have improved during the first half of 2025. Next year posted revenue of $2.242 billion. This is a record first half revenue with an increase of $143 million or 6.8% compared with last year, driven by strong customer production schedules in APAC with the China OEMs. EBITDA of 230 million or 10.3% of revenue was higher by 33 million or 16.8% compared with last year. This was driven by higher production volumes and improvements in material and manufacturing performance in the first half. Net profit of 63 million or 2.8% of revenue was four times higher year over year with margins improving by 210 basis points. Free cash flow for the first half of 2025 was positive 37 million compared to a slight cash use last year. Improvements in earnings and lower capital spending were the two primary drivers for the increase in cash flow. Slide 13 shows a walk of the first half 2025 revenue compared to first half 2024. Revenue of $2.2 billion in the first half of 2025 was $143 million, or 6.8% higher than last year. Unfavorable foreign currency reduced revenue by $13 million as a result of the strengthening of the U.S. dollar against the RMB. Net commodity price reductions decreased revenue year-over-year by $2 million. Increased volume offset these negative impacts with $159 million of improvement, which was driven both by higher global OEM light vehicle production and significant new and conquest program launches. This slide shows our year-over-year revenue growth over market adjusted for foreign exchange and commodity price changes. Our total adjusted revenue growth in the first half of 2025 was 7.6%. We outperformed the market by 4.5%, or 450 basis points. North America adjusted revenue increased by 2%, above market growth of 6%, resulting from strong production performance of major customer programs that we cover. EMA SA revenue increased by 11%, above market by 13%, driven with volume ramping up from new programs. And APAC increased by 17%, above market by 9%, driven by significant new and conquest program launches with China OEMs. This slide shows our revenue performance by region. On the left of the slide, the regional distribution of our revenue for first half of 2025 and 2024 is provided. Our North America segment is still the largest. and in the first half of 2025 comprised of 51% of our total revenue, followed by APAC and EMEA-SA of 31% and 18% respectively. Compared to last year, the regional revenue distribution is approximately 300 basis points higher in APAC, while North America is approximately 200 basis points lower. North America revenue of $1.138 billion is $19 million or 1.7% higher than last year. APAC revenue of $687 million is $92 million or 15.5% higher than last year, despite unfavorable foreign exchange of $7 million due to the U.S. dollar strengthening into the RMB. EMEASA revenue of $401 million is $35 million, or 9.4% higher than last year. Turning to our earnings performance, EBITDA for the first half of 2025 was $230 million, providing a margin of 10.3%, increasing $33 million compared with the 197 million or 9.4% margin for the same period in 2024. Volume growth drove a favorable 36 million flow through to earnings across all three regions. In North America, we were impacted by trouble supplier issues and the net impact of tariffs. The troubled supplier issue was driven by two small suppliers that experienced financial challenges. We incurred a $7 million cost impact related to this issue in the first half. Our teams have worked diligently to address this issue, and we do not expect any significant costs going forward. The net tariff impact was a cost of 2 million in the first half, which was primarily due to the timing of customer recoveries. We continue to take actions to limit tariff costs by partnering with our customers and developing solutions with our supply base. The tariff costs that cannot be mitigated will be passed on to our customers. The first half included $3 million of restructuring costs, which is $1 million favorable compared to the $4 million of costs in the prior year. The first half initiatives included restructuring costs to support a further 10% reduction in U.S. salary employment in the first half as we continue to focus on optimizing our cost structure to improve margins. and costs related to the transfer of the Collins operation from the U.S. to Mexico, which is nearing completion. Lastly, all other net performance totaled $5 million, with significant material and manufacturing performance improvements offsetting customer pricing and economics. This slide highlights EBITDA and margin profile for each of our regions. North America EBITDA of 86 million was largely flat compared with the same period in 2024. The improvements in operating performance and fixed cost reductions were offset by net tariff costs and troubled suppliers. Excluding tariffs and troubled supplier costs, North America margin is 8.5%, expanding 70 basis points compared to prior year. APAC posted EBITDA of $116 million, $11 million, or 10.5% higher than 2024, driven by year-over-year revenue growth. EBITDA margins remain strong at 16.9%. Our APAC team continues to deliver strong earnings results with excellent operating execution. EMEASA posted EBITDA of $35 million with margin expanding to 8.8%, driven by improved operating efficiency and revenue growth. Our EMEASA team is executing well on the margin improvement plans. and we see continued momentum into the second half of the year. This slide shows our EBITDA to net profit walk. Overall, the year-over-year 33 million EBITDA improvement is driving the 47 million net profit increase. I will highlight a couple of items. Depreciation and amortization of $137 million includes plant, property, and equipment depreciation, as well as amortization of our intangible assets. Overall, DNA decreased by $19 million, which is driven by the first half 2024 net impairment costs of $14 million due to the customer program cancellations. Income tax expense of $27 million increased by $9 million compared to 2024. This increase was driven by the improved profitability for the first half of 2025. Our U.S. operations remain in the income tax valuation allowance position, resulting in an elevated global 28% effective tax rate in the first half of 2025. We expect our full year 2025 effective tax rate to be 30% compared to 36% in 2024. Our effective tax rate will continue to reduce as our U.S. operations profitability improves. Moving to the balance sheet and cash flow. To the left of the slide is our cash flow performance for first half 2025 and first half 2024 and our balance sheet metrics to the right. We generated free cash flow of $37 million in the current period compared to $2 million use in 2024. Cash from operating activities of $142 million in the current first half year was $10 million lower than 2024 due to net working capital investment, more than offsetting higher profits. Cash used in investing activities of $105 million in the first half of 2025 was lower than last year due to lower capitalized engineering and product development costs and reduced capital spending. As noted on the right of the slide, we ended the first half 2025 in a net cash position of $367 million. Liquidity stood at $839 million, which included $459 million of cash and committed borrowing capacity under our available credit facility of $380 million. Turning to 2025 operating considerations. Despite our forecast for flat, full year-over-year global OEM production volumes, we are on track for another record year for revenue as we expect to outperform the market growing by 300 to 400 basis points. This growth is driven by strong new and conquest program launches in APAC with the China OEMs. We are closely monitoring the dynamic U.S. tariff environment and other geopolitical tensions that may have an impact on production volumes in the second half. We have plans in place to mitigate tariff costs by partnering with our suppliers and customers to reduce costs. The remaining tariff costs will be negotiated as pass-throughs to our customers. We continue to execute on improving profit margins. The results of restructuring actions have lowered our fixed costs, and we have further actions underway. Our operating performance improved again in the first half of the year due to our continued focus on our next-year production system, as well as our supply chain initiatives. And we are seeing continuing momentum into the second half of the year. Our strategy for profitable growth centers on disciplined execution, technology leadership, and agile operations, enabling us to deliver sustainable stakeholder value amid evolving market conditions. I appreciate your attendance today and will now move to the Q&A session of the call. Operator, please open the line.

