Q3 2025 Adient PLC Earnings Call

1.

Welcome to today's conference call. At this time, all participants are in a listen-only mode. During the question and answer session, please press star 1 on your phone. Today's conference is being recorded if you have any objections, you may disconnect at this time. I will now turn today's meeting over to Mike heler. Thank you. You may begin.

Thank you, Denise. Good morning, everyone, and thank you for joining us.

The press release and presentation slides for our call today have been posted to the investor section of our website at avant.com.

This morning, I'm joined by Jerome dorlac Advanced president, and chief executive officer and Mark, Oswald our Executive Vice, President and Chief Financial Officer.

On today's call, Jerome will provide an update on the business. Mark will then review, our Q3 Financial results and our outlook for the remainder of our fiscal year.

After our prepared remarks we will open the call to your questions. Before I turn the call over to Jerome and Mark there are a few items I'd like to cover.

First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today and therefore, involve risks and uncertainties, I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to slide 2 of the presentation for our complete Safe, Harbor statement.

In addition to the financial results presented on a gap basis, we will be discussing non-gaap information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-gaap measures to the closest Gap. Equivalent can be found in the appendix of our full earnings release.

And with that, it's my pleasure to turn the call over to Jerome.

Thank you, Mike.

Good morning, everyone. And thank you for joining us today.

Today, we will review our strong third quarter results which demonstrate the adyant team's commitment to continuous business, performance Improvement, and the strength that we're operating model.

before we get into results, I want to share our perspectives on the current tariff climate

As I have mentioned previously, we saw the industry work together to overcome historical shocks like the great financial crisis.

Coid and supply chain shortages.

In our view tariffs are different and we believe they will result in a reset of the competitive landscape.

With definitive winners and losers. We see adyant as a winner and net beneficiary from the current tariff policies and onshoring Dynamics.

in a few minutes, I will share additional thoughts and proof points on how we are approaching and capitalizing

on these growth opportunities arising from us onshore.

As we began to discuss in last quarter's call, we are focused on leveraging. Our unmatched footprint and capabilities and are working collaboratively and proactively with our customers to add value.

Customers are increasingly awarding new business to add in.

I will walk you through new business wins, including net new business, from our customers us onshoring initiatives.

We also remain dedicated to being good stewards of capital and continue to execute our balance Capital allocation plan.

I will walk you through these topics in more detail, and then turn it over to Mark to review Q3 financials.

And our updated updated guidance for the fiscal year.

Moving on to slide 4.

As we expected our positive first half momentum continued into Q3 with improved business performance for a year ago across all regions.

allowing us to more than offset ongoing, customer volume and mix, headwinds and a Maya and Asia, as well as net commodity headwinds

In the Americas, we outperformed industry, volumes and saw strong year-over-year margin Improvement as we drove additional efficiencies and had favorable comparisons with last year's. Heavy launch calendar.

As a result, we're able to improve total company. Adjusted IBA to margins by 60 basis points and grow adjusted Ava by 24 million to 226 million.

Tariff rules and values continue to be fluid. As we have worked through our second quarter of new tariffs, we continue to believe that adant has ample degrees of freedom to mitigate impacts through resourcing of components and customer any negotiations.

Last earnings call, we shared that our gross monthly exposure to incremental tariffs. At that time was approximately 12 million

given policy changes in recent weeks.

Today that figure is closer to 4 million.

In short, we believe the terrific expense is manageable and we continue to find Solutions proactively working through the issue with our customer base.

The company's ongoing, operational excellence combined, with Innovative Seat Solutions are helping us win.

Significant new business across all regions including new business driven by us onshore.

I'll walk you through some of our new business wins in a few slides and more detail.

Before we go there, I want to acknowledge the adyant team for their dedication, leading to multiple Awards recognizing audience, effort to drive outstanding, quality, efficiency and customer service.

Some examples of recent Awards include GAC, Toyota's quality collaboration award.

Multiple GM supplier. Quality excellence awards at our site's globally.

And Ford supplier of the year.

As I've commented before, external validation of the value, we provide and how we operate the business speaks volumes.

I am proud that our team continues to win broad-based customer and Industry recognition.

And I'd also like to thank our customer for their continued, trust and audience.

Without you, the business would not be possible.

We are focused on delivering best-in-class quality value and service to our customers.

It is, this type of behavior and execution that is allowing us to win. Onshoring net, new business with some of our asia-based oems.

