Q4 2023 Visteon Corp Earnings Call

Ryan Brinkman: Good morning, I'm Ryan Wendling, Vice President of Investor Relations and Treasurer. Welcome to our earnings call for the fourth quarter and full year 2023. Please note this call is being recorded, and all lines have been placed on listen only mode to prevent background noise.

Good morning, I'm, Ryan Wentling, Vice President of Investor Relations and Treasurer.

Welcome to our earnings call for the fourth quarter and full year 2023.

Speaker Change: Please note. This call is being recorded and all lines have been placed on listen only mode to prevent background noise.

Unnamed Speaker: Before we begin this morning's call, I'd like to remind you that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks, and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the page entitled Forward-Looking Information for additional details. Presentation materials for today's call were posted in the investor section of Visteon's website this morning.

Speaker Change: Before we begin this morning's call I'd like to remind you that this presentation contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Speaker Change: Forward looking statements are not guarantees of future results and conditions, but rather are subject to various factors risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements.

Speaker Change: Please refer to the page entitled forward looking information for additional details.

Speaker Change: Presentation materials for today's call were posted on the investors section of <unk> website. This morning.

Ryan Brinkman: Please visit investors.visteon.com to download the materials if you have not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer, and Jerome Roquet, Senior Vice President and Chief Financial Officer. We have scheduled the call for one hour, and we'll open the lines for your questions after Sachin and Jerome's remarks.

Speaker Change: Please visit investors that visteon dot com to download the material if you have not already done so.

Speaker Change: Joining us today, our stocks on the one day, President and Chief Executive Officer, and Jerome Roquet, Senior Vice President and Chief Financial Officer.

Speaker Change: We have scheduled the call for one hour and we'll open the lines for your questions after assumptions and drums remarks. Please.

Sachin S. Lawande: Please limit your questions to one and one follow-up. Thank you for joining us. Now, we will turn the call over to Sachin.

Speaker Change: Please limit your questions to one question and one follow up.

Speaker Change: Thank you for joining US now I will turn the call over to function.

Sachin S. Lawande: Thank you, Ryan. And good morning, everyone. Thank you for joining our fourth quarter and full year 2023 earnings call. I would like to start with a summary of our full year performance, as outlined on page 2. In 2023, our team demonstrated our commitment to excellence across customers, operations, and financials. We delivered record performance across many of our metrics and further strengthened our foundation for long-term growth. We increased our base sales by about $400 million, or 12% when removing the impact of supply chain recoveries. Our full year sales reached $3.95 billion. The demand for our products is strong, as car makers respond to the trends of digitalization and electrification, and the company delivered another year of strong product sales growth with digital clusters up more than 30%, smart core up by more than 20%, and BMS more than doubling compared to the prior year. Adjusted EBITDA was $434 million at a margin of 11% of sales.

Jerome Roquet: Thank you Ryan and good morning, everyone. Thank you for joining our fourth quarter and full year 2023 earnings call.

Function: I would like to start with a summary of our full year performance as outlined on page two.

Function: In 2023, our team demonstrated a commitment to excellence across customers operations and financials.

Function: They delivered a record performance across many of our metrics and further strengthened our foundation for long term growth.

Function: The increased our base sales by about $400 million or 12% when removing the impact of supply chain recoveries.

Function: Our full year sales reached $3 $95 billion.

Function: The demand for our products is strong as car makers respond to the trends of digitalization and electrification and the company delivered another year of strong product sales growth with digital clusters up more than 30% smartphone up by more than 20% and BMS more than doubling compared to the prior year.

Function: Adjusted EBITDA was $434 million at a margin of 11% of sales.

Sachin S. Lawande: We improved our margin by 170 basis points over the prior year, driven by strong growth as well as our excellent operational performance. Our adjusted EBITDA came in above the midpoint of our guidance issued last year and at the beginning of the year. Adjusted free cash flow was $150 million in 2023.

Function: We improved our margin by 170 basis points over the prior year, driven by strong growth as well as an excellent operational performance.

Function: Our adjusted EBITDA came in above the midpoint of our guidance issued last year and at the beginning of the year.

Function: Adjusted free cash flow was $150 million in 2023.

Sachin S. Lawande: Our focus on cash flow conversion has yielded great results, with a 35% conversion of adjusted EBITDA to adjusted free cash flow for the year. We have also performed very well in strengthening our foundation for future growth. We launched a high number of products on vehicle models in 2023, which will drive our sales growth in the coming quarters. We also won over $7 billion of new business, a record performance for the company, which will help sustain our growth in the midterm as these programs get into production. We expanded both our product and customer portfolio in 2023 with the acquisition of Battery Junction Box Business and the addition of three customer logos for digital cockpit products. We repurchased $106 million of shares during the year, delivering on our balanced capital allocation strategy. I will provide more details on a strong 2023 performance as well as our outlook for sales for 2024 and 2026 on the following pages before handing it over to Jerome to discuss the financials. Turning to page three.

Function: Our focus on cash flow conversion has yielded great results.

Function: The 35% conversion of adjusted EBITDA to adjusted free cash flow for the year.

Function: He also performed very well in strengthening our foundation for future growth.

Function: Launched a high number of products on vehicle models in 2023, which will drive our sales growth in the coming quarters.

Function: We also won over $7 billion of new business a record performance for the company.

Function: Which will help sustain our growth in the midterm as these programs get into production.

The expanded both our product and customer portfolio in 2023 with the advent of battery junction box business and the addition of three customer logos for digital cockpit products.

Function: We repurchased $106 million of shares during the year delivering on our balanced capital allocation strategy.

Function: I will provide more details on our strong printer quantity performance as well as our outlook for sales for 2024, and <unk> 26 on the subsequent pages before handing it over to Jerome to discuss the financials.

Jerome Roquet: Turning to phase III.

Sachin S. Lawande: This slide shows our base sales growth since the recovery of the industry from the lows of COVID-19 and the subsequent semiconductor supply shortages. The company has done a great job of executing its strategic plan and growing its base sales by about a billion dollars over the two years of 2022 and 2023, reflecting the high demand for our digital cockpit and electrification products. In 2023, we continued our focus on executing our strategic objectives and delivered another year of strong base sales growth of 12% year over year. Our sales growth would have been higher without a couple of one-timers in Q4 that, combined with the negative customer mix in China, cost us a few points of growth. We were impacted by the timing of the roll-off of some older programs and the slower ramp-up of follow-on and new programs that created a temporary air pocket in our quarterly sales growth, and the UAW strike at our Detroit customers impacted our quarterly sales by about $20 million. We also experienced a more negative customer mix in China in Q4 than the rest of the year.

Jerome Roquet: This slide shows our base sales growth since the recovery of the industry from the lows of COVID-19, and the subsequent semiconductor supply shortages.

Jerome Roquet: The company has done a great job of executing our strategic plan and growing its base sales by about $1 billion over the two years of 2022 and 2023, reflecting the high demand for our digital cockpit in electrification products.

Jerome Roquet: In 'twenty to 'twenty three we continued our focus on executing our strategic objectives and delivered another year of strong base sales growth of 12% year over year.

Jerome Roquet: Our sales growth would have been higher without a couple of one timers in Q4 that combined with the negative customer mix in China caused us a few points of growth.

Jerome Roquet: We were impacted by the timing of the roll off of some older programs and the slower ramp up of follow on and new programs that created a temporary air pocket in our quarterly sales growth.

Jerome Roquet: And the UAW strike at a Detroit customers impacted our quarterly sales by about $20 million.

Jerome Roquet: We also experienced a more negative customer mix in China in Q4 than the rest of the year.

Sachin S. Lawande: I would also like to highlight some of our key accomplishments for 2023 that set the stage for continued high performance in 2024 and beyond. Our digital cockpit products, including digital clusters, smart core, and infotainment, performed very well in 2023 as the trend of digitalization continues to gain momentum in the industry. Sales of digital clusters were strong as recently launched products ramped up in production, and we solidified our position as the global market share leader in this product category. Just over half of our total cluster shipments were digital clusters, compared to about a third for the industry. We strengthened our position in cockpit domain controllers by launching a smart core system with two new customers, Harley-Davidson in the U.S. and JMC Ford in China. This brings the current number of smart core customers to 8 OEMs, which is probably the most for any Tier 1 supplier in this category, considering how challenging it is to launch these complex systems.

Jerome Roquet: I would also like to highlight some of our key accomplishments for 2023 that sets the stage for continued outperformance in 2024 and beyond.

Jerome Roquet: Our digital cockpit products, including digital clusters, smart core and infotainment performed very well in 2023 is the trend of digitalization continues to gain momentum in the industry.

Jerome Roquet: Sales of digital clusters was strong as recently launched products ramped up in production and.

Jerome Roquet: And we solidified our position as the global market share leader in this product category.

Jerome Roquet: Just over half of October cluster shipments with digital clusters compared to about a third for the industry.

Jerome Roquet: We strengthened our position in cockpit domain controllers by launching a smart core system with two new customers Harley Davidson in the U S and GMC Ford in China.

Jerome Roquet: This brings the number of smart core customers two eight Oems, which is probably the most for any tier one supplier in this category considering how challenging it is to launch this complex systems.

Sachin S. Lawande: Sales of SmartCore had another year of robust growth, and the new launches will help this product line to continue to grow in the coming quarters. We moved up in the value chain in our digital cockpit products with new vision and cloud software solutions that are unique amongst our peers. Our latest infotainment and smart core systems offer advanced camera-based driver monitoring and surround view features that are fully implemented in software, which avoids the need for separate and dedicated ECUs as is the case today. This in-house developed software demonstrates the growing capabilities at Visteon in terms of developing automotive-specific applications.

Jerome Roquet: Sales of Smart core had another year of robust growth and the new launches will help this product line to continue to grow in the coming quarters.

Jerome Roquet: We moved up in the value chain in our digital cockpit products with new vision in cloud software solutions that are unique amongst our peers.

Jerome Roquet: Our latest infotainment smart water systems offer advanced camera based driver monitoring and surround with features that are fully implemented in software, which avoids the need for separate and dedicated easy use as is the case today.

Jerome Roquet: This in house developed software demonstrates the growing capabilities that visteon in terms of developing automotive specific applications.

Sachin S. Lawande: Last month at CES, we displayed the first cockpit domain controller with integrated Level 1 and Level 2 ADAS features, including driver monitoring, which is the next level of cockpit electronics integration that we believe will be a competitive advantage in the future. We followed up on our first all-go App Store win from the third quarter with two additional connected services wins in the fourth quarter, one with a global OEM and the other on a two-wheeler. Our app store technology continues to mature, and we added several popular apps, including Spotify, Amazon Music, and Reliance Jio, that make it a compelling solution for connected cockpits.

Jerome Roquet: Last month at CES, we displayed the first cockpit domain controller with integrated level, one and level two adas features including driver monitoring.

Jerome Roquet: As the next level of cockpit electronics integration that we believe will be a competitive advantage in the future.

Jerome Roquet: We followed up on our first all go at store wins from the third quarter with two additional connected services wins in the fourth quarter, one with a global OEM and the other on a two liter.

Jerome Roquet: Our App store technology continues to mature.

Jerome Roquet: And we added several popular apps, including Spotify, Amazon music and reliance <unk> that makes it a compelling solution for connected cockpits.

Sachin S. Lawande: We launched our BMS product on multiple electric vehicle models with GM in 2023 and made good progress with two other OEMs that will go into production in 2024. We also won our first power electronics business for a smart battery junction box, extending our electrification product line beyond BMS. This is a very important milestone for Visteon, and we believe electrification offers us the potential to expand our product portfolio and consolidate battery electronics similar to what we have done in the cockpit. Lastly, as I mentioned earlier, we added three new customers in 2023, demonstrating the success of our go-to-market strategy. Over the past three years alone, we have added 18 customer logos. This is a testament to the work that the team has put in developing relationships with prospective customers and winning business with them. Turning to page four.

We launched our BMS product on multiple electric vehicle models with G. M. In 2023 and made good progress with two other Oems that will go into production in 2024.

Jerome Roquet: We also won our first power electronics business for the Smart battery junction box, extending our electrification product line beyond BMS.

Jerome Roquet: This is a very important milestone for Visteon and we believe electrification offers us the potential to expand their product portfolio and consolidate battery electronics similar to what we've done in the cockpit.

Jerome Roquet: Lastly, as I've mentioned already we added three new customers in 2023, demonstrating the success of our go to market strategy.

Jerome Roquet: Over the past three years alone we have added 18 customer logos.