We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. We ask that you limit yourself to one question and one follow-up. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Tim Hussow with Morgan Stanley. Please go ahead.

Hi, Robin. This is from . Thanks for taking my questions. I have two questions. The first one is about the booking. Despite the solid operational progress in first half, we noticed that the total amount of booking rings dropped about 30% over the year, especially in North America. So just wondering what are the key factors to the slowdown? and whether we are looking for more meaningful progress in second half with the cancellation of the unit tax credit and some loading demands prior to the tariffs hike in the U.S. and the pickup of the sales and booking maintenance in second half. So, that's my first question. Thank you.

Hey, Tim. Thanks for the question. This is Mike. I'll take a shot at answering that one. So, bookings really depend on how our customers roll out their product planning cycles. We saw in the first half less opportunities that our customers were presenting for bookings. I will say that we have executed on the bookings that we had planned to win in the first half, albeit that some of those programs now are catered toward the second half of the year. So, we have a solid look at our bookings plan for the whole year, and at this point, we see that we can still achieve our goal of $5 billion overall for the year.

Thank you, Mark. My second question is about why, because we noticed that the company has done a fantastic job about a new product, a new technology. And apparently in China, so the adoptions of new technology has been always competition-driven. So after some top-notch EV makers put steered-by-wire technology on the reflection model this year, do we see just increasing interest among the Chinese OEM, or they are indeed accelerating adoption of by-wire technology on the upcoming models for next year, 2026? And in that space, what kind of growth profile should we expect for next year or the year after for older by wire technology just mentioned? Yeah, that's my second question.

