Nexteer Automotive Gp Ord

Ladies and gentlemen, welcome to next year Automotive Group Limited 2025 Annual Results Conference Call. All participants will be in a listen-only mode. Should you need assistance by pressing the star key followed by zero. After today's presentation, questions, to ask a question you may press star and then one on your telephone keypads, press star and two. I would now like to turn the conference call over to Investor Relations Director, Mr. Tony Wang. Please go ahead.

Okay. Thank you, Jamie. Again, welcome everyone to our earning call for the announcement of our annual results this evening, Hong Kong time. Before we begin today's call, I would like to remind you that the presentation contains a safe harbor statement. For additional information, please refer to the content in the second page of our slides. The presentation accompanying today's call are available on our company's website. Please visit nextyear.com to download slides if you have not done yet. Joining us today are Robin Milovic, Executive Board Director, President, CTO, and Interim Global COO. Mike Beierlein, Senior Vice President and CFO. Starting the presentation, Robin and Mike highlights respectively, and then we will open the lines for your questions. Please follow the limit. Let me turn the call over to our President, Robin.

Everybody online today. I'll begin with an overview of our business performance, strategic progress, and then I'll hand it over to Mike Bierlein, our Chief Financial Officer, and he will walk and 2026 outlook. So, starting with a high-level overview of our full-year business highlights. This reflects five milestones demonstrating next year's focus on long-term profitable growth. First, revenue reached nearly $4.6 billion, increasing 7.2% compared to 2024. And as a result, we achieved record revenue for a third consecutive year. Above-market growth driven by new and conquest business wins. We successfully launched 57 customer programs, reflecting our deepening engagement with both global and Chinese OEMs. Third is new business bookings. We achieved customer program bookings totaling $4.9 billion, including new with two leading Chinese NEV OEMs. The business development on Steer by Wire is execution by our team in 2025. Fourth mission. APEC revenue reached a record of approximately $1.5 billion. This represents a 9.8% increase year-over-year, making the fourth consecutive year of record revenue in this region. This milestone highlights a remarkable organic growth trajectory with revenue surging from about $1 billion to $1 billion in less than three years. In 2025, next year, China and next year, each achieved record revenue, reflecting continued growth and strong regional execution. Finally, enhancing shareholder returns. We are glad to announce that the Board of Directors has approved a $46 million dividend for the approval of the shareholders in the upcoming Annual Shareholders Meeting. This dividend amount and represents a total of 45% payout ratio of the 2025 net profit to equity holders, which is an increase from 35% we had in 2024. These milestones collectively demonstrate next year's ability to grow above market while maintaining financial discipline. As I mentioned earlier, we successfully launched 57 customer programs across multiple product lines regions, customers, and vehicle segments. Four of these were new or conquest wins, and 36 were for electric vehicle platforms, demonstrating how new bookings convert into revenue. Today, rather than walking through a detailed list, this slide simply highlights a selection of major program launches that illustrate our new bookings wins that are translating into tangible growth. First, we achieved the initial launch of our modular column EPS or MCEPS in the EMEA SA region. While next year's MCEPS was first introduced in China, leveraging our industry-leading EPS building blocks, this successful EMEA SA launch further enhances our competitiveness and our regional footprint. Second, we delivered the first dual-pinning EPS program launch with the leading Chinese OEM. Following the inaugural dual-pinning APS launch in EMEA SA, we have secured additional orders from multiple Chinese domestic OEMs and other European OEMs over the past year. The customer demand for this product is strong, driven by the need for cost-effective, speed-to-market solutions combined with Nexair's proven steering reliability and performance. At the same time, despite the emergence of dual-pinning APS, we have built a very solid and growing RAC EPS business foundation in China. Next-year technologies have been adopted across numerous mainstream including Xiaomi, Xiaopeng, Li Auto, and others. Overall, the strong launch momentum across gear-based EPS platforms, including our single pinion, dual pinion, and RAC EPS products, continue to reinstate leadership, particularly in the China market. Out of the 57 were in APAC, supporting both Chinese and global customers. Strategic targeting and capitalizing on the region's growth opportunities. Reflects increasing diversity across products, across customers and regions, to our long-term success. Looking ahead, we are particularly excited about two product launches beginning in 2026. We secured 4.9 billion in customer program bookings in 2025 across products, regions, and customers. These wins include several breakthrough awards and important firsts. underscoring our leadership in advanced steering technologies. Steer-by-wire program with two leading Chinese new energy vehicle OEMs. And these cover both the hand-wheel actuator as well as the road-wheel actuator applications. Further reinforce next year's leadership in next generation motion-by-wire technologies. Let me expand a little bit more on these two customers. So building on our first Steer-by-Wire win with the leading Chinese OEM in the second half of 2024, we successfully secured a second award with this customer. This follow-on win demonstrates growing customer confidence and an expanded across the OEM's upcoming vehicle platforms. And this first Steer-by-Wire booking with another leading Chinese OEM including, again, both the hand-wheel actuator and road-wheel actuator applications. This program is expected to launch next year, reflecting a short lead time from a business award to production and strong capabilities. Beyond steer-by-wire, we continue to expand our dual-pinion and rear-wheel steering business across the EMEA S8. deepening relationships with existing Chinese OEMs while also securing a new European-based OEM. These wins highlight not only the scalability of the technology, but also our ability to deliver a