Jerome Roquet: This is a testament to the work that the team has put in developing relationships with prospective customers and winning business with them.

Jerome Roquet: Turning to page four.

Sachin S. Lawande: We had a successful year of product launches in 2023, with 129 products launched on vehicle models across 24 different passenger, commercial, and two-wheeler OEMs around the world. About 45% of the launches were for digital clusters, highlighting the continued growth of the largest product line at Visteon. With global market penetration at about 35%, there is still plenty of runway for growth for digital clusters. Our other digital cockpit products, such as the smart core, infotainment, and displays, accounted for another 35%, and the remainder were BMS and other products. From a regional perspective, about half of our launches were with customers in Asia, which saw higher new model launch activity in 2023 than other regions. About a third were in Europe, and the rest were in North America.

Jerome Roquet: We had a successful year of product launches from 'twenty to 'twenty three with 129 products launched on vehicle models across 24 different passenger commercial and tubular Oems around the world.

Jerome Roquet: About 45% of the launches were for digital clusters, highlighting the continued growth of the largest product line at Visteon.

Jerome Roquet: With global market penetration at about 35% that is still plenty of runway for growth for digital clusters.

Jerome Roquet: Our other digital cockpit products, such as smart core infotainment and displays accounted for another 35% and the remainder with BMS and other products.

Jerome Roquet: From a regional perspective about half of our launches that with customers in Asia, which saw higher new model launch activity in 2023 and other regions.

Jerome Roquet: About a third but in Europe, and the rest were in North America.

Sachin S. Lawande: Our digital cockpit products are powertrain agnostic, and digital clusters, infotainment, smart core, and displays are well suited for both ICE and electric vehicles. During 2023, approximately 15% of our launches were on electric vehicles, including multiple vehicle models with our BMS system with GM. These launches will be the main driver of our BMS sales growth in 2024. Now, I would like to highlight several of our key fourth quarter launches. In China, we launched a Smart Core Cockpit Domain Controller and a 12-inch display with JMC Ford for the Ranger, our first with this customer.

Jerome Roquet: Our digital cockpit products powertrain agnostic and digital clusters infotainment smart core and displays are well suited for both ice and electric vehicles.

Jerome Roquet: During 2023, approximately 15% of our launches were on electric vehicles, including multiple vehicle models with our BMS system that G M.

Jerome Roquet: These launches of the main driver of our BMS sales growth in 2024.

Jerome Roquet: Now I would like to highlight several of our key fourth quarter lunches.

Jerome Roquet: In China, we launched a smart core cockpit domain controller, and a 12 inch display with GMC afford for the Ranger are first with this customer.

Sachin S. Lawande: There are additional vehicle models planned for launch with this product in the coming quarters, and we expect this customer to represent a significant source of future growth. We also launched a smart core system and a dual 10-inch digital cluster and display system on the Mahindra XUV400, which is the first electric SUV launched by that OEM for the Indian market. This launch builds on the strong relationship we have with Mahindra and the continued inroads we have made with OEMs in the fast-growing Indian market. Lastly, we launched a 12-inch digital cluster on the Nissan Rogue for the North American market. This represents content for one of the best-selling SUVs in the market and reinforces our ability to deliver value as a key supplier to Japanese OEMs, which continue to be amongst the top-selling brands in North America. Turning to page five.

Jerome Roquet: There are additional vehicle models planned for launch with this product in the coming quarters, and we expect this customer to represent a significant source of future growth.

Jerome Roquet: We also launched our smart hoist system and a dual tenants district cluster and display system on the Mahindra excuse me 400.

Jerome Roquet: Which is the first electric SUV launched by that OEM for the Indian market.

Jerome Roquet: This launch builds on the strong relationship we have with Mahindra and the continued inroads they've made with Oems in the fast growing Indian market.

Jerome Roquet: Lastly, we launched a 12 inch digital cluster on the Nissan Rogue for the North American market.

Jerome Roquet: This represents content on one of the best selling Suvs in the market and reinforces our ability to deliver value as a key supplier to Japanese Oems, which continue to be amongst the top selling brands in North America.

Jerome Roquet: Turning to page five.

Sachin S. Lawande: Our product and technology portfolio is one of the best in the industry when it comes to addressing the trends of digitalization and electrification and is the key driver of our new business wind performance. We won $1.4 billion in new business in the fourth quarter, bringing our total wins for the year to $7.2 billion, a record new business win total for the company. The product mix in full year new business wins was well diversified across the product portfolio and powertrains.

Jerome Roquet: Our product and technology portfolio is one of the best in the industry. When it comes to addressing the trends of digitalization and electrification and is the key driver of our new business win performance.

Jerome Roquet: The $114 billion in new business in the fourth quarter, bringing our total wins for the year to $7 2 billion a record new business wins total for the company.

Jerome Roquet: The product mix in our full year, new business wins was well diversified across our product portfolio and powertrains.

Sachin S. Lawande: We had substantial new business wins for ICE, EV, and cross-powered train platforms, as well as several extensions of current ICE platforms. SmartCore and Infotainment made up almost 40% of the total, including a significant conquest win with a European luxury OEM and several platform wins with global OEMs. Our electrification wins were primarily extensions of BMS business with current customers, including the addition of new models and extension of production until 2030. It also includes the strategic win of our first power electronics product for a battery junction box with a European OEM. We further build on our leadership position in digital clusters with a high number of new business ventures and one display business across several OEMs. And importantly, we've added three significant new OEM logos for our digital cockpit business in 2023, with significant potential to grow our business with them in the future.

Jerome Roquet: We had substantial new business wins for ice EV and cross powertrain platforms as well as several extensions of current ice platforms.

Jerome Roquet: Smart core in infotainment made up almost 40% of the total including a significant conquest win with a European luxury OEM and several platform Vince with global Oems.

Our electrification Vince we're primarily extensions of BMS business with current customers, including the addition of new models and extension of production until 2030.

Jerome Roquet: It also includes the strategic win of a first part electronics product for the battery junction box with a European OEM.

Jerome Roquet: We further built on our leadership position in digital clusters with the high number of new business wins.

Jerome Roquet: And one displays business across several Oems.

Jerome Roquet: And importantly, we've added three significant new OEM logos for our digital cockpit business in 2023 with significant potential to grow our business with them in the future.

Sachin S. Lawande: On the right side of the page, we highlight a few key wins for the fourth quarter. We had two significant wins during the fourth quarter for our upgraded Android-based infotainment system. While cockpit domain controllers like SmartCore that use high-performance silicon are great for the mid and upper end of the market, mass-market, high-volume vehicles need more cost-effective solutions that also offer highly valued features such as camera-based rear and surround-view systems, natural language voice assistant, smartphone projection with CarPlay and Android Auto, and with the choice of connected apps and over-the-air software updates.

Jerome Roquet: On the right side of the page, we highlight a few key events for the fourth quarter.

Jerome Roquet: We had two significant wins during the fourth quarter for our updated Android based infotainment system.

Jerome Roquet: While cockpit domain controllers like Smartwater that use high performance silicon are great for mid and upper end of the market.

Jerome Roquet: Mass market high volume vehicles need more cost effective solutions that also offer highly valued features such as camera based career in Sudan with system <unk>.

Jerome Roquet: <unk> language voice assistant.

Jerome Roquet: Smartphone projection with currently in Android auto and with the choice of connected apps and over the air software updates.

Sachin S. Lawande: Our upgraded Android-based infotainment products offer a very attractive value proposition to car makers, especially in the mass market segment of the industry. Since it's developed as a platform solution with a high degree of reuse, we can develop and launch this infotainment system with multiple customers faster than our peers. The first win is for a B-segment compact SUV platform with a global OEM that will launch on four SUV models in multiple Asian markets starting in early 2025. The second win is with an Indian OEM and will feature on multiple vehicle models that launch at the beginning of next year. Both these systems come with a 10-inch display that's also supplied by Visteon.

Jerome Roquet: Our updated Android based infotainment products offer a very attractive value proposition to car makers, especially in the mass market segment of the industry.

Jerome Roquet: Since its developed as a platform solution with a high degree of reuse, we can develop and launch this infotainment system with multiple customers faster than our peers.

Jerome Roquet: The first win is for our beef segment compact SUV platform with a global OEM if a launch on for SUV models in multiple Asian markets starting in early 2025.

Jerome Roquet: The second win is with an Indian OEM and will feature on multiple vehicle models that launched at the beginning of next year.

Jerome Roquet: Both these systems come attendance display that's also supplied by Visteon.

Sachin S. Lawande: The third win I would like to highlight is for a 12-inch digital cluster and a 13-inch center display on a luxury SUV platform with a German luxury OEM. This is a follow-on win for the electric version of a platform that we won the ICE version of last year. Turning to page 6.

Jerome Roquet: The third win over I'd like to highlight its for a 12 inch digital cluster and the 13 inch center display on a luxury SUV platform with a German luxury OEM.

Jerome Roquet: This is a follow on win for the electric version of our platform that we've won the ice versus last year.

Jerome Roquet: Turning to page six.

Sachin S. Lawande: On this page, I would like to share our outlook for 2024 for the industry and Visteon. We are anticipating another year of strong sales growth for the company in 2024 with double-digit market performance. We are expecting 2024 global vehicle production to be largely in line with S&P Global's January forecast of down slightly as compared to 2023. However, our customer's vehicle production is expected to be slightly more negative, at about 1% down year over year. From a regional perspective, customer vehicle production is expected to be slightly higher in North America, largely due to the non-recurrence of the UAW strike, while it is expected to modestly decline in Europe and China. However, forecasting electric vehicle production has become much more challenging over the past year.

Jerome Roquet: On this page I would like to share our outlook for 2024 for the industry and Visteon.

Jerome Roquet: We are anticipating another year of strong sales growth for the company in 2024 with the double digit market outperformance.

Jerome Roquet: We're expecting 2024 global vehicle production to be largely in line with the S&P Global's January forecast of down slightly as compared to 2023.

Jerome Roquet: Our customers' vehicle production is expected to be slightly more negative at about 1% down year over year.

Jerome Roquet: From a regional perspective customer vehicle production is expected to be slightly higher in North America, largely due to non recurrence of the UAW strike, while it is expected to modestly decline in Europe and China.

Jerome Roquet: Forecasting electric vehicle production has become much more challenging over the past year.

Sachin S. Lawande: In addition to the EV vehicles already launched with our BMS products with GM, we have several additional launches this year with GM as well as new launches with two other OEMs that should drive higher sales for BMS in 2024. Nevertheless, our outlook considers a more conservative EV vehicle production than customer forecasts and is more in line with S&P Global. Turning to the supply chain, we expect a much improved environment for semiconductors this year.

Jerome Roquet: In addition to the EV vehicles already launched with our BMS products with GM.

Jerome Roquet: Several additional launches this year, the GM as well as new launches with two other Oems This should drive higher sales for BMS in 2024.

Jerome Roquet: Nevertheless, our outlook considers a more conservative EV vehicle production than customer forecasts and is more in line with S&P global.

Jerome Roquet: Turning to the supply chain, we expect a much improved environment for semiconductors this year.

Sachin S. Lawande: As a result, we forecast a lower need for open market purchases and resulting recoveries from our customers. Our growth over market expectations is based on the ramp-up of the products we launched throughout 2023 and the additional launches planned in 2024. As these launches ramp up in production, we expect a modest rebound in Q1 from the lower growth over market in Q4 of last year and expect it to accelerate throughout 2024. For the full year, we are anticipating a growth over market of low double digits in the 10-12% range. Turning to page 7.

Jerome Roquet: As a result, we forecast a lower need for open market purchases and resulting recoveries from our customers.

Jerome Roquet: Our growth over market expectations are based on the ramp up of the products with launch throughout 2023 and the additional launches planned in 2024.

Jerome Roquet: As these launches ramp up in production, we expect a modest rebound in Q1 from the lower growth over market in Q4 of last year and expect it to accelerate throughout 2024.

Jerome Roquet: For the full year, we're anticipating a growth over market of low double digits in the 10% to 12% range.

Jerome Roquet: Turning to page seven.

Sachin S. Lawande: Looking beyond 2024, we expect our market performance to continue as we execute our strategic growth plan. We have an attractive multi-year growth profile that is supported by an industry-leading product portfolio targeting two fast-growing domains of automotive electronics, the cockpit and the electric powertrain. Visteon's growing capabilities in automotive electronics and software are very well suited to take advantage of the opportunities created by the megatrends of digitalization and electrification that are changing the industry in a fundamental manner, and our proven operational and commercial excellence means that this growth comes with strong returns and cash flow generation.