Including the Nissan Rogue, which we will supply. Additional volumes coming from Japan to our Murphy's Bureau Tennessee facility, as well. As another Asia OEM that is moving production from Canada to the US.

In addition to these onshoring wins, we have 1, significant new conquest business in Europe, and the US with the Mercedes van C, large.

In Asia, we continue to grow with the likes of byd and other EV leaders.

The company generated strong free cash flow of 115 million in Q3 in line with earn like in line with internal expectations.

As we have previously commented, we typically generate positive free cash flow in the second half of the year.

Importantly, we have maintained a strong cash balance of $860 million and ample liquidity of $1.7 billion.

Our free cash flow supported 50 million of additional share repurchases in the quarter.

bringing our total repurchases so far, this fiscal year to 75 million

Or approximately 4% of our outstanding shares.

Mark will get into our Outlook and more detail in a few minutes.

Given our positive momentum.

We expect a strong finish to fiscal year, 25 and are increasing. Our guidance for revenue and adjusted, Eva to 14.4 billion and 875 million respectively.

Now, let's discuss how the adyant business is progressing at a high level, from a regional perspective on slide 5.

As a general comment.

While we remain intensely focused on business performance, and efficiency.

We have been deliberately pursuing profitable new business by leveraging, our competitive advantage.

Of an innovation, consistently strong, operational execution. And a world-class footprint.

In the Americas. We continue to benefit from strong business performance and margins continue to expand.

Incremental efficiencies driven by automation?

Innovation, continuous Improvement and Engineering cost out.

As I mentioned earlier, we are focused on navigating tariff Dynamics and driving value for our customers.

By doing. So we are beginning to realize growth opportunities.

From an expense perspective, we believe the Tariff impact is manageable.

In Q3, if you recall, we experienced the net headwind of approximately 4 million in the quarter down from 9 million in Q2 when terrorists began to go in effect at the end of the second quarter.

We Believe tariff expenses are manageable based on our understanding of the current tariff policies.

Our objective going forward.

Is continues to be to mitigate most of these expenses.

And the Maya we are seeing improving business, performance, and strong execution, including restructuring benefits.

Combined with the expiration of underperforming metals contracts. Beginning in fiscal 26 into 27 as significant self-help Tailwind.

Importantly, we believe we have ring ring facts, cash restructuring costs in the region.

Over the next 2 to 3 years.

We are starting to see some signs of Industry, volume, stabilizing and the region and giving our self-help measures over the next few years, we believe we can achieve mid single-digit, ebit and margins in a man.

We are also seeing several.

New key Business Awards in the region.

That will strengthen our Topline performance in the out years.

In Asia, the team continues to execute at very high levels.

And drive strong business performance.

Margins have expanded this year, and growth in the rest of Asia nearly offsets lower sales volumes in China. In the quarter,

While we continue to experience near-term. Pressure on China Revenue, we believe this to be temporary as new business with local China. Oems is expected to drive growth.

Our strong relationships and footprint in China, are helping us win more business this year and we expect to capitalize.

On China, OEM growth abroad.

Rapid adoption of innovative seeding Solutions such as zero gravity and mechanical massage seats.

And mega Mobility, Trends such as smart, vacation and electrification are driving content growth.

Our Asia business remains profitable and cash generative.

In short, adding can you continues to consistently execute while demonstrating agility for our customers?

We're capitalizing on emerging growth opportunities.

Now, let us turn to slide 6 and talk about on showing growth opportunities in the US.

earlier this year, as tariff policy Rose to prominence,

The adyant team proactively performed Deep, dive analysis of our customers, us footprint and compared that to our facilities.

Differentiating between unibody and Body on frame capacity.

We had identified overlapping footprints and proactively approached our customers with solutions to support their onshore needs.

These proposals are in various stages of consideration by our customers.

The key takeaway is we are leveraging our competitive advantages to win new business.

our strategically, advantaged footprint allows us to service our customers and aligned as opportunities emerge

Our customers, appreciate our track record of execution, and strong quality.

and lastly, we are being recognized for our customers for our Solutions oriented

Leadership, and our partnership.

Approach on the issue.

Eddie's us presence is an enabler for future growth.

That we are announcing today with our new onshoring wins with our asia-based customers.

Agent is competitively advantaged with the US production footprint of 75% of total North American production compared to our nearest competitor with approximately 55%.

From what we know today, we estimate approximately 600,000 units of annual Vehicles could be onshore to the US.

We expect to get more than our fair. Share of this opportunity. With minimal incremental investment.

Moving on to slide 7.