cost-effective, lightweight rear wheel steering that enables up to a 12 degrees of rear wheel steering turning angle and supporting a We also earned our first column assist EPS win with a market-leading OEM in India. This marks an important milestone for next year in one of the world's fastest-growing automotive markets. This win demonstrates our ability to localize proven global electric power and compete effectively on cost, quality, and reliability in a highly value-focused market. earned the first high output column assist EPS win with the leading Chinese OEM. This represents an important expansion of our column EPS portfolio into higher performance and load efficacy. This win highlights our ability to extend column EPS technology beyond the traditional output range to meet more demanding vehicle requirements. We continue to capture the global expansion of Chinese OEM and South America by leveraging our strong China relationships and global footprint. scalable steering solutions across regions. Importantly, this trend winds into incremental global revenue opportunities. And lastly, we successfully conquested a new power column business for full size truck platform in North America. strengthening our leadership position in this region as well. Looking at bookings, over 75% of next year's bookings were in our EPS product line and nearly half or 45% of our bookings were secured in the APAC region. Overall, this diversified portfolio indicates our technology is becoming the product of choice by many domestic and global OEMs. On the next slide, This highlights that customer diversification remains a core growth pillar for next year. We partner selectively with OEMs that align with the long-term industry megatrends, including electrification, autonomy, and connectivity. And today, we serve more than 60 OEMs globally. Over the last year, we've expanded our customer base by winning programs across a broad range of customer models, from leading domestic OEMs in China to the market leader in India, to premium EV manufacturers in North America, as well as an emerging autonomous mobility company. Importantly, these wins span a wide mix of technologies, including our rack EPS, column EPS, dual pinion, rear wheel steering, driveline, and columns and intermediate steering shafts. This demonstrates our ability to deploy the full next-year performance capture growth from established volume leaders, while also participating in the emergence of new mobility players, which are reshaping the industry. While every competitive situation is different, our success consistently comes down to a few core strengths. We bring world class product and process technology, quality and reliability performance as measured by our customers remain strong and continues to improve. We listen carefully to understand what each customer truly values, and as the tier one in our space with experience as a global OEM in our early history, we understand how critical speed, agility, and mindset are in responding to those needs. Flawless execution from development through launch remains a defining differentiator. Capabilities underpinning scale and grow profitably across a diverse and evolving customer base. We also continue to make disciplined progress in expanding our manufacturing and technical footprint across Asia Pacific to support long-term growth and localization. APEC steering production and validation has expanded in the past five years. we opened our state-of-the-art Changshu manufacturing and testing facility in China, strengthening our ability to support the growing demand from Chinese OEMs while aligning with Chinese focus on high and sustainable manufacturing. That expansion is complemented by our Asia Pacific Technical Center in Suzhou, which brings comprehensive engineering, validation, and corporate functions together in faster development cycles and closer proximity to our customers. Center near Bengaluru with additional physical validation capabilities in that region. Looking into 2026, we've opened our first manufacturing facility in Rayong, Thailand, which has begun production with an initial focus on columnist to support growing demand across Southeast Asia. And finally, we broke ground in both Uyojo and Suzhou, further expanding capabilities, including EPS and steer-by-wire. Together, these initiatives reflect our disciplined approach to scaling capabilities and supporting customers across the region. On this next slide, I'd like to update the status of one of our most important motion by wire products, which is electromechanical braking, or EMB. Next year publicly debuted EMB at the 2025 Shanghai Auto Show. We leveraged our technology building blocks to create a modular, high-precision braking system to strategically expand into motion by wire chassis control. One year ago, a second round of winter vehicle tests were completed in Yakushi, China, the period between December of 2025 and March of this year. In this event, we had more than 17 OEM customers that were engaged and had given very positive feedback on the vehicle performance through the on-site test driving and technical review. Meanwhile, our customers were surprised by the rapid pace of our EMB product development progress. Right now, we're developing highly automated production line to accelerate our industrialization process, and we also will continue to optimize the function, performance, and durability of the EMB product. We're looking to secure our first business booking of EMB with a Chinese OEM in the course of this year. This next slide highlights how we are capitalizing on motion by wire and motion IQ to enable intelligent motion in the vehicle. First, we're integrating smart chassis technologies, including steer by wire, rear wheel steering, and brake by wire with electric powertrain architectures. This system level integration allows us to deliver precise, coordinated motion control across the vehicle while supporting OEM's efforts to simplify platforms and scale advanced architectures. Second, we're embedding software-defined vehicle and AI capabilities directly into motion control. Through MotionIQ, we combine proven safety-critical algorithms with flexible software tools, enabling OEMs to develop, tune, and update motion functions more quickly while retaining control differentiation. And third, these capabilities support autonomous vehicle applications, including robotaxis and ADAS level three plus. Our motion by wire hardware and software foundation enables the redundancy, the precision, and the control required for higher levels of automation. Now I'll hand it over to Mike Bierlein for the financial review.