Looking beyond 2024, we expect our market our performance to continue as we execute our strategic growth plan.

Jerome Roquet: We have an attractive multi year growth profile that is supported by an industry, leading product portfolio targeting two fast growing domains of automotive electronics, the cockpit and the electric powertrain.

Jerome Roquet: <unk> growing capabilities in automotive electronics and software is very well suited to take advantage of the opportunities created by the Mega trends of digitalization and electrification, that's changing the industry and the fundamental manner.

Jerome Roquet: And our proven operational and commercial excellence means that this growth comes with strong returns and cash flow generation.

Sachin S. Lawande: We are targeting $5 billion in sales in 2026. That's an increase of over $1.2 billion when removing the impact of supply chain recoveries and represents low double-digit growth over the market annually over the three-year period. The fundamentals of the business remain strong and have not changed substantially from early 2023 when we gave our midterm outlook on our investor day. The main drivers of growth through 2026 remain our digital cockpit and BMS products. What has changed are some market dynamics that we have been highlighting for the past few quarters. As you can see on the bottom right of the page, there are three primary factors driving the reduction in sales compared to our original $5.5 billion target. First, the 2026 vehicle production forecast for our customers has been reduced by about 4% compared to the forecast from early 2023. Second, lower EV demand throughout the forecasting period has affected both our BMS and digital cockpit product sales on EV platforms.

Jerome Roquet: We are targeting $5 billion in sales in 2026.

Jerome Roquet: That's an increase of over $1 $2 billion, when removing the impact of supply chain recoveries and representing low double digit growth over market annually over the two year period.

Jerome Roquet: The fundamentals of the business remains strong and they have not changed substantially from early 2023, when we gave our midterm outlook on our Investor day.

Jerome Roquet: The main drivers of growth through 2026 remain our digital cockpit and BMS products.

Jerome Roquet: It has changed some market dynamics that we have been highlighting for the past few quarters.

Jerome Roquet: As you can see on the bottom right of the page. There are three primary factors driving the reduction of sales compared to our original $5 5 billion dollar target.

Jerome Roquet: First the 2026 vehicle production forecast for our customers has been reduced by about 4% compared to the forecast from early 2023.

Jerome Roquet: Second lower EV demand throughout the forecasting period has affected both our BMS and digital cockpit product sales on EV platforms.

Jerome Roquet: Lastly, the growth of domestic Chinese Oems share of the China market at the expense of international brands, where they have stronger relationships is lowering our expectations in that region.

Jerome Roquet: Overall, we have a strong foundation for growth and are confident in achieving our 2026 targets.

Jerome Roquet: And we do not expect our growth to stop in 'twenty or 'twenty six the new business wins that we secured in 'twenty to 'twenty three are largely expected to launch in 2026 and beyond.

Sachin S. Lawande: Lastly, the growth of the domestic Chinese OEM share of the Chinese market at the expense of international brands where we have stronger relationships is lowering our expectations in that region. Overall, we have a strong foundation for growth and are confident in achieving our 2026 targets. And we do not expect our growth to stop in 2026. The new business wins that we secured in 2023 are largely expected to be launched in 2026 and beyond. This is a formula for consistent long-term growth. Turning to page eight.

Jerome Roquet: This is a formula for consistent long term growth.

Jerome Roquet: Turning to page eight.

Jerome Roquet: In summary, the company performed very well and had a very successful 2023.

Jerome Roquet: We delivered strong base sales growth of 12% driven by growth over market and higher industry production.

Jerome Roquet: The team continued to execute on our commercial and operational plans, which resulted in our strong adjusted EBITDA margin of 11%.

Jerome Roquet: In summary, the company performed very well and had a very successful 2023. We delivered strong base sales growth of 12% driven by growth over market and higher industry production. The team continued to execute on our commercial and operational plans, which resulted in a strong adjusted EBITDA margin of 11%. We continue to build momentum for future growth by launching 129 new products and winning $7.2 billion in new business. Finally, we executed on our commitment to return capital to shareholders with $106 million of share repurchases. Now, I will turn the presentation over to Jerome. Thank you, Sachin, and good morning everyone.

Jerome Roquet: We've continued to build momentum for future growth by launching 129, new products and vending seven 2 billion in new business.

Jerome Roquet: Finally, we executed on our commitment to return capital to shareholders with $106 million of share repurchases.

Jerome Roquet: Now I will turn the presentation over to Jerome.

Jerome Roquet: Thank you Sachin and good morning, everyone Visteon posted a solid set of results in the fourth quarter, demonstrating another quarter of robust commercial and operational execution.

Jerome Roquet: Q4 sales were $990 million.

Jerome Roquet: When excluding the impact of supply chain recoveries based sales grew 1% against a difficult prior year comparable.

Jerome Roquet: Our base sales performance was supported by strong customer demand, we continue to see for digital clusters cockpit domain controllers displays and the ongoing ramp of our BMS program.

Jerome Roquet: Several factors impacted our fourth quarter sales, we experienced approximately $20 million in lost sales from the UAW strike, we were as well impacted by the timing of roll offs and the slower ramp up of new roll ons as mentioned by catching earlier on.

Jerome Roquet: Visteon posted a solid set of results in the fourth quarter, demonstrating another quarter of robust commercial and operational execution. Q4 sales were $990 million. When excluding the impact of supply chain recoveries, base sales grew 1% against a difficult prior comparable. Our base sales performance was supported by the strong customer demand we continue to see for digital clusters, cockpit domain controllers, displays, and the ongoing ramp of our BMS program. Several factors impacted our fourth quarter sales, which experienced approximately $20 million in lost sales due to the UAW strike.

Jerome Roquet: We expect these headwinds to be largely transitory.

Jerome Roquet: Consistent with the first three quarters of the year, we continue to experience customer mix headwinds in China. We expect these to ease in 2024 as we continue to increase our exposure to domestic Oems.

Jerome Roquet: The semiconductor supply situation has improved significantly compared to the fourth quarter of last year.

Jerome Roquet: Recoveries declined by roughly $85 million year over year he.

Jerome Roquet: This has mostly been the result of our reduced reliance on open market purchases and related recoveries.

Jerome Roquet: We were as well impacted by the timing of roll-offs and the slower ramp-up of new roll-ons, as mentioned by Sachin earlier on. However, we expect these headwinds to be largely transitory. Consistent with the first three quarters of the year, we continue to experience customer mixed headwinds in China. We expect these to ease in 2024 as we continue to increase our exposure to domestic OEMs. The semiconductor supply situation has improved significantly compared to the fourth quarter of last year, but supply chain recoveries declined by roughly 85 million euros per year.

Jerome Roquet: Open market purchases were minimal in the second half of 2023, and we expect this trend to continue in 2024.

Jerome Roquet: As a reminder, recoveries although bucket. It is pricing are pass through in nature, increasing sales neutral for adjusted EBITDA, but diluting margin percentages.

Jerome Roquet: Adjusted EBITDA was $117 million for the quarter, an improvement of $14 million versus the prior year adjust.

Jerome Roquet: Adjusted EBITDA benefited from operational improvements and manufacturing efficiencies as well as lower engineering spending partially offset by a headwind from foreign exchange.

Jerome Roquet: Lower engineering in the quarter was mostly the result of good cost controls.

Jerome Roquet: This has mostly been the result of our reduced reliance on open market purchases and related recoveries. Open market purchases were minimal in the second half of 2023, and we expect this trend to continue in 2024. As a reminder, recoveries, although bucketed as pricing, are passed through in nature, increasing sales, neutral for adjusted EBITDA, but diluting margin percentages. Adjusted EBITDA was $117 million for the quarter, an improvement of $14 million versus the prior year. Adjusted EBITDA benefited from operational improvements and manufacturing efficiencies, as well as lower engineering spending, partially offset by a headwind from foreign exchange. Lower engineering spending in the quarter was mostly the result of good cost controls, the timing of project spending and customer recoveries, combined with a non-recurrence of a one-time program expense from the prior year. Our adjusted EBITDA margin was 11.8%, but adjusting for a more normalized engineering spend and excluding the effect of foreign exchange, our run rate was roughly 11%. Adjusted free cash flow was $57 million in the quarter.

Jerome Roquet: Timing of project spending and customer recoveries combined with a non recurrence of a onetime program expense from the prior year or.

Jerome Roquet: Our adjusted EBITDA margin was 11, 8%, but adjusting for a more normalized engineering spend and excluding the effect of foreign exchange all run rate was roughly 11%.

Jerome Roquet: Adjusted free cash flow was $57 million in the quarter, our strong adjusted free cash flow performance was the result of a higher adjusted EBITDA and neutral trade and other working capital.

Jerome Roquet: We ended the fourth quarter with a net cash position of 182 million and total cash of 518 million.

Share repurchases were $30 million in the quarter and $106 million for the full year turning to page 11.

Jerome Roquet: I am proud of what the Visteon team was able to achieve in 2023, we delivered on our operational initiatives, notably strong sales growth meaningful margin expansion and impressive cash flow generation.

Jerome Roquet: Sales were a record $3 95 billion base sales, which excludes customer recoveries were $3 66 billion, an increase of 12% or 400 million compared to prior year.

Jerome Roquet: The increase in base sales were driven by strong growth over market from robust product launches during the year and higher industry production cut.

Jerome Roquet: Our strong adjusted free cash flow performance was the result of a higher adjusted EBITDA and neutral trade and other working capital. We ended the fourth quarter with a net cash position of $182 million and total cash of $518 million. Share repurchases were $30 million in the quarter and $106 million for the full year. Turning to page 11.

Jerome Roquet: Customer recoveries, which are illustrated in the dotted boxes totaled approximately $300 million.

Jerome Roquet: The roughly $200 million year over year decline in recoveries reflects the significant improvement in the semiconductor supply chain and the reduction in associated recoveries.

Jerome Roquet: Adjusted EBITDA was $434 million for the year, an increase of $86 million or 25% year over year.

Jerome Roquet: I am proud of what the Visteon team was able to achieve in 2023. We delivered on our operational initiatives, notably strong sales growth, meaningful margin expansion, and impressive cash flow generation. Sales were a record $3.95 billion.

Jerome Roquet: The increase in adjusted EBITDA, primarily reflects the impact of higher sales, while leveraging an efficient cost base with modest increases in engineering and SG&A.

Jerome Roquet: <unk> net engineering increased $14 million year over year, as we continue to invest in technology to support future growth.

Jerome Roquet: Base sales, which excludes customer recoveries, were $3.66 billion, an increase of 12% or $400 million compared to the prior year. The increase in base sales was driven by strong growth in the market from robust product launches during the year and higher industry production. Customer recoveries, which are illustrated in the dotted boxes, totaled approximately $300 million.

Jerome Roquet: As a percentage of sales net engineering remained flat at five 3% adjusted SG&A increased $17 million year over year and as a percentage of sales increased slightly to four 5%.

Jerome Roquet: Adjusted EBITDA margin improved to 11% in 2023, a 170 basis point improvement year over year.

Jerome Roquet: While not on this slide I wanted to highlight our return on invested capital R. R. O I see as calculated by tax effected adjusted EBITDA over equity debt and leases was 16% in 2023.

Jerome Roquet: The roughly $200 million year-over-year decline in recoveries reflects the significant improvement in the semiconductor supply chain and the reduction in associated recoveries. Adjusted EBITDA was $434 million for the year, an increase of 86 million or 25% year-over-year. The increase in adjusted EBITDA primarily reflects the impact of higher sales while leveraging an efficient cost base with modest increases in engineering and SG&A. Net engineering revenue increased 14 million year-over-year as we continue to invest in technology to support future growth. As a percentage of sales, net engineering remained flat at 5.3%.

Jerome Roquet: The improvement in our return in past years has largely been driven by substantial improvement in adjusted EBITDA and modest increases in our invested capital base.

Jerome Roquet: This metric supports our view that Visteon is an increasingly compelling investment opportunity turning to page 12.

Jerome Roquet: Starting with the balance sheet, we ended the year with a total cash position of $518 million and a net cash position of $182 million.

Jerome Roquet: We have no material near term debt maturities and an attractive current interest rates of approximately three 5%, we repaid approximately $13 million in 2023, as a result of our quarterly amortization payments.

Jerome Roquet: Adjusted SG&A increased 17 million year-over-year and as a percentage of sales increased slightly to 4.5%. Adjusted EBITDA margin improved to 11% in 2023, a 170 basis point improvement year-over-year. While not on the slide, I wanted to highlight our return on invested capital. Our ROIC, as calculated by tax-affected adjusted EBIT over equity, debt, and leases, was 16% in 20

Jerome Roquet: In conjunctions with our March 2023, Investor Day, we announced a $300 million share repurchase authorization.