We continue to prioritize winning the right business and executing successful launches.

Our business Awards. This quarter demonstrate tangible growth from us on Shoring, significant new conquest wins. And it may underpinning stabilization in the region and growth in China, including new business with byd and other EV leaders.

I want to take a moment to highlight new business with 1 of our asia-based oems that I mentioned earlier.

This business is currently produced in Canada.

Production will be moving to the US and includes jit foam and trim.

And with Nissan, we are currently supplying seating for the Rogue from a Murfreesboro, Tennessee, facility, and the customer will be moving incremental volume from Japan to the U.S.

I want to thank both of these customers for their trust and audien with an accelerated launch timeline.

We expect additional customer onshore and announcements will be coming, which will open up more opportunities for adding it.

And AMA, we are very excited about supplying the Mercedes van, C-Class large complete seat.

This is a conquest win and represents stable high volume and a program which will start production in fiscal year 28 and will be additive to our volumes in the region.

This is also a full value chain win, which includes jet foam, trim and metals.

This win also includes production in the U.S., highlighting our ability to provide global solutions to our customers.

Also in May and we recently won new complete seat business on the Volvo ex40.

In Asia, we have 1 significant trim, business with byd on the denza D9.

We continue to cultivate our relationship with fast growing china-based OEM

We've also won complete seat business with Toyota on the 560b, which is a 7 seat, multi-purpose vehicle expected to launch in the India market. This is another example of how we are helping our Asia based customers globalized,

As you can see, on the right hand side of the slide, we are launching several key platforms around the globe.

These programs are a testament to our high level of execution on multiple launches and our ability.

To perform on safety quality and on-time delivery. Methods for a customer

Finally, moving on to key factors we as a management team, want you to come away with a differentiate adding from other suppliers on slide 8.

The IDM team achieved strong momentum in Q3 and we expect this to continue into Q4.

The team is committed to consistently strong execution and support of our customers, we'll demonstrate in their resiliency and the ability to quickly pivot and overcome macro challenges.

Eddie and possesses a world-class Global footprint and continues to drive value to our customers wherever they do business around the world.

We see significant us. Onshoring opportunities. Requiring minimal capital investment.

And we're starting to see those opportunities come to fruition.

We are winning new business in Europe and Asia.

We believe we have tremendous runway for earnings growth and free cash flow generation.

Lastly, Annie and has demonstrated a balanced approach to Capital allocation.

In Q3 adding repurchase 4% of its shares and is nearly acquired 15% of its total shares outstanding. Since our buyback program began a year ago.

And we are committed to continue to be good stewards of capital.

Now, I'd like to turn it over to Mark to take you through our financial Outlook.

Thanks, Jerome. Let's jump into the financials on slide. 10 is hearing to our typical format, the pay shows are reported results on the left side in our adjusted results. On the right side, we will focus our commentary on the adjusted results, which excludes special items that we view as either 1 time in nature or otherwise, skew, important Trends and underlying performance.

Details of all adjustments for the quarter are in the appendix of the presentation.

High level for the quarter adjusted. Ibido was 226 million up, 12% year-on-year,

points year-over-year to 6.0% the Improvement, reflected outstanding business performance in the quarter, despite lower customer volumes and the negative impact of tariffs

As Jerome mentioned, we continued to demonstrate the resilience of the adyant operating model and ability to mitigate external pressures.

Worth noting that our underlying Equity income remains quite strong, particularly in our asia-pacific segment, despite this quarter's results being negatively impacted by 6 million dollars from the same period. A year ago, due to the restructuring of a pricing agreement within audience, typer, joint venture.

At the bottom line, adding it reported adjusted net income of 38 million or 45 cents per share.

I'll cover the next few slides rather quickly. Since details of the results are included on the slides. This should ensure we have adequate time for Q&A.

Starting with revenue on slide 11. We reported Consolidated sales of approximately 3.7 billion dollars an increase of 25 million compared with Q3 fiscal year 24.

the year-on-year increase was driven by 84 million of favorable FX partially offset by lower customer production volumes,

Focusing on the right side of the slide, adding Consolidated sales on an fx adjusted basis were higher in the Americas, and lower in Amia and Asia year on year.

In the Americas.

Higher sales versus industry were driven by a favorable comparisons versus a year ago. When many of our key customer programs were launching at low volumes such as GM's, large 3 row crossovers in the Toyota Tacoma.

In Europe, we were negatively impacted by overall weaker, market demand.

Additionally, we underperformed the market due to planned. Portfolio actions in adverse customer mix.