Thanks, Robin, and good day, everyone. Next year delivered a record year in 2025, reaching $4.6 billion. On an adjusted basis, excluding foreign exchange and commodity impacts, the revenue increased by 0.9% year over year, outperforming the market by approximately 320 basis points. Importantly, all three regions delivered growth. supported by strong production schedules. Profitability continues to improve. EBITDA grew 11.2% year-over-year, margins expanding by 40 basis points. We generated positive free cash flow of $100 million, and the sheet remains strong, ending the year with $414 million of net cash. From a growth and visibility standpoint, we secured 4.9 billion of customer program during 2025, including two Steer by Wire program awards, reinforcing our long-term growth outlook. Finally, reflecting our confidence in next year's financial strength, our board approved a 46 million dividend representing a 45% up from 35% in 2024. This confirms our commitment to discipline and increasing shareholder returns. This slide highlights our key financial metrics for 2025, revenue, EBITDA, net profit, and free cash flow, and demonstrates solid improvement across our core earnings profile. Revenue reached $4.6 billion in 2025, up 7.2% year-over-year, reflecting favorable volumes and execution on new and conquest program launches. EBITDA increased to $472 million, representing an 11.2% increase versus 2024, with to 10.3%. driven by favorable volume and improved operating performance. Attributable to equity holders was $102 million, or $2.2 million, compared to $62 million in 2024. This includes $64 million of net impairment costs driven by customer program cancellations. While we recognized a similar net impairment cost of $23 million a year ago, for these one-time items, our net income would be $126 million or $2.7 million in 2025. Free cash flow was $124 million compared to $166 million in 2024. Improvements in EBITDA by a favorable tax benefit received in 2024 and support growth. Overall, 2025 represents a year of improved earnings quality supported by stronger volumes and operating performance. This slide shows a walk of 2024 revenue to 2025 revenue. favorable foreign exchange increased revenue by $15 million, driven by the euro's strengthening compared to the U.S. dollar. As noted here, the largest driver of the year-over-year increase in revenue was represented by volume, pricing, and others, which provided an uplift of $193 million, driven by strong customer schedules and above-market APAC continued to lead with revenue growth OEMs. Finally, commodity prices reduced slightly, causing a year-over-year increase of $1 million. This slide shows our year-over-year revenue growth versus the market in 2025. Adjusted for foreign commodity prices. On a global basis, Next Year delivered 6.9% adjusted growth year-over-year, outperforming the market by approximately 320 basis points. Looking at the regions, North America revenue increased by 4.4% year-over-year and 5.4% above market as our customer programs continue to perform well in the market. APAC continued to lead with 10.2% year-over-year growth and 3.1% growth over market, underscoring the strength of our regional execution and customer portfolio. EMASA delivered strong growth with 8.5% year-over-year revenue increase and 9.5% above market, supported by program ramp-ups. This is our revenue performance by region and highlights both the mix and growth dynamics across. The left total revenue increase from 4.3 billion in 2024. Billion in 2025. From a mixed standpoint, North America remain. Region at 50% of total revenue. With a pack at 32% and Overall, the regional mix remains balanced, continued growth in APAC. Turning to the regional growth performance on the right, North America revenue of 2.3 billion increased 4.4% year over year. APAC delivered strong growth of 9.8% or 10.2% excluding FX and commodity impacts. supported by sustained momentum from new and conquest program launches over the past several years, and our leading position with EMA SA revenue increased 11.4% year over year, or 8.5% excluding FX and commodity impacts, driven primarily by conquest program volume ramp-ups. This slide walks through the year over year change in EBITDA from 2024 to 2025. EBITDA increased from $424 million in 2024 to $472 million in 2025, representing an 11.2% year over year increase, with margins expanding from 9.9% to 10.3% of revenue. Starting with the key drivers, volume and mix contributed 59 million, reflecting higher revenue and improved operating leverage across the business. These gains were partially offset by 10 million related to troubled supplier costs, as well as 10 million of net tariff impact, both of which pressured year-over-year performance in North America. Restructuring cost was $9 million in 2025, which was equal