Jerome Roquet: In the fourth quarter, we repurchased shares for $30 million at an average price of $126 $85 per share.

Jerome Roquet: This brought our full year repurchases to $106 million.

Jerome Roquet: The improvement in our return in recent years has largely been driven by a substantial improvement in adjusted EBITDA and modest increases in our invested capital base. This metric supports our view that Visteon is an increasingly compelling investment opportunity. Turning to page 12.

Jerome Roquet: We will continue to be opportunistic in our share repurchases in order to return capital to shareholders.

Jerome Roquet: Turning now to cash flow, we generated $150 million of adjusted free cash flow in 2023.

Jerome Roquet: This is a $49 million improvement compared to the prior year, primarily due to the higher adjusted EBITDA and lower working capital build partially offset by higher cash taxes and higher capital expenditures.

Jerome Roquet: Starting with the balance sheet, we ended the year with a total cash position of $518 million and a net cash position of $182 million. We have no material near-term debt maturities and an attractive current interest rate of approximately 3.5%. We repaid approximately $13 million in 2023 as a result of our quarterly amortization payments. In conjunction with our March 2023 Investor Day, we announced a $300 million share repurchase authorization. In the fourth quarter, we repurchased shares for $30 million at an average price of $126.85 per share.

Jerome Roquet: The outflow related to trade and other working capital declined year over year, primarily as a result of the stabilization of our supply chain and improvement in our inventory balances.

Jerome Roquet: Cash taxes were higher than prior year due to cash payments related to increasing profitability in some jurisdictions book in the current year and in the prior year.

Speaker Change: Related to taxes I would like to explain briefly the significant tax item in the fourth quarter that impacted our net income and EPS, primarily as a result of our improved profitability in the U S. We had a noncash benefit of $313 million related to a reduction in the valuation allowance against USD.

Jerome Roquet: This brought our food year repurchases to $106 million. We will continue to be opportunistic in our share repurchases in order to return capital to shareholders. Turning now to cash flow, we generated $150 million of adjusted free cash flow in 2023. This is a $49 million improvement compared to the prior year, primarily due to the higher adjusted EBITDA and lower working capital build, partially offset by higher cash taxes and higher capital expenditures. The outflow related to trade and other working capital declined year over year, primarily as a result of the stabilization of our supply chain and improvement in our inventory balances. Cash taxes were higher than the prior year due to cash payments related to increasing profitability in some jurisdictions, both in the current year and in the prior year.

Speaker Change: For tax assets.

Speaker Change: This change in our valuation allowance had no impact on cash, but increased our net income and earnings per share for the period.

Speaker Change: While a positive sign of the health of our business, we do not expect any change to our go forward cash tax profile as a result of this valuation allowance reduction.

Speaker Change: Interest payments remained low and were offset by higher interest income from increased rates.

Speaker Change: Capex was $125 million or three 2% of sales, reflecting our ongoing investments in manufacturing and electrification.

Jerome Roquet: Related to taxes, I would like to explain briefly the significant tax item in the fourth quarter that impacted our net income and EPS. Primarily as a result of our improved profitability in the U.S., we had a non-cash benefit of $313 million related to a reduction in the valuation allowance against U.S. deferred tax assets. This change in our valuation allowance had no impact on cash but increased our net income and earnings per share for the period. While a positive sign of the health of our business, we do not expect any change to our go-forward cash tax profile as a result of this valuation allowance reduction. Interest payments remained low and were offset by higher interest income from increased rates.

Speaker Change: We have steadily increased our free cash flow generation in recent years.

Speaker Change: Our conversion ratio was 35% in 2023 and is in line with our medium term targets are improved cash performance as being largely due to the increase in adjusted EBITDA and diligent management of other cash items like trade working capital cash taxes interest and Capex.

Speaker Change: We have structural elements that support consistent cash flow generation, including limited capital intensity across the both capex and working capital of debt like capital structure and substantial tax attributes.

Speaker Change: In just a few years our team has successfully transform visteon into a robust cash flow generator and we expect these to continue for the years to come as our business grows turning to page 13.

Jerome Roquet: CAPEX was $125 million, or 3.2 percent of sales, reflecting our ongoing investments in manufacturing and electrification. We have steadily increased our free cash flow generation in recent years. Our conversion ratio was 35 percent in 2023 and is in line with our medium-term target. Our improved cash performance has been largely due to the increase in adjusted EBITDA and diligent management of other cash items like trade working capital, cash taxes, interest, and CAPEX. We have structural elements that support consistent cash flow generation, including limited capital intensity across both CAPEX and working capital, a debt-light capital structure, and substantial tax attributes. In just a few years, our team has successfully transformed Visteon into a robust cash flow generator, and we expect this to continue for the years to come as our business grows. Turning to page 13.

For 2024, our guidance range for sales is four to $4 2 billion, which at the midpoint represents an 8% increase in base sales.

Speaker Change: Focusing on the mid point, we have assumed visteon customer production declines by approximately 1% while growth of our market is anticipated to be in the range of 10% to 12%.

Speaker Change: On the pricing side, we're assuming a year over year headwind from lower customer recoveries. In addition to some level of standard customer price downs.

Speaker Change: Adjusted EBITDA is expected to be between $470 million and 500 million, representing adjusted EBITDA margin of 11, 8% at the midpoint.

Speaker Change: The year over year increase in adjusted EBITDA is primarily the result of a higher base sales continued strong commercial performance and further operating efficiencies, partially offset by an increase in net engineering spend.

Speaker Change: As a percentage of 2024 sales, we anticipate net engineering to be in the mid 5% range and SG&A to be in the mid 4% range as we continue to invest in technology and in our teams to support future growth.

Jerome Roquet: For 2024, our guidance range for sales is 4 to 4.2 billion, which at the midpoint represents an 8% increase in base sales. Focusing on the midpoint, we have assumed Visteon customer production declines by approximately 1% while growth of the market is anticipated to be in the range of 10 to 12%. On the pricing side, we're assuming a year-over-year headwind from lower customer recoveries in addition to some level of standard customer price downs. Adjusted EBITDA is expected to be between 470 million and 500 million, representing an adjusted EBITDA margin of 11.8% at the midpoint.

Speaker Change: Adjusted free cash flow is expected to be between $155 million to $185 million, which at the midpoint is a conversion of 35% of adjusted EBITDA into adjusted free cash flow.

Speaker Change: We expect working capital will be a modest outflow for the year as a result of our continued growth capex is forecasted to be approximately $145 million as we invest for future growth. Despite these investments we expect capex as a percentage of sales to remain in the mid 3% range.

Speaker Change: And finally, even though we're not providing quarterly guidance, we expect the first quarter to be lower sequentially and represents our low point of 2024, followed by a progressive ramp up of our sales and EBITDA over the course of the year similar to what we saw in 2023 turning to page 14.

Jerome Roquet: The year-over-year increase in adjusted EBITDA is primarily the result of higher base sales, continued strong commercial performance, and further operating efficiencies, partially offset by an increase in net engineering spend. At the percentage of 2024 sales, we anticipate net engineering to be in the mid-5% range and SG&A to be in the mid-4% range as we continue to invest in technology and in our teams to support future growth. Adjusted free cash flow is expected to be between 155 and 185 million, which at the midpoint is a conversion of 35% of adjusted EBITDA into adjusted free cash flow.

Speaker Change: Looking at the long term as such and noted earlier, our sales targets for 2026, <unk> 5 billion.

Speaker Change: This is an increase of over $1 2 billion in base sales between 2023, and 2026 with low double digit growth of market on an annual basis. Overall. This is an attractive growth profile and reflects our current expectations for our business and the market dynamics that touching outlined earlier.

Speaker Change: Our adjusted EBITDA margin target is 13, 5%, a 250 basis point increase from 2020 threes with.

Jerome Roquet: We expect working capital to be a modest outflow for the year as a result of our continued growth. CAPEX is forecasted to be approximately 145 million as we invest for future growth. Despite these investments, we expect CAPEX as a percentage of sales to remain in the mid-3% range. And finally, even though we're not providing quarterly guidance, we expect the first quarter to be lower sequentially and represent our low point for 2024, followed by a progressive ramp-up of our sales and EBITDA over the course of the year, similar to what we saw in 2023. Turning to page 14.

Speaker Change: This increase in margin is expected to be driven by the growth of the business as well as the ongoing leveraging of our fixed cost across manufacturing engineering and SG&A. In dollar terms. This represents approximately 675 million of adjusted EBITDA in 2026, which is a 16% CAGR over there.

Speaker Change: Period.

Speaker Change: We expect to convert 35% to 40% of adjusted EBITDA to adjusted free cash flow in 2026.

Speaker Change: I'm very proud of what the team has been able to accomplish over the past few years, we have increased our sales by $1 billion compared to 2019, we have grown profitably compared to in 2019, our adjusted EBITDA has nearly doubled and we have been generating substantial cash flow in the same period.

Jerome Roquet: Looking at the long term, as Sachin noted earlier, our sales targets for 2026 are $5 billion. This is an increase of over $1.2 billion in base sales between 2023 and 2026, with low double-digit growth in the market on an annual basis. Overall, this is an attractive growth profile and reflects our current expectations for our business and the market dynamics that Sachin outlined earlier. Our adjusted EBITDA margin target is 13.5%, a 250 basis point increase from 2023.

Speaker Change: We're strengthening our foundation for future growth through record new business wins high level of product launches and continued investment in our people when I look at the next few years I'm excited to deliver on our plan for significant growth in sales EBITDA and free cash flow turning to page 15.

Speaker Change: Visteon remains a compelling long term investment opportunity, we have positioned the company for topline growth margin expansion and free cash flow generation.

Speaker Change: We have an exciting growth profile and have demonstrated a strong focus on operational and commercial discipline to deliver this growth profitably. Thank.

Jerome Roquet: This increase in margin is expected to be driven by the growth of the business, as well as the ongoing leveraging of fixed costs across manufacturing, engineering, and SG&A. In dollar terms, this represents approximately $675 million of adjusted EBITDA in 2026, which is a 16% CAGR over the period. We expect to convert 35 to 40% of adjusted EBITDA to adjusted free cash flow in 2026. I am very proud of what the team has been able to accomplish over the past few years.

Speaker Change: Thank you for your time today I would like now to open the call for your questions.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: At this time, if you would like to ask an audio question. Please press Star then the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question Press Star one a second time.

And we will pause for just a moment to compile the Q&A roster.

Speaker Change: And we will take our first question from Joe Spak with UBS. Your line is open.

Joe Spak: Thanks, Good morning, everyone.

Joe Spak: Maybe just good morning.

Joe Spak: Maybe just to start.

Joe Spak: Now a couple on the.

Jerome Roquet: We have increased our sales by $1 billion compared to 2019. We have grown profitably. Compared to 2019, our adjusted EBITDA has nearly doubled, and we have been generating substantial cash flow in the same period. We're strengthening our foundation for future growth through record new business wins, a high level of product launches, and continued investment in our people. When I look at the next few years, I'm excited to deliver on our plan for significant growth in sales, EBITDA, and free cash flow. Turning to page 15.

Joe Spak: On the revised 26, I think b.

Joe Spak: Prior commentary from.

Joe Spak: From you guys was that you weren't necessarily taking.

Joe Spak: Managements.

Joe Spak: Targets for some of the EV programs that you were sort of making your own assessment and now obviously you started the world has drastically changed even since.

Joe Spak: Since those comments, but maybe you can provide us.

A little bit more more color as to sort of how what type of planning went into the revised.

Speaker Change: Uh huh.

Unnamed Speaker: Visteon remains a compelling long-term investment opportunity. We have positioned the company for top-line growth, margin expansion, and free cash flow generation. We have an exciting growth profile and have demonstrated a strong focus on operational and commercial discipline to deliver this growth profitably. Thank you for your time today. I would like now to open the call to your questions. Thank you for watching. Bye.

Speaker Change: 2026 top line targets.

Speaker Change: Yeah.

Speaker Change: I'll take that Joe.

Paul: This is for Paul.

Paul: It could be not all BMS all the EV production that is driving the reduction.

Paul: Really three factors.

Paul: Driver is actually the overall.

Paul: Vehicle production output for our customers.

Paul: I would say that is contributing.

Paul: Our portfolio.

Paul: Then the second driver is.