And in our APAC region sales, in China, underperformed industry production, primarily due to lower volumes from our traditional luxury OEM customers longer term, we see growth over market and Improvement giving our numerous wins with key China. Oems

We continue to outperform the industry in Asia outside of China due to new customer launches, which occurred in the second half of 202024, which are now at full run rate volumes.

Regarding audience, unconsolidated seating Revenue, you're under results are down about 9% adjusted for FX.

Revenue in North America is lower due to a JV portfolio, rationalization, which is, partially offset by growth in Europe of our Denise joint venture in Turkey.

Sales in China were down nearly year-over-year, mainly due to lower sales within our CFAA joint venture.

Partially offset by growth with byd and exports through our Kyper joint venture.

Moving on to slide 12, we provided a bridge of our adjusted ibida to show the performance of our segments between the periods.

Adjusted. Ibra as indicated was up 12% at 226 million.

The primary drivers of the year-on-year. Comparison are detailed on the page.

The addi team drove improved business. Performance of 33 million primarily resulting from better. Net material margin and reduced operating costs including lower launch costs.

Worth mentioning this quarter's performance results include 4 million dollars of net. Tariff expenses.

The improved business performance was partially offset by net Commodities, which was a headwind of 7 million. Largely resulting from timing of customer reimbursements.

Volume mix was a million dollar headwind driven by lower customer vehicle production, in Amia, and China.

FX was a million dollar Tailwind, mostly from favorable transactional impacts in Asia.

As in past quarters, we provided our detailed segments, performance, slides in the appendix of the presentation.

High level for the Americas improved business. Performance of 20 million dollars. In Q3 was primarily driven by favorable commercial actions, lower input costs and lower launch costs.

Partially offset by lower net. Engineering recoveries.

Tariffs were a $4 million headwind during the quarter.

Assuming no changes to current policy. We expect our net tariff expenses to be lower in Q4. We expect to recover or offset through business performance. The majority of peripheral expenses going forward

Commodities before million dollar headwind driven by the Tommy of recoveries.

In Amia the year over results were influenced by positive business performance. Call it 6 million dollars in Q3

partially offsetting the improved business, performance was lower volume and mix of 5 million.

FX was a 2 million headwind, primarily driven by transactional exposure from the zlati and commodities were a 3 million dollar headwind due to timing of recovery.

in a Mia, we continue to focus on driving additional operating efficiencies restructuring and executing our plan which includes the rolloff of lower performing Metals business in the start of production of better margin new business,

Which we believe will infect positively in 2026.

Moving on, in Asia, our results, improved year-on-year by 12 million and our ebit of margin expanded 150 basis points. Driven by positive business, performance, in favorable FX more than offsetting somewhat lower volumes in mix,

In summary, the company continues to drive improved business performance across all regions, which we expect to continue in Q4.

Let me now shift to our cash liquidity and capital structure on slides 13 and 14.

Starting with cash on slide 13 for the quarter free cash. Flow defined as operating cash flow, less capex. Was 115 million year to date which Smooths out worth in capital timing. We generated seventy million dollars of free cash flow

change versus last year is more than explained by the higher. Cash. Restructuring particularly in Europe.

as Jerome mentioned earlier, this was in line with our internal expectations in Q3 we incurred 34 million of cash restructuring in line with prior quarters

We continue to expect solid free cash, conversion in fiscal 2025.

1 last point and called out at the bottom of the slide. Adding continues to utilize various factoring. Programs is a low-cost source of liquidity at June 30th 2025. We had 168 million of factored receivables about flat with, where we started the year in quarter.

Flipping the slide 14 adding is committed to being good stewards of capital, while maintaining a strong and flexible balance sheet, ensuring efficient allocation of resources and ample liquidity.

Turning to our balance sheet, Eddie's debt and net, debt position totaled about 2.4 billion and 1.5 billion respectively at June 30th.

The company's net leverage at June 30th was 1.7 times within the targeted range of 1 and a half to 2 times.

total liquidity for the company was approximately 1.7 billion dollars at June 30th, comprised of 6 860 million of cash on hand in 872 million of undrawn capacity under audience, revolving line of credit

during Q3 we repurchased $50 million of our stock, we retired approximately 2.8 million shares

Year to date. We've repurchased 75 million of stock and reduced our shares outstanding by approximately 4%.

We have 185 million remaining on our current share repurchase authorization.

Lastly, turning the slide 15.