Hi, Tim. This is Robin. I'll take a shot at that question. So, we are, you know, next year, we've been investing pretty heavily in our stair-by-wire technology. and developed it to a very mature state, I would say compared to a lot of the other competitors in the industry. And what we're seeing today in the market is, as you mentioned, the China market appears to be positioned to adopt steer by technology at a much higher pace than I would say we would see in Europe or in the US. We have booked a couple of businesses so far in the China market. We have our sights on some additional opportunities remaining this year, and we're optimistic about the pace of adoption of steered-by-wire, particularly in the China market, because we see, just in general, the OEMs in the China market are adopting autonomous vehicle technology, which is pulling with it a lot of the by-wire technology, both in steering and braking. We're pretty bullish on the adoption rate of steered by wire in the China market, and we feel good about our competitive position there. I think Europe will be probably the second region in terms of adoption rate, followed by North America, kind of in that order. But if you look past 2030, we continue to see steered by wire becoming more and more common with all vehicle platforms globally after that point in time.

Thank you for sharing all the details. Thank you.

Thank you, Tim.

The next question comes from Rebecca Wen with JPMorgan. Please go ahead.

Hi, Robin and Mike. Thank you for taking my question. So my first question also related to the new order launches. So I think we hear from other suppliers saying that they U.S. customers are delaying their EV program launches because of the old alternatives related to IRA, et cetera. I recall that our EV models, we could usually get a higher ASP per car on EV models for the new programs in the U.S. So, my question is, like, are we seeing similar scenario where customers are delaying their EV program launches? what would be the potential impact to us given, you know, the expected ASP changes?

Thanks, Rebecca, for the question. Yeah, we are also seeing that with the change in the U.S. that adoption for EVs has slown, and with that, certainly our customers are becoming a bit more cautious on their product planning as well. I guess the one thing I would say about next year's product lines is that our products are agnostic to powertrains. So whether it's internal combustion engine or hybrid or an EV, our products are working well with all of those programs. And in many cases, we've also secured multiple product lines on our key truck programs, for example, in North America. So if the volume shifts then between the powertrains, that we're continuing to capture the market share and revenue for those vehicles. But to your question, overall, we are seeing some delay in EV program developments in North America. but some acceleration as well, though, in terms of other hybrid-type vehicles.

And, Rebecca, this is Robin. I'll just kind of build on what Mike said. In fact, we are seeing this sort of a pause on, what I would say, the optimism of EV sales in North America. But as these OEMs are looking at next-generation EV platforms, there's more of a acknowledgement and a push to have the steering system and other systems in the vehicle truly be more common with the ICE engine version of those vehicles. Whereas the first generation in North America, a lot of the products like steering were relatively unique and designed and developed for those EVs. In the future, I think we're going to see OEMs trying to create much more synergies between the ICE version and the battery version of those vehicles, which is good in terms of the investment required to produce those programs. We're going to be much more efficient with those products because there'll be a lot of synergies, not only in our manufacturing, but in our bill of material. And that's probably a good thing overall, as these products will be more common and will build scale and efficiency as these new EV vehicles launch in the future.

Thank you. If I can have a second question. So my first question is related to guidance on the tariff impact and restructuring cost. So any guidance on second half tariff impact and restructuring cost, and specifically on tariff, like I saw that you have, and sharing that there is a net 2 million negative impact on carrots in the first half. Can I confirm that this is all from increased cost and not yet passed through to our customer, and we are expecting that likely to be passed through in the second half or later on in the future? But any comments, like, aside from the cost inflation, what is it expected? tariff impact on our sales side? So, for instance, we are seeing rush pressures in the U.S. markets ahead of the tariffs. Are we seeing potentially a much weaker momentum in the U.S. production activity in the second half? Thank you.

As far as the $2 million of net tariff costs, that is our costs offset by customer recoveries. And as we have negotiated with our customers, there is some element of time delay between when we're able to record those recoveries from our customers. So our goal overall is to be net tariff cost neutral. And we have a little bit more work to do, as you can see, due to this $2 million that we incurred in the first half of the year. So in the second half of the year, our plan remains the same, that we are working with our customers and our supply base to first minimize the tariff cost impact. And then to the extent that these costs cannot be avoided, then we pass those costs along to our customers. So overall for the year, in fact, we expect our net tariff cost to be zero.