Paul: Robert.

Paul: Again.

Paul: And export our digital cockpit products as well as PFS.

Paul: And the last one.

Paul: Customer mix in China.

Paul: <unk> has impacted us all.

Paul: And more.

Paul: Specifically in Q4 2023.

Paul: Expect this mix to moderate a little bit but.

Paul: Bill.

Paul: Continue to be a headwind.

Paul: All of them.

Paul: Now if you look at just the.

Paul: Specific.

Paul: Yes.

Paul: Or revenues.

Paul: All new projection for 2026 has not come down significantly.

Paul: Lowered expectations from earlier in 2020.

Paul: But we are being a little more conservative than the volume.

Paul: That has been shared with those customers.

Paul: I'd say that our expectations now are more in line.

Speaker Change: Of course.

Speaker Change: Models.

Speaker Change: Production alcohols as for S&P Global for example, so I would say really feedback overall reduction and all that.

Speaker Change: Production number two lower EV production at other customers.

And.

Speaker Change: Sales and then the customer mix.

Speaker Change: Yeah.

Speaker Change: I think thats more than China, now, having said that they are expecting all of our product lines.

Speaker Change: And this new target that we have.

Speaker Change: These sales.

Speaker Change: Each one of those three years at a low double.

Unnamed Speaker: Thank you. And at this time, if you would like to ask an audio question, please press star and then the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time.

Speaker Change: Double digit level.

Speaker Change: What do you think the suite sales.

Sachin: Okay Sachin.

Sachin: Thanks for that and maybe just a follow on to that and I'll pass it on.

Speaker Change: You know the low double digit growth over market.

Sachin: You're sort of assuming I guess like a relatively flattish environment. Some negative mix as you mentioned, but with growth of our market and we're seeing this across the supply base like you can't control that.

Unnamed Speaker: And we will pause for just a moment to compile the Q&A roster, and we will take our first question from Joe Spack with UBS. Your line is open. Uh, thanks. Good morning, everyone. Or, maybe just good morning.

Sachin: Part of that relative.

Sachin: Comparison.

Joe Spack: Maybe just to start. You know, a couple on the, um..., on the revised 26. I think, you know, prior commentary from you guys was that, you know, you weren't necessarily taking management's targets for some of the EV programs; you were sort of making your own assessment. Now, obviously, the world has drastically changed even since those comments, but maybe you could provide, you know, a little bit more, more color as to sort of how what type of planning went into the revised 2026 top-line targets. I'll take that too.

Sachin: Now obviously some of that you know it sounds like youre sort of counting on some of that negative mix, but.

Sachin: And share loss at some of your customers is clearly still possible, but would you say that.

Sachin: Based on what you know now.

Sachin: And the content that you have for what you won this sort of translates to like a high single digit low double digit organic growth rate in like understanding that.

Sachin: If some of those customers that you don't have exposure.

Sachin: Grow faster like your growth over market is going to look worse, even if your organic growth might still be a little bit relatively steadier.

Sachin S. Lawande: So, first of all,,,,,,,,,,,,,,,, And I would say that is contributing, I would say, about half of the reduction. And the second driver is lower EV production again, and that affects both our digital cockpit products, as well as BMS. And the last one is the customer mix in China, which has impacted us all through 2023 and more specifically in Q4 of 2023. We expect this mix to moderate a little bit, but it will still continue to be a headwind going forward and through 2026. Now, if you look at just the specific BMS-related revenues, the volume projection for 2026 has not come down significantly from our lowered expectations from earlier in 2023, but we are being a little more conservative than the volume that has been shared with us by our customers. I would say that our expectations are now more in line with those vehicle models and their production outputs, as per S&P Global, for example. So, I would really say three factors, right?

Sachin: So the first thing over to say Joe is that we have already factored in like you.

Sachin: Good.

Sachin: I expect that some of the customers with whom we don't have helped customers, but Oems that we don't have business that especially on evs.

Sachin: We're going to grow faster in this time period than our customers as far as the visa concerned so EV.

Sachin: April production assumptions.

Sachin: Certainly already taking into account this dynamic that we've talked about now.

Sachin: Now.

Sachin: Obviously the market all at all Ken can grow even faster because we don't control that and we don't have necessarily a full.

Sachin: Full exposure to that but we have been looking more specifically at our customers for us.

Sachin: When it went to six is not that far away in terms of.

Sachin: Being able to understand what vehicles, we are on and what those production volumes.

Sachin: Going to be at.

Sachin: A year that has passed since last year beginning of last year, when we give our 2026.

Sachin: Guidance, what I can say is that.

It is largely transpired the way we would have expected it to.

Sachin S. Lawande: Overall, a reduction in vehicle production. Number two, lowered EV production at our customers, that is, processing ports, additional cockpits, and Visteon, James Picariello, Brian Sponheimer, Richard Carlson, James Picariello. Now having said that, we're expecting all of our product lines to still grow, and this new target that we have means that our base sales would grow for each one of those three years at a low double-digit level as compared to 2023 Okay, Sachin, thanks for that.

Sachin: Except that the BMS sales has been more suppressed. So this the ramp up has been slower in 2023 than we expected.

Sachin: It's almost like a year delayed and so we are expecting 2024 to look more like what we thought 2023 would look like in terms of BMS seats. In other words now 25, and 26 that has a certain level of ramp up of production that we have in that assumption.

And that has to come to pass for us to be able to get to where we have set.

Sachin: But I believe that those are.

Joe Spack: And maybe just to follow on to that, and I'll pass it on to you, but, you know, the low double-digit growth over market, you're sort of assuming, I guess, a relatively flash environment, some negative mixes, as you mentioned, but, you know, with growth over market, and we're seeing this across the supply base, like you can't control that, you know, part of that relative comparison. Now, obviously, some of that sounds like you're sort of counting on some of that negative, negative mix, but you know, and share loss at some of your customers is clearly still possible. But would you say that, based on what you know now and the content you have for what you won, this sort of translates to a high single-digit, low double-digit organic growth rate and the understanding that you know if some of those customers where you don't have exposure grow faster, your growth over markets is going to look worse even if your organic growth might still be a little bit relatively steadier?

Sachin: Oh.

Sachin: It is naval assumption in terms of.

Sachin: Customer support.

Sachin: And should be able to accomplish.

Sachin: I guess, maybe just slightly rephrase. The question I appreciate that that those comments, but when you say negative mix our faster growing with customers you don't have exposure for that.

Sachin: <unk>.

Sachin: That also factored in to your expectation for <unk>.

Sachin: Volume for the programs that you are on sort of like that some of your customers may lead to spin a share. Okay. Thank you absolutely absolutely. Thank you.

Speaker Change: We will take our next question from EPA My Count at Pardon Me Mcnealy with Citi. Your line is open.

Speaker Change: Great. Thanks, This is Justin <unk>.

Justin: So maybe a quick one on slide 14, you are providing the high level overview, I guess of the base and kind of giving the recovery bucket. That's in there can you maybe let us know what the implied recoveries are for 'twenty four and then maybe what youre assuming in that 26 guide as well.

Justin: Yes.

Justin: I get social multi depth.

Speaker Change: Maybe let me step back a little bit on recoveries are generally.

Joe Spack: The first thing I would say, Joe, is that we have already factored in, like you would expect, that some of the customers with whom we don't have, not customers, but OEMs that we don't have business with, especially for EVs, are going to grow faster in this time period than our customers, as far as EVs are concerned. So our EV vehicle production assumptions are certainly already taking into account this dynamic that you talked about. Now, obviously, the market overall can grow even faster because we don't control that, and we don't necessarily have full exposure to it. But we've been looking more specifically at our customers.

Speaker Change: We have seen recoveries coming down over the last few quarters.

Speaker Change: 2023, and Thats largely because our open market purchases have declined and therefore, the associated recoveries have declined as well so.

Speaker Change: We were if you recall, we recovered including open market purchases close too.

Speaker Change: $500 million in 2022 in 2023 will have recovered close to $300 million.

Speaker Change: Off recoveries.

Speaker Change: So a fairly substantial reduction.

Speaker Change: Most of it is driven by open market purchases. There is a second factor that is now.

Speaker Change: Impacting us in a positive way, which is the fact that we have some positive impact as we go into 'twenty four as it just relates to surcharges, we see some programs rolling off that are more burden.

Sachin S. Lawande: For us, 2026 is not that far away in terms of being able to understand what vehicles we are on and what those production volumes are likely going to be. With a year that has passed since the beginning of last year when we gave our 2026 guidance, what I can say is that, a year in, it has largely transpired the way we would have expected it to, except that BMS sales have been more suppressed. So the ramp-up has been slower in 2023 than we expected. It's almost like a year delayed.

Speaker Change: The programs Rolling on and therefore, we have that positive mix coming into play again as we go into 2024, so the two.

Speaker Change: It is two way.

Speaker Change: Our plan for 2024, which is going to contemplate a little bit less than $200 million of recoveries.

Speaker Change: And then we see that as well coming down.

Speaker Change: Because also of.

Speaker Change: Cost reductions from suppliers into 'twenty six and we've kept our assumptions are the same for 2006 as we had back in March of 2020, threes and it is $100 million so a slow reduction.

Sachin S. Lawande: And so we are expecting 2024 to look more like what we thought 2023 would look like in terms of BMS sales. In other words, now for 2025 and 2026, there is a certain level of ramp-up of production that we have in our assumption, and that has to come to pass for us to be able to get to where we have set as our target. But I believe that those are reasonable assumptions in terms of what our customers would and should be able to accomplish. I guess maybe just to slightly rephrase the question, I appreciate those comments, but when you say, you know, negative mix or faster growth with customers, you don't have exposure to that, that also factored into your expectation for the volume for the programs you are on. So like that, some of your customers may lose share. Okay.

Speaker Change: From the very high.

Speaker Change: Levels that we had in 2002, all the way down to $1 million.

Speaker Change: 2026.

Speaker Change: Perfect Super helpful. And then maybe sticking to 26 do you have the percentage of target already booked in terms of sales or if you can.

Speaker Change: Help us out maybe.

Speaker Change: Yes, we can we can talk a little about it so typically.

Speaker Change: We look at the targets of sale.

Speaker Change: Sales that needs to be booked.

Speaker Change: We have a range between 75% to 80% of the sales in the three years out.

Speaker Change: And I would say that we had within that 426.

Speaker Change: And as you know we had a pretty good robust level of new business wins in 2023.

Speaker Change: Exceeded our initial expectations, which is also helping and we also believe on account of some of the changes that have happened with Evs that we would see some program extensions, which are going to be helpful. In the near term as some of these ice and <unk>.

Itay Michaeli: Thank you. Absolutely. Absolutely. Thank you. Thank you. Thank you. Thank you. And we will take our next question from Itay Michaeli, pardon me, Michaeli with Citi. Your line is open.

Jerome Roquet: Great. Thanks. This is Justin.

Jerome Roquet: So maybe a quick one on slide 14, you're providing the high-level overview, I guess, of the base and kind of giving the recovery bucket that's in there. Can you maybe let us know what the implied recoveries are for 24 and then maybe what you're assuming in that 26 guide as well? Yes, good morning. It's Jérôme. I'll take that.

Speaker Change: Vehicles.

Speaker Change: It needs to be extended by our customers.

Speaker Change: They rethink their EV model portfolio and go to market.

Speaker Change: And we'll take our next question from Dan Levy with Barclays. Your line is open.

Dan Levy: Hi, good morning.

Dan Levy: For for taking the questions.

Dan Levy: First I wanted to ask a question about the margin sale.

Dan Levy: <unk> fourth quarter, you did 11, 8%.

Jerome Roquet: Maybe let me step back a little bit on recoveries. Generally, we have seen recoveries coming down over the last few quarters of 2023, and that's largely because our open market purchases have declined, and therefore, the associated recoveries have declined as well. So we were, if you recall, we recovered, including open market purchases, close to 500 million in 2022. In 2023, we'll have recovered close to 300 million in recoveries

Dan Levy: That was weighed down by by the strike and Youre guiding to an 11, 8% midpoint for 2024.

Perhaps you could give us basically a bridge I recognize.

Dan Levy: We shouldn't extrapolate too much from one quarter, but a bridge from.

Dan Levy: The <unk> run rate to 2024, what are maybe some of the offsets that make the 11, 8% that you did.

Dan Levy: The fourth quarter are not necessarily representative of the true run rate, which I think you said was closer to 11%.