to our restructuring cost in 2024. Restructuring costs were primarily to support a further 15% reduction in U.S. salaried employment in 2025, as we continue to focus on optimizing our cost structure to improve margins. related to the transfer of the columns operation from the U.S. to Mexico, which is nearing completion. All other performance factors contributed 9 million, reflecting continued improvement in manufacturing and material performance, more than offsetting price reductions in economics. This slide highlights our EBITDA and margin performance by region in 2020. Starting with North America, EBITDA was 174 million in 2025 compared with 178 million in 2024. Margin declined from 8.1% to 7.6% as margin improvement initiatives were more than offset by troubled supplier and net tariff costs. APAC EBITDA increased to 243 million, up from 230 million in the last year. Driven by continued strong revenue growth, EBITDA margins remained robust at 18.6%. APAC continues to deliver solid earnings growth supported by increased scale and operating execution. In EMEA S8, EBITDA increased significantly to $69 million, up from $36 million in 2024. EBITDA margins expanded from 5% to 8.6%, driven by improving operating efficiency and revenue growth. reflecting meaningful year-over-year progress in the region. This slide shows our EBITDA net profit walk for 2025. Overall, the year-over-year 48 million in EBITDA increase is driving the net profit increase from 62 million to Depreciation and amortization totaled $309 million in 2020, broadly flat versus last year. DNA includes depreciation property and equipment, as well as amortization of intangible assets. The results include program impairment charges recorded in 2025. and $23 million in 2024, primarily related to North America EV program reductions. We continue to work with our customers on cost recoveries. Operating profit increased to $163 million last year, reflecting the stronger EBITDA performance. The low operating profit, JV, earnings increased modestly, driven mainly by contributions from our chunk . Income tax expense increased to $55 million compared with 42 . This increase was primarily driven by improved profitability. Our remains valuation allowance position. driving our effective tax rate to be elevated for 2025 compared to 36% in 2024. Continues to improve in the U.S., our effective tax rate will continue to reduce. For 2026, the forecast for effective tax rate is below 30%. The tax rate remains in the high teens. the balance sheet and cash flow. On the left of the slide, you can see our full year 2025 cash flow performance compared with 2024. Cash from operating at 5 million in 2025 was 41 million lower than 2024. Increased EBITDA was offset by a one-time favorable tax benefit in 2024 by a net investment in working capital to support growth. Cash used in investing activities totaled $281 million in 2025, largely in line with the last year. Overall, free cash flow was strong at $124 million. 25 with $501 million of cash on hand and gross debt of only $50 million. with finance leases of 37 million, resulting in a net cash cap of 414 million at year end. Total liquidity stood at 833 million, comprised of 501 million of cash and 332 million of committed credit facilities, providing significant financial flexibility. Turning to our 2026 operating considerations. Expectations for modestly lower global OEM production in 2026. We remain on track to deliver another year of record revenue. We expect above market revenue growth in 2026 of approximately two to three points. driven primarily by continued growth in APAC, particularly in China as both global and domestic OEMs. perspective, we expect continued margin expansion, benefiting from net performance, increased volume leverage. Our motion by wire portfolio continues to build momentum. with additional order opportunities anticipated and initial revenue recognition expected to begin in 2026, marking an important milestone in the commercialization of this technology. At the same time, geopolitical risks, including ongoing conflicts and trade tensions, we remain vigilant and continue to These risks through close engagement with customers, suppliers, and our global operating footprint. Next year's long-term investment opportunity remains compelling, supported by above market revenue growth, continued margin expansion through operational efficiency and execution. Our leading position in motion by wire technology, and a strong balance sheet enabling strategic investments and increasing shareholder returns. In closing, Nextier has a well-defined strategy focused on technology leadership, portfolio alignment with megatrends, disciplined cost management, and targeted growth in China and emerging markets. Thank you for joining us today. Operator Jamie, please open the line for Q&A.

And ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then phones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. Questions, you may and two. Again, that is star and then one to ask a question. We'll pause momentarily to assemble the roster. And our first question today, Morgan Stanley. Please go ahead with your question.

Thank you for taking my questions. I have two questions. The first is about our new products. And it's good to see the progress on the RFC About Wired project link. in the long term, are we more focused on the CFR wire itself or we target to provide like the integrated solutions, maybe including the CFR wires like the EMB. And then if it's the integrated one, then what's our advantage if comparing to other . So this is my first question. And my second question is about the impairments and the compensation. And they have found the financial statement, which is we booked the 24 million customer compensation in 2004, but only eight last year. So are we expected to receive more compensations this year or eight million is all for the cancellations last year? Yeah, so that's my second question.

Okay. Thank you, Shelly. This is Robin. I'll take the first question that you had, and then I'll turn it over to Mike to address your second question. So in terms of the new product strategy, certainly we've been developing our steer-by-wire product for a number of years now in the market, especially in the China market with steer-by-wire. production launches that will start this year. And as a part of this by wire technology, our intention is to be a chassis motion by wire supplier. So that is the reason for the recent development of our electromechanical braking system. Go milestone in the chassis by wire system that we need to fulfill. So I will The advantage that we will have in this market, obviously, when you think about braking, we don't have a long history of braking as a company. However, we are very experienced in safety-critical vehicle systems, and the EMD product shares a lot of commonality with electric power steering in terms of the electric motor, the actuator, the electronics, the software. It's very scalable and it builds on those critical technology building blocks with . We see a lot of potential to increase our scale and really drive competitiveness by wire and the EMB products together. In addition, we don't have legacy investments in hydraulic braking. So we're really free from the older technology that will be phasing out. And we are entering in this technology shift in to electric braking. So we believe that is also an advantage for us. In the third event, our partnership that we have developed with the China OEMs, I noted that we had 17 customers our brake-by-wire vehicles in our winter testing. There is significant interest from many of the China OEMs to support next year, and we believe that relationship will lead to business sourcing for both steer-by-wire and EMB, and that will enable us to enter the braking market globally at some point in the near future. With that, let me hand it over to Mike for part two of your question, Shelley.

Thanks for the question, Shelly. Certainly a challenging situation in North America with the and support from government programs to support the electric vehicles. So, each of our three major customers within North America determined to, or significantly reduced volumes on their EV truck and SUV platforms toward the end of the year of 2025. We did record $32 million of impairments between write-offs for our engineering intangible assets, as well as specific, say, machinery and equipment. We did that netted us down to $24 million on a P&L impact for the year. And because the program cancellations happened toward the end of the year, we were to fully negotiate the recoveries with our customers, and we do expect to receive recoveries yet in 2026. Now, we also have to across our supply chain as certainly we have costs that and our supply base have incurred relative to these program cancellations as well. To answer your question, expect to recover this further cost to offset these write-offs in 2026.

And our next question comes from Jiayi Shi from Gaitai Haitong Securities. Please.

Oh, thank you for taking my question. And I'm just wondering how much would you estimate the growth of revenue of each area in 2096? Thank you.

Yeah, same. for the questions and certainly, you know, considering the dynamic environment facing in 2006, there has been certainly a mix of impacts on our revenue outlook forecast. As I mentioned, we are expecting our revenue to grow on a year-over-year basis above market And with that, we are at this point anticipating market volumes to be lower by about 1% for the year. And I think that the 1% really depends on how this geopolitical conflict between the US, Israel, and Iran ends up playing out over the years. over the year, hopefully the conflict ends sooner. Our forecast is, of course, assuming a short-term conflict with that. So, from a volume perspective, we are seeing that most of our growth over market will be in Asia Pacific. So, you can think about this 200 to 300 basis points growth being largely in Asia Pacific. From an earnings profile, we do see a continued margin expansion. And if you think about breaking that down then by region, I continue to challenge our Asia Pacific region to maintain profit margins in around the 16 to 17% EBITDA range. And we continue to see improvement in momentum in our EMA essay. So, you can expect added improvements in EMA essay. We see improvements in North America as we have charges related to troubled suppliers and net tariff costs within North America.

Once again, if you would like to ask a question, please press star and withdraw. You may press star and two. Again, that is star and then one. Join the question. And at this time, in showing no additional questions, we would like to thank you for the questions. If there are any further queries, please contact us at investors at nextyear.com. The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

Thank you, Jamie.