And Rebecca, this is Rob, and I'll just again build on Mike's answer. So early on when the tariffs we saw that they were likely to come into effect, and obviously they've been very dynamic and they're changing even until today. They're still in a mode of changing, but we had to take a very aggressive collaborative approach with our customers to mitigate these. So we didn't take the approach that it's purely a pass-through. It's much more of a cooperative, collaborative approach with our customers where we are doing certain things in our supply chain to mitigate the cost, and a lot of times that means becoming what they call USMCA compliant with the current North America Free Trade Agreement. If our products are compliant to that, and if we can make small adjustments quickly to our supply chain to become compliant, that also reduces the potential tariff impacts that we will experience. So we've been very successful working in partnership with our customers to try and find win-win solutions. And as Mike said, our goal and our objective for the full year, and that will be tariff neutral.

Thank you. I want to ask about guidance on structuring cost.

Yeah. So, in terms of restructuring cost, I mentioned we had $3 million of cost in the first half. I think you can consider another $3 million in the second half as well. I think you had a question relative to volumes in North America. I'd say that's something that, you know, we continue to watch closely. So far, we haven't seen any kind of significant changes in our customer schedules. However, you know, with the increased cost on tariffs, that certainly could be a reason for caution in North America volumes here in the second half. Again, so far, what we're seeing in our actual production, as well as the schedules we received from our customers, we have not seen any significant slowdowns.

Very clear. Thank you. The next question comes from Yi Ming Lu with Guo Tai High Talent Securities. Please go ahead.

Hello, this is Yiming from Guohai. Thank you for having me. So I've got one question with your motion IQ system that you newly introduced. So what type of model or what type of customer do you expect to adopt this system first in the very beginning? And what do you expect the volume of this type of system in the next several years? Thanks.

So the Motion IQ software system has been developed around, you know, three different pillars. So one is advanced vehicle dynamic functions. It's really chassis control. So obviously we have been specialists in the steering area. We are now advancing and extending our chassis products into electromechanical braking. We also have looked at some options with active suspension as well. But this Motion IQ, first part of this suite is to provide the functionality of controlling the chassis, different elements to optimize the performance of the vehicle. And then the second pillar of our Motion IQ has to do with how we allow the customers to have more control over the tuning of those systems as opposed to having to make massive software updates that might take weeks in some cases through some of our Motion IQ tools, and I would highlight Modelware as being one of those tools. It enables OEMs to have a hands-on approach to tuning these systems to get the chassis feel that they expect. Along with that comes some prognostic capabilities where we can monitor certain elements of the various systems in the vehicle, provide diagnostics that might allow us to intervene and service specific components before they fail in a proactive manner. And then finally, the third element of this suite, which is called Motion-Q-Dev, is providing tools in a virtual sense that allow the development of these systems and integration into the vehicle in the virtual world, which allows our customers to go to market faster. So we have seen initial interest in these tools, both from some of our more mature global customers, as well as some new I would say EV manufacturers that have interest in that, as well as some of the China OEMs. So I would say we're at the beginning of this software product revenue, but we are expecting to generate significant revenue from our software products, certainly by 2030 and beyond. with various OEMs, so I don't see this really restricted to a certain category of OEMs. I think all of the benefits that these tools offer to improve the product, to reduce the lead time, are going to be very attractive to many OEMs in the market. All right. Thank you very much. Thank you for the question.

Due to the limited time, we will take the last question from Dan Wong from Deutsche Bank. Please go ahead.

Thank you. I want to talk about the Europe market. What is the key travel for the typical margin increase in the past six months from the year-over-year and half-over-half base? And what is your overall margin guidance for the second half? Thank you.

Thanks, Ben, for the question. So I've been very proud of our team in EMEASA. They are executing quite well. As you know, our margins have been certainly lower than we had expected in EMEASA, and the team has undertaken a significant plan to improve margins really on every line item on the P&L. I'd say relative to the first half of the year, we did have some benefits as our customer programs that we were on within region started to ramp up with higher volumes. That was a benefit, but material performance has been improving in region as well as very strong manufacturing performance that we saw in the first half. And I'd say we still have a lot of work to do. We're still not satisfied with this 8.8% margin that we achieved in the first half, but certainly a good progress from the overall team. In terms of guidance for overall for the second half profitability, We don't generally give specific guidance on earnings, but as you know, we've been working hard as a team to continue to improve our margins. We have seen our margins improving each year and each half that we have reported, and we continue to work to improve our margins here into the second half. I'd say one caution, as we talked on an earlier question, is relative to volumes. You know, if volumes are short of what we're expecting here due to overall market conditions, that could impact us. But overall, this team is committed to continuing to expand margins as we move forward.

Thank you.

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