Jerome Roquet: So a fairly substantial reduction, and most of it is driven by open market purchases. There is a second factor that is now impacting us in a positive way, which is the fact that we have some positive impact as we go into 2024 as it relates to surcharges. We see some programs rolling off that are more burdened than the programs rolling on, and therefore, we have that positive mix coming into play again as we go into 2024. So the two lead us to a plan for 2024, which is going to contemplate a little bit less than 200 million in recoveries. And then we see that as well coming down because of cost reductions from suppliers into 26. And we've kept our assumptions for 26 the same as we had them back in March of 2023. And it is $100 million. So a slow reduction from the very high levels that we had in 22, all the way down to 100 million in 2020. Perfect, super helpful.

Speaker Change: Thanks, Thanks, Dan.

So we always try to normalize EBITDA margin as we report our earnings and have done that now for the last few quarters.

Speaker Change: Just because they are.

Speaker Change: Anomalies or exceptional items impacting EBITDA positively or negatively so for Q4, specifically we had 11.

Speaker Change: 8% as you mentioned and.

Speaker Change: Most of that was.

Speaker Change: All came from the fact that we had a pretty low.

Speaker Change: Engineering spend in Q4, and it's fairly traditional I would say.

Speaker Change: We were probably a little bit surprised by the amount of recoveries that we were able to book in Q4, but that's essentially improved our EBITDA for Q4, so when you take that out and take out as well.

Jerome Roquet: And then maybe sticking to 26, do you have the percentage of the target already booked in terms of sales, or if you can help us out maybe a little bit there? Yeah, we can. We can talk a little about it. So typically, when we look at the targets of sales that need to be booked, we have a range between 75 to 80% of the sales, you know, three years out. And I would say that we are within that for 2026. And as you know, we had a pretty good, robust level of new business wins in 2023 that exceeded our initial expectations, which is also helping. And we also believe, on account of some of the changes that have happened with EVs, that we will see some program extensions, which are going to be helpful in the near term, as some of these ICE and hybrid vehicles will need to be extended by our customers as they rethink their EV model portfolio and go Thank you. Thank you. Thank you. And we will take our next question from Dan Levy with Barclays. Your line is open. Hi, good morning.

Speaker Change: Some level of negative FX that we had in Q4, our normalized EBITDA is closer to 11% maybe slightly slightly higher.

Speaker Change: So that's kind of the run rate with as well our sales level.

Speaker Change: Likely below $1 billion. So as we go into next year, we've got a 80 basis point improvement most of the improvement is going to come from the additional sales that will get in 2024 were growing at a level of 8% at face value and 10%. If you exclude the recoveries so thats a fairly significant.

Speaker Change: It can't improvement that will flow through EBITDA, we are continuing to see fairly.

Speaker Change: Good level of operational efficiencies.

Speaker Change: I got you said that we've been saying that now for the last few quarters.

Speaker Change: And then finally, we've got an offsets by coming from engineering.

Speaker Change: Engineering, and as well as G&A, which are.

Speaker Change: Let's say flattish.

Speaker Change: In terms of percentage, but increasing in dollar terms and that's kind of the offset or partial offset to our.

Dan Levy: Thank you for taking the question. First, I wanted to ask a question about the margins. In the fourth quarter, you did 11.8%.

Speaker Change: EBITDA going into 'twenty, four I think generally I would say that we've been running pretty well and ahead of the curve or ahead of our original guidance in 2020 threes. We you may remember that we had.

Dan Levy: That was weighed down by the strike. You're guiding to an 11.8% midpoint for 2024. Perhaps you could give us basically a bridge. I recognize we shouldn't extrapolate too much from one quarter, but a bridge from the 4Q run rate to 2024. What are maybe some of the offsets that make the 11.8% that you did in the fourth quarter not necessarily representative of the true run rate, which I think you said was closer? Thanks. Thanks, Dan.

Speaker Change: Guided to 10, 5% EBITDA at the midpoint of our guidance and we finished the year closer to 11 so.

Speaker Change: It kind of helps going into next year.

And therefore, we feel pretty comfortable with a 10.8% that we saw.

Speaker Change: Great.

Speaker Change: I'll just.

Speaker Change: A follow up on that and then.

Speaker Change: Question just.

Follow up is maybe you could just comment on.

Jerome Roquet: So we always try to normalize EBITDA margin as we report our earnings. And I've done that now for the last few quarters, just because there are anomalies or exceptional items impacting EBITDA positively or negatively. So for Q4 specifically, we had 11.8%, as you mentioned, and most of that was or came from the fact that we had a pretty low engineering spend in Q4. And it's fairly traditional, I would say.

Speaker Change: Within the decline of recoveries, what the net EBIT impact is it if it's neutral.

Speaker Change: Recoveries on reduced cost.

Speaker Change: And then my.

Speaker Change: My second question.

Speaker Change: Maybe you could just talk about the environment for uptake of the products.

Speaker Change: Ex BNS, we've heard about some extension of ice platforms as automakers are delaying Tvs I think we know theres generally that trend.

Jerome Roquet: We were probably a little bit surprised by the amount of recoveries that we were able to book in Q4, but that essentially improved our EBITDA for Q4. So when you take that out and take out, as well, some level of negative effects that we had in Q4, our normalized EBITDA is closer to 11%, maybe slightly, slightly higher. So that's kind of the run rate with, as well, a sales level slightly below a billion dollars. So as we go into next year, we have an 80 basis point improvement. Most of the improvement is going to come from the additional sales that we'll get in 2024. We're growing at a level of 8 percent at face value and 10 percent if you exclude the recoveries. So that's a fairly significant improvement that will flow through EBITDA. We are continuing to see a fairly good level of operational efficiencies. And I got to say that we've been seeing that now for the last few quarters.

Speaker Change: Evs are adopting more of the premium content.

Speaker Change: To what extent does your <unk>.

Speaker Change: 2026 outlook contemplate maybe some extension of the platform to what extent are the other products like.

Speaker Change: Digital cluster or domain controllers.

Still intact, despite slower uptake thank you.

Speaker Change: Yes.

Speaker Change: I will take the first question and.

Speaker Change: Give the second to such in so in terms of recovery. That's a very good point in fact, we.

Speaker Change: We are seeing a reduction in recoveries in 2024 as well.

Speaker Change: Right.

Such: 2026, generally we are not assuming any negative P&L impact largely because the two reasons for the decrease in 'twenty four or the fact that we're going to buy less open market purchases and therefore, we're going to recover less so it's neutral and the second reason I gave earlier on is the fact that we have this positive mix in some cases impact.

Such: Seeing us in a favorable way and therefore, the associated recoveries are matching as well the reduction in cost. So there is virtually no P&L impact on that side as we go into 'twenty four we have assumed a normal level of pricing like we normally give to our customers that has obviously an impact.

Jerome Roquet: And then finally, we've got an offset coming from engineering and as well as DNA, which is, let's say, flattish in terms of percentage but increasing in dollar terms. And that's kind of the offset or a partial offset to our EBITDA going into 2024. I think, generally, I would say that we've been running pretty well and ahead of the curve or ahead of our original guidance in 2023. You may remember that we had guided to 10.5 percent EBITDA, the midpoint of our guidance. And we finished the year closer to 11.

Such: On the P&L, but not the reduction in recoveries perfect. Thank.

Speaker Change: Thank you Jerome and regarding this topic of the call.

Speaker Change: Content on.

Speaker Change: Ice and.

<unk> hybrid vehicles, which are expected to.

Dan Levy: So it kind of helps going into next year. And therefore, we feel pretty comfortable with the 10.8. Great.

Speaker Change: Growth in the near term as well.

Speaker Change: Our eyes of Saudi as full electric perhaps slowdown in their growth, we're extremely well positioned to take advantage of that we have.

Jerome Roquet: I'll just put a follow-up on that, and then a second question. The follow-up is, maybe you could just comment on, within the decline in recoveries, what the net EBITDA impact is. If it's neutral, it's reduced recoveries on reduced costs.

Speaker Change: Very good.

Speaker Change: Digital cockpit.

Speaker Change: Our portfolio of products that are already.

Dan Levy: And then my second question is, maybe you could just talk about the environment for uptake of the products X BMS. We've heard about some extension of ICE platforms as automakers are delaying EVs. I think we know there's a general trend that EVs are adopting more premium content. So, to what extent does your 2026 outlook contemplate maybe some extension of the platforms? To what extent are the other products, like digital clusters or domain controllers, still intact despite slower EVs? I will take the first question and give the second to Sachin.

Speaker Change: Engineered and launched on many of the programs that are going to benefit from the extension or introduction of.

Speaker Change: New models.

Speaker Change: And the content increase that we're seeing is not just restricted to two <unk> by the way we are seeing a general increase in cockpit content, even on ice vehicles that has been if you look at the last couple of years.

Speaker Change: The driver of our growth over market.

Speaker Change: We have had 18 consecutive quarters of growth over market driven largely by the content increase.

Jerome Roquet: So in terms of recovery, that's a very good point. In fact, we are seeing a reduction in recoveries in 2024 as well all the way to 2026. Generally, we are not assuming any negative impact, largely because the two reasons for the decrease in 2024 are the fact that we're going to buy less open market purchases and therefore we're going to recover less, so it's neutral. And the second reason I gave earlier is the fact that we have this positive mix in some cases impacting us in a favorable way, and therefore the associated recoveries are matching as well the reduction in cost. So there is virtually no P&L impact on that side as we go into 2024. We have assumed a normal level of pricing, like we normally give to our customers. That obviously has an impact on P&L, but not the reduction in recovery. Thank you, Jerome.

Speaker Change: Happening in the cockpit and mostly on ice.

Speaker Change: In the hybrid vehicles.

Speaker Change: But our customers extremely well represented one data point is.

Speaker Change: Digital clusters growth right. If you look at.

Speaker Change: 2023, roughly half of our shipments of.

Speaker Change: <unk> clusters, all digital compared to about 30%, 35% for the industry. So there's a lot of runway ahead in terms of growth for digital content in general and I think.

Speaker Change: To answer your question about how much of that has been already factored into our 2026.

Speaker Change: Guidance there are a few programs, where we know those extensions.

Speaker Change: A lot happening and we have factored those in and I would say there is some.

Sachin S. Lawande: And regarding this topic of content on ICE and perhaps hybrid vehicles, which are expected to grow in the near term as ICE, sorry, as full electric, perhaps slow down in their growth. We are extremely well positioned to take advantage of that, right? We have a very good digital cockpit portfolio of products that are already engineered and launched on many of the programs that are going to benefit from the extension or introduction of new models. And the content increase that we're seeing is not just restricted to EVs, by the way. We are seeing a general increase in cockpit content, even on ICE vehicles.

Speaker Change: Further potential.

Speaker Change: But we have not.

Speaker Change: <unk> accounted for and we will only do so once we have more formal confirmation with the customers about the extensions so I would say.

Speaker Change: EV is a slightly depressed net.

Speaker Change: Net positive for us because majority of our revenue today is on ice and on the kind of content that is expected to grow to have these vehicles remain competitive.

Speaker Change: And we will take our next question from Luke junk with Baird. Your line is open.

Luke L. Junk: Good morning, Thanks for taking the questions.

Luke L. Junk: Started I'm, hoping we could you could just disaggregate the 2020 for growth of our market drivers you highlighted in slide six specifically within that just wanted to better understand your approach to forecasting EV volume this year both.

Sachin S. Lawande: That has been, if you look at the last couple of years, the major driver of our growth in the market. We have had 18 consecutive quarters of growth in the market, driven largely by the content increase that is happening in the cockpit and mostly on ICE slash hybrid vehicles. With our customers, we are extremely well represented.

Luke L. Junk: In terms of the pit at.

Luke L. Junk: Track launches as well as.

Luke L. Junk: <unk> incrementally this year and then within that maybe if you could touch on China mix exiting 2023, and the Utah moderating impacts in 2004 here. Thank you.

Sachin S. Lawande: One data point is our digital cluster growth, right? If you look at 2023, roughly half of our shipments of clusters were all digital, compared to about 30, 35% for the industry. So there's a lot of runway ahead in terms of growth for digital content in general. And I think to answer your question about how much of that has already been factored into our 2026 guidance, there are a few programs where we know those extensions are happening, and we have factored those in. And I would say there is some further potential that we have not accounted for, and we will only do so once we have more formal confirmation with the customers about the extension. So I would say if EVs are slightly depressed, that's a net positive for us because the majority of our revenue today is on ice and on the kind of content that is expected to grow to have these vehicles remain competitive. Go to Beadaholique.com for all of your beading supplies needs!

Speaker Change: Yes sure.

Speaker Change: And so what I would like to say again, just to reiterate our expectations for 2024.

Speaker Change: Vehicle production viewpoint as we have said on slide six.

Speaker Change: We expect visteon customers to continue to face some headwind and we will see a negative customer mix.

Speaker Change: Also in 'twenty, four but it will moderate as compared to what we saw in <unk> III and largely we expect that moderation to occur in China, as I said still negative but less so.

Speaker Change: And as you look at the slide on the right of way, but identified the major drivers of growth over market of.

Speaker Change: Which are the number one driver continues to be.

Speaker Change: The high number of new products that we launched in 2023 as well as continuing into 2024 and as they start to ramp up in production.

Luke L. Junk: And we will take our next question from Luke Junk with Baird. Your line is open. Good morning.

Sachin S. Lawande: Thanks for taking the questions. To start, I'm hoping you could just disaggregate the 2024 growth over market drivers you highlighted in slide six specifically. Within that, just want to better understand your approach to forecasting EV volumes this year, both in terms of contract electronic launches as well as BMS incrementally this year. And then within that, maybe you could touch on China Mix exiting 2023 and the view to moderating impacts in 2024 here. Thank you. Yeah, sure, Luke.

Speaker Change: The.

Speaker Change: The first.

Speaker Change: Major driver of our growth over market.

Speaker Change: The non recurrence of the one timers, that's contributing to about 1% to 2% of growth over market and then the third one which is.

Speaker Change: This BMS sales, which I mentioned.

Speaker Change: Sort of delayed in terms of their ramp up all through 'twenty two 'twenty three towards the end of 2023, we started to see them.

Speaker Change: Grow we expect that growth to continue into <unk>.

Speaker Change: 2024, we have launched on I would say about seven vehicles with GM. So far already and more are planned also in 2024 in addition to that.

Sachin S. Lawande: And so, what I would like to say again is to reiterate our expectations for 2024. From a vehicle production viewpoint, as we have said on slide six, we expect Visteon customers to continue to face some headwinds, and we will see a negative customer mix also in 24, but it will moderate as compared to what we saw in 23. And largely, we expect that moderation to occur in China. As I said, still negative, but less so.

Speaker Change: Diversifying our Vms.

Speaker Change: Business of two additional Oems with whom we will be having our first launches this year. So.

There's going to be a strong growth driver for us even though it is lower than our expectations earlier in the beginning of 2022 still.

Speaker Change: Strong growth and I would say, there's 10% to 12%.

Speaker Change: If you think about 1% to 2% for the non recurrence of the one timers.

Sachin S. Lawande: And as you can see on the slide on the right, we have identified the major drivers of growth over market, of which the number one driver continues to be the high number of new products that we launched in 2023, as well as continuing into 2024. And as they start to ramp up in production, that's the first major driver of our growth over market. The non-recurrence of the one-timers is contributing to about one to two percent of growth over the market. And then the third one, which is this BMS sales, which I mentioned, were sort of delayed in terms of their ramp-up all through 2023. Toward the end of 2023, we started to see them grow.

Speaker Change: The rest is split between the other two factors this new model launches and the growth of BMS. BMS also includes new model launches.

Speaker Change: Got it that's helpful session and then for my follow up hoping you could just comment on the award environment as we go into the beginning of the year here, obviously, oem's grappling with the evolving dynamics around EV thinking about.

Speaker Change: Some of the things you mentioned in terms of maybe extensions to existing ice and hybrid platforms just.

Speaker Change: Hoping you could put a finer point on what that means good bad or otherwise for the number of awards and should we still be gearing to kind of a $6 billion plus number. This year is a good starting to yet look absolutely and if you go back to what I've said earlier.

Sachin S. Lawande: We expect that growth to continue into 2024. We have launched on, I would say, about seven vehicles with GM so far already, and more are planned for 2024. In addition to that, we are diversifying our BMS business with two additional OEMs with whom we will have our first launches this year. So BMS is going to be a strong growth driver for us, even though it is lower than our expectations earlier at the beginning of 2023, still strong growth. And I would say there's 10 to 12 percent GOM. If you think about one to two percent for the non-recurrence of the one-timers, the rest is split between the other two factors.

Speaker Change: Think about our product portfolio and with the additions we have made to it.

Speaker Change: Continuously expanded the market is available to us.

Speaker Change: And so in terms of the digital cockpit.

Speaker Change: Product line itself.

Speaker Change: The pipeline of new business opportunities that we see is pretty robust similar I would say to what we had for two.

Speaker Change: 2023, and I would expect us to perform well there as well.

Speaker Change: One of the things that we're seeing is that.

Infotainment in particular is going through a lot of.

Speaker Change: Changes from a technology viewpoint with Android and connected services and vision services that are all coming together not just at the upper end of the market, but now going more into the mass market vehicles. So very strong a pipeline of opportunities there now when it comes to electrification.

Luke L. Junk: There are new model launches and the growth of BMS, although BMS also includes new models. Got it. That was helpful, Sachin.

Sachin S. Lawande: And then for my follow-up question, I was hoping you could just comment on the award environment as we go into the beginning of the year here. Obviously, OEMs are grappling with evolving dynamics around EV, thinking about, you know, some of the things you mentioned in terms of maybe extensions to existing ICE and hybrid platforms. Just hoping you could put a finer point on what that means, you know, good, bad, or otherwise, for the number of awards, and should we still be aiming for kind of a $6 billion-plus number this year as a good starting point? Yeah, Luke, absolutely.

Beyond BMS.

Speaker Change: As we discussed we have expanded our product line into power electronics, and we hope that we have a repeat this year as well with an extension of the win that we had last year and other customers.

Speaker Change: Well, so I would say that.

Speaker Change: We would feel pretty comfortable saying that we would have a similar year from a new business win performance this year as last year.

Speaker Change: And we will take our next question from John Babcock with Bank of America. Your line is open.

John Babcock: Hey, good morning, guys. Thanks for taking my questions I guess, just starting out as it pertains to the content that you guys provide in as Youre talking to Oems I'm, just kind of curious I mean, how much obviously a lot of this content has been much more used in higher end vehicles and I'm kind of curious as to what demand you are sorry.

Luke L. Junk: And if you go back to what I said earlier, and think about our product portfolio and the additions we have made to it, we have continuously expanded the market that is available to us. And so, in terms of the digital cockpit product line itself, the pipeline of new business opportunities that we see is pretty robust, similar, I would say, to what we had for 2023, and I would expect us to perform well there as well. One of the things that we're seeing is that, you know, infotainment in particular is going through a lot of changes from a technological viewpoint, with Android and connected services and vision services that are all coming together, not just at the upper end of the market but now going more into mass market vehicles.

John Babcock: To see for mass market vehicles, and how much of it is technology.

Sorry down into those vehicles and how quickly over time, and then I have a follow up on that.

Speaker Change: Yes, great question, and if you look at the clock content.

Speaker Change: Especially digital clusters and infotainment.

Speaker Change: A lot of events are coming now for more mass market vehicles right. The upper end of the market either has this product already and if we see opportunities to use our successor follow on opportunities.

Luke L. Junk: So, a very strong pipeline of opportunities there. Now, when it comes to electrification, beyond BMS, as we discussed, we have expanded our product line into power electronics, and we hope that we have a repeat this year as well with an extension of the VIN that we had last year and other customers as well. So, I would say that we would feel pretty comfortable saying that we would have a similar year from a new businessman performance this year as last year. Thank you for watching. We'll see you next time.

Speaker Change: The new opportunities Thats growing the market in terms of.

Speaker Change: More content is all coming at the mass market segments.

Speaker Change: Segment, B and C of vehicles, which you would think in the past we're not typically the targets now what's driving that number one is.

Speaker Change: Digitalization trend right and within that.

John Babcock: And we will take our next question from John Babcock with Bank of America. Your line is open. Hey, good morning, guys. Thanks for taking my questions. I guess just starting out as it pertains to, you know, the content that you guys provide and as you're talking to OEMs. I'm just kind of curious, I mean, how much you know, obviously, a lot of this content's been much more used in higher end vehicles. And I'm kind of curious as to what demand you're starting to see for, you know, mass market vehicles and how much of this technology might carry down into those vehicles and how quickly over time. Yeah, great question.

Speaker Change: We talk about larger displays talk about.

Speaker Change: Infotainment content that.

Speaker Change: Brings in downloadable apps.

Speaker Change: More connected services and OTT and that requires fundamentally more capable electronics.

Speaker Change: And so that trend is.

Speaker Change: To see continue.

Speaker Change: Somewhat irrespective of the powertrain it is whether it is a small EV.

Speaker Change: And I sort of hybrid.

Speaker Change: This trend is cutting across the powertrain and will continue to drive.

Sachin S. Lawande: And if you look at the content, especially digital clusters and infotainment, a lot of our wins are coming now for more mass market vehicles, right? The upper end of the market either has these products already, and if we see opportunities, these are successor, follow-on opportunities. But the new opportunities that are growing the market in terms of adding more content are all coming at the mass market segments, the segment B and C vehicles, which you would think in the past were not typically the targets. Now, what's driving that?

Speaker Change: Business opportunities as we go forward.

Speaker Change: Okay. Thanks for that and then just a quick follow up here is there a way to frame how much costs ultimately needs to come down.

Speaker Change: Not to be carried into the mass Margaret segment.

Speaker Change: I think as we have demonstrated in fact with the two wins that we can.

Speaker Change: Talked about on this call those out to our infotainment wins both.

Speaker Change: For mass market segments. So.

Speaker Change: Good work that Visteon has done.

Speaker Change: In working with the semiconductor supplier base as well as the display supply base.

Speaker Change: To drive the cost of the systems to weather does not very affordable for that segment of the market.

Sachin S. Lawande: Number one is the digitalization trend, right? And within that, we talk about larger displays, talk about infotainment content that brings in downloadable apps, more connected services, and over-the-air. And that requires fundamentally more capable electronics.

Speaker Change: Okay, and so we believe as a result of that we have a set of software technologies hardware platforms the manufacturing.

Speaker Change: Our integration vertical integration that we have done, especially for displays is putting us in a position to offer products at price points that.

Sachin S. Lawande: And so that trend we expect to see continue somewhat irrespective of the powertrain. Whether it is a small EV or an ICE or a hybrid, this trend is cutting across the powertrain and will continue to drive our business opportunities as we go forward. Okay, thanks for that.

Speaker Change: Very competitive and affordable so we'd love to see that as a hurdle for the industry taking more of it as we go forward.

Speaker Change: Okay. Thanks for the help.

Speaker Change: And we'll take our next question is from Colin Langan with Wells Fargo. Your line is open.

John Babcock: And then just a quick follow-up here: is there a way to frame how much cost ultimately needs to come down for that to be carried into the mass market segment? I think, as we have demonstrated, in fact, with the two wins that we talked about on this call, those are two infotainment wins; both are for mass market segments. So the good work that Visteon has done is in working with the semiconductor supply base as well as the display supply base to drive the cost of the systems to where it is now very affordable for that segment of the market.

Colin Langan: Oh, great. Thanks for taking my questions.

Colin Langan: Sorry, just a recap I just want make sure I got the puts and takes in the year so sales.

Colin Langan: We're going to be up $150 million, but thinking of it more like 300, if we exclude the.

Colin Langan: The impact of the lower semi recoveries is that right and then that would imply about <unk>.

Colin Langan: $50 million.

Colin Langan: Increase in EBIT, it's about a 70% conversion on that EBIT or any other puts and takes we should be thinking on that conversion I know there was the recall impact is R&D and SG&A up it looks like those ratios look about flat and then you also mentioned in Q4. There is some normalization helped is that a headwind as we go into next year or is that sort of.

Sachin S. Lawande: And so we believe, as a result of that, we have a good set of software technologies, hardware platforms, the manufacturing integration, and the vertical integration that we have done, especially for displays, is putting us in a position to offer products at price points that are very competitive and affordable. So we do not see that as a hurdle for the industry taking more of it as we go forward. Thanks for the help. And we will take our next question from Colin Langan with Wells Fargo. Your line is open. Joe, great.

Colin Langan: Phil are continuing health.

Phil: Yes, hi, Colleen so as your home.

Colleen: Yes, so youre right the our sales at face value increase I think by 4% year over year.

Colleen: But once you back out the impact of the recoveries, which are coming down in the low just below $300 million of additional sales.

Colin Langan: Thanks for taking my questions. Just sorry, just to recap, I just want to make sure I get the puts and takes for the year. So sales are going to be up $150 million, but I think of it more like $300 million if we exclude the impact of the lower semi-recoveries. Is that right?

Colleen: So in term and that's obviously contributing to EBITDA. So in terms of other factors we do have.

Colleen: Engineering going up year over year, we finished the year with engineering being a little bit lower.

Colleen: Then what we had originally expected we were at five 3% of sales and we are forecasting for 2020 for a mid 5% saw an increase a slight increase in percentage, but as well obviously in dollar terms given the percentage of increase as well as the sales increase so thats a.

Jerome Roquet: And then that would imply about how many other puts and takes we should be thinking about in that conversion. I know there was the recall impact. Is R&D and SG&A up? It looks like those ratios look about flat.

Colin Langan: And then you also mentioned that there was some normalization help. Is that a headwind as we go into next year, or is that... Yes. Hi Colin, it's Jerome.

Colleen: Negative as we go into.

Colleen: Next year, but we are obviously continuing to invest in engineering as we've done in the last few years.

Jerome Roquet: Yes, so you're right. Our sales at face value increased, I think, by 4% year over year. But once you back out the impact of the recoveries, which are coming down, you're in the low, just below $300 million of additional sales. And that's obviously contributing.

Colleen: SG&A will be fairly flat in percentage.

Colleen: But again it will be a slight increase in dollar terms you have there in terms of other puts and takes slight negative FX that we've accounted for and then as well our normal pricing.

Colleen: We give to customers all of this is offset as well by operational efficiencies that we've been.

Jerome Roquet: So in terms of other factors, we do have engineering going up year over year. However, we finished a year with engineering being a little bit lower than what we had originally expected. We were at 5.3 percent of sales, and we are forecasting for 2024 a mid-five percent. So an increase, a slight increase in percentage, but also, obviously, in the dollar terms, given the percentage increase as well as the sales. So that's a negative as we go into next year, but we are obviously continuing to invest in engineering as we have done in the last few years. SG&A will be fairly flat in percentage terms, but again, it will be a slight increase in dollar terms. You have then in terms of other quick and takes slight negative effects that we've accounted for.

Colleen: Able to deliver over the last few years and will continue to delivering in 2024. So overall.

Colleen: We've got Incrementals, maybe that's another way to look at it on base sales of about in <unk>.

Colleen: Hi.

Colleen: Single digits double digits up time going into next year, and that's very consistent with the way we've been.

Progressing in the last few years and Thats as well.

Colleen: Incrementals, we have going all the way to 2026.

Speaker Change: Alright, you mentioned negative effects or what are you referring to there the negative.

Speaker Change: Yes, we do have a little bit off with the assumptions. We've made for some currency, we do have little bit of a negative FX going into 2024 on sales and as well EBITDA.

Speaker Change: Yes.

Speaker Change: Just a quick question you mentioned tax wasn't changed.

Speaker Change: What about your tax rate further delays with that.

Jerome Roquet: And then, as well, our normal pricing that we give to customers, all this is offset as well by operational efficiencies that we've been able to deliver over the last few years and will continue to deliver in 2020. So overall, we've got incrementals, maybe that's another way to look at it, on base sales of about in the high single digits, double digits, I'm sorry, going into next year. And that's very consistent with the way we've been progressing in the last few years, and that's also the kind of incrementals we have going all the way to 22. You mentioned negative effects; what are your thoughts on that?

Speaker Change: What should we be thinking kind of backing into like 23, 24% is that the right range and why it doesn't change if youre, releasing a deferred tax asset.

Speaker Change: Yes, no. That's a good question. So we've had a large one timer in Q4 with our valuation allowance release in the U S.

Speaker Change: To the tune of $313 million. So that's really a noncash tax item I think the key takeaways that from a cash tax standpoint, our profile will look very similar as we go into 'twenty four than what we've seen in prior years and generally our ETR easing the mid twenties.

Colin Langan: Yes, we do have a little bit of a negative effect going into 2024 on sales and EBITDA. Just a quick question. You mentioned taxes weren't changed. I mean, I got to make your tax rates all over the place a bit. What should we be thinking? I'm kind of backing into like, is that the right range, and why does it matter? Yeah, that's a good question. So we had a large one-timer in Q4 with our valuation allowance release in the U.S. to the tune of $313 million. So that's really a non-cash tax item.

Speaker Change: There is obviously some variability as you said.

Speaker Change: But I think if you can count on a mid 'twenty is a good proxy for ETR generally as well our cash taxes converge over time towards our.

Speaker Change: Income.

Speaker Change: Tax expense. So I think that's a good proxy if you need to evaluate what cash taxes are going to be for 2024.

Speaker Change: And we will take our next question from Mark Delaney with Goldman Sachs. Your line is open.

Jerome Roquet: I think the key takeaway is that from a cash tax standpoint, our profile will look very similar as we go into 2024 than it has in prior years. And generally, our ETR is in the mid-20s. It varies, obviously, with some variability, as you said. But I think you can count on a mid-20 as a good proxy for ETR. Generally, as well, our cash taxes converge over time towards our income tax expense.

Mark Trevor Delaney: Yes, good morning, and thank you very much for taking my questions. The company expects customer mix to remain somewhat of a headwind can you comment more on how visteon has positioned with Chinese domestic auto Oems and do you see an opportunity to improve your exposure with the Chinese domestic Oems.

Mark Trevor Delaney: Yes.

Speaker Change: So very good question Mark and.

Speaker Change: As you know.

Speaker Change: In China that has been what some might call a member of a wide list type of an environment lot of Oems.

Mark Trevor Delaney: So I think that's a good proxy if you need to evaluate what cash taxes are going to be for 2024. Thank you. Thank you. We will take our next question from Mark Delaney with Goldman Sachs. Your line is open. Yes, good morning.

Speaker Change: Fighting it out for market share.

Speaker Change: <unk>.

Speaker Change: It's going to be very important for us not to be caught in that environment.

Speaker Change: The ultimately what might.

Sachin S. Lawande: Thank you very much for taking my questions. The company expects customer mix to remain somewhat of a headwind. Can you comment more on how Visteon is positioned with the Chinese domestic auto OEMs? And do you see an opportunity to improve your exposure with the Chinese domestic OEMs? Yeah, that's a very good question, Mark.

Speaker Change: Who could be the wrong set of customers.

Speaker Change: We do not believe that this level of number of Oems and what's happening there in the market is sustainable in the long run we expect that to consolidate.

Speaker Change: So that's one thing now having said that.

Sachin S. Lawande: And as you know, in China, there has been what some might call a little bit of a Wild West type of environment. A lot of OEMs are, you know, fighting it out for market share. And it's going to be very important for us not to be caught in that environment with ultimately what might prove to be the wrong set of customers. We do not believe that this level of number of OEMs and what's happening in the market is sustainable. In the long run, we expect that to consolidate, so that's one thing.

Speaker Change: That is also a mix shift between domestic and JV Oems that we've touched upon previously as well that mix.

Speaker Change: In 2023 was even more pronounced in favor of the.

Speaker Change: Domestic Oems it's about roughly.

Speaker Change: 60 40.

Speaker Change: And.

Speaker Change: Not too long ago, it used to be the other way around so we have been addressing that by growing our business with domestic Oems and with domestic Oems that we believe have a longer term.

Sachin S. Lawande: Now, having said that, there is also a mixed shift between domestic and JV OEMs that we have touched upon previously as well. That mix in 2023 was even more pronounced in favor of the domestic OEMs. It's about roughly 60-40 now. And not too long ago, it used to be the other way around.

Play like Julie.

Speaker Change: And others, we talked about the launch with GMC forward, we're very excited about the potential with them and.

Speaker Change: We have very good content and a set of vehicles that.

Speaker Change: Our plan for launch so we are taking a very measured steps to grow our exposure to the domestic Oems without necessarily perhaps falling into some of the pitfalls. So far it has worked out well in the interim.

Sachin S. Lawande: So we have been addressing that by growing our business with domestic OEMs. And with domestic OEMs that we believe have a longer-term play, like Geely and others, we talked about the launch with JMC Ford. We are very excited about the potential for them, and we have very good content and a set of vehicles that are planned for launch. So we are taking very measured steps to grow our exposure to the domestic OEMs without necessarily perhaps falling into some of the pitfalls. So far, it has worked out well in the interim.

You'll see some mix.

Speaker Change: Negative mix dynamic, which will improve from.

Speaker Change: What we saw in Q4 and still be negative.

Speaker Change: But we believe we are.

Speaker Change: At a good position to navigate those waters and delivered growth with profitability that we desire.

Thanks Sachin.

My next question was with regards to the new 2000, Twenty's ex forecast what percent of your digital electronics revenue is coming from EV programs and can you give us a sentence how agnostic you might be in.

Mark Trevor Delaney: We will see some negative mix dynamics, which will improve from what we saw in Q4, but it will still be negative. But we believe we are in a very good position to navigate those waters and deliver the growth with profitability that we desire. Thanks, Sachin. My next question was, with regard to the new 2026 forecast, what percent of your digital electronics revenue is coming from EV programs? And can you give us a sense of how agnostic you might be?

Speaker Change: And if your own EV.

Speaker Change: OEM customers ship ice or hybrid vehicles, instead of Evs, you think you'd sell similar digital electronics revenue onto those ice and hybrid.

Speaker Change: And your customers do next faster than you currently anticipate away from Evs.

Yes, yes.

Speaker Change: As I mentioned earlier already we have been.

Speaker Change: Growing our.

Speaker Change: Sales on all evs or with our customers in line with the market in 2023.

Sachin S. Lawande: And if your own EV, excuse me, if your own OEM customers ship ICE or hybrid vehicles instead of EVs, do you think you'd sell similar digital electronics revenue on those ICE and hybrids to send your customers to NICs faster than you currently anticipate away from EVs? Yeah, yeah, as I mentioned earlier, we have been growing our sales on EVs with our customers in line with the market. And in 2023, just over 10 percent of our total sales came from EVs, right? And only a small portion of that, low single digits, was BMS. So we are today well positioned with respect to exposure to EVs outside of China. As I mentioned, China is somewhat different in that regard.

Speaker Change: Just over 10% of our total sales came from movies and only a small portion of that.

Speaker Change: Low single digits was BMS. So we are today, well positioned with respect to the exposure to evs outside China.

Speaker Change: As I mentioned, China is somewhat different in that regard, but outside of China.

Speaker Change: Well positioned and we expect to grow with the market outside of China as our customers launch new EV models now.

Speaker Change: No.

Speaker Change: Added to that.

Speaker Change: BMS revenues.

Speaker Change: See a faster acceleration that's net.

Speaker Change: Mental revenue to us.

Speaker Change: In addition to the.

Sachin S. Lawande: But outside of China, we are very well positioned, and we expect to grow with the market outside of China as our customers launch new EV models. Now, added to that, our BMS revenues are going to see a faster acceleration; that's net incremental revenue to us. And in addition to the ramp-up of production of models with GM and the new launches that we will see with them this year, I mentioned also that we are launching with two other OEMs this year, which will further diversify and grow our BMS. So, you know, what we have assumed is largely a similar sort of exposure to EVs outside of BMS that we have with customers in Europe and Americas, and then the BMS growth that will follow on account of the launches, which is one of the faster growing parts of our business.

Speaker Change: The ramp up of.

Speaker Change: Production of models with GM and the new launches that we will see with them. This year. I mentioned also that we are launching with two other Oems this year, which will further diversify and grow.

Speaker Change: BNS business.

Speaker Change: So 2026.

Speaker Change: What we have assumed is largely.

Speaker Change: A similar sort.

Speaker Change: Sort of exposure to evs outside of BMS.

Speaker Change: That we have with customers in Europe and Americas.

Speaker Change: And then the BMS growth that will follow on account of the launches which.

Speaker Change: As one of the faster growing parts of our business.

Speaker Change: Okay.

Speaker Change: This concludes our earnings call for the fourth quarter and full year 2023 results. Thank you everyone for participating in today's call and your ongoing interest in Visteon.

Speaker Change: And ladies and gentlemen, this concludes <unk> fourth quarter and full year 2023 results earnings call you may now disconnect.

Unnamed Speaker: This concludes our earnings call for the fourth quarter and full year 2023 results. Thank you everyone for participating in today's call and your ongoing interest in Visteon. Thank you. And, ladies and gentlemen, this concludes Visteon's fourth quarter and full year 2023 results earnings call. You may now disconnect. Please wait; the conference will begin shortly. Please wait; the conference will begin shortly.

Speaker Change: Please wait the conference will begin shortly.

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