Given her strong year-to-date financial performance, current exchange rates, and visibility we have into production schedules for adding Q4, we are raising our fiscal year 2025 revenue and EBITDA guidance to approximately $14.4 billion.

In approximately 875 million respectively.

It's important to emphasize that this outlook doesn't contemplate policy changes or additional tariffs to what we know as of today.

It's worth noting that this Outlook is quite similar to where we thought we would be when we started the year. Last November adjusted for FX and tariffs.

A free cash flow. We are maintaining our guidance of 150 to 175 170 million.

While we have been able to drive favorability in adjusted ibida, in our improved Outlook with regard to capex and cash taxes.

We still face uncertainty and timing. Delays related to tariff, recoveries?

I'd also point out that we are expecting elevated levels of cache restructuring this year, due to timing of cash payments related to previously announced actions, pilot close to 130 million dollars.

Contemplating our setup in 2026, we'll confident, we feel confident in our ability.

To manage the controllables in our business and believe our strong 2025 financial performance will be a positive starting point going into 2026.

we will have more specifics to share about our 2026 Outlook when we report next in November,

To sum it up. Adding is demonstrating, consistently strong execution and is well, positioned to weather macro challenges,

We remain focused on delivering excellent products and value for our customers, meeting or exceeding our financial commitments to our shareholders while maintaining a strong and flexible balance sheet.

With that, let's move to the question and answer portion of the call.

Operator. Can we have our first question, please?

Thank you. Our first question comes from Joe SPAC with UBS. Your line is open.

Good morning everyone. Um,

Jerome, uh, some some um, interesting data points on on the um, on sharing opportunity with some early wins and in the future opportunities, I guess. Um,

A couple things here. Um, the Nissan business you talked about, I just want to confirm that you had that business but there but you just think there's higher volume with the US and in the Asian OEM 1 is purely incremental. Um and then on the on the bigger opportunity where you talked about 600,000,

You know, units, potentially coming back to to the US. Um,

And your advantage footprint there. Um,

How what do you think the the net opportunity for adding is because presumably, you already have some of that business, you know, in other parts of the world. And, and if you don't win that business, even if you do have the footprint, what what happens typically in that case, is there an opportunity to sell assets or facilities? I just want to sort of better understand how you're thinking about this, um, opportunity.

Yeah, so thanks for the thanks for the question Joe, I think so just, uh, a couple points on that. So on the on the Nissan business, you know, the way we view that, I mean that's a net positive force. So that business today is produced, you know, in Japan by 1 of our competitors. They're bringing that over into their Smyrna facility. You know, that will represent incremental revenues for us. We'll run that on existing capital and the other piece of business that you, you know, that you reference that we referenced on our call. Um, that's coming from Canada into the US for us. The sum total of those 2 pieces. You can think of it, somewhere between 150 to 200 million of Inc.

Mental revenue for us that will start really flowing in in 26 that'll hit full run rate. Um by the time we get into 27 just based on as our customers fully ramped up um from that standpoint.

And that is truly.

New incremental, revenues.

The way we think about the 600. You know, that 600 is

Business that we do not have today. So that doesn't exist in our portfolio today. Um, it would really be at the expense of our competitor base and that's why we really called out. You know, our footprint today is largely 75% us-based and you know, compared to our next largest competitor who sits at 55% and you know, others in the market have different Footprints. And so when we think about that 600, you know, that's based on already existing announcements that are in the market today, you would have seen, you know, the announcement of General Motors, what they want to rotate through with their footprint.

Other customers have, you know, approached us already looking to, you know, rotate other volumes out of whether that's Mexico or potentially Canada as well. Um also Japan some other regions into the US and again, that would be net positive. Now, are we going to get all 600 of that? No, I don't think that's a realistic way to look at it. Is there going to be other incremental volume that comes in? I think, we, we feel that we feel that we will be a beneficiary of it. It's just a question of timing. And where does that?

That land in the US and at which 1 of our sights again with very little net investment.

So we don't see any of that. 600 winding down facilities elsewhere in the world and we don't see us having to shutter Assets in Mexico. We have no footprint in Canada today, and so it would be a net positive for us with very little downside. Almost no downside from that standpoint.

Are you sort of touched on a little bit? Um, um,

Of, um, you know, using 2 into 26, and that, you know, the business performance is pretty strong this quarter. You're pointing to positive business performance in, in, in fourth quarter. You talked about, um,

You know, the the UN underperforming business sort of rolling off um and obviously volume is still sort of a key variable with some levels of uncertainty. But but it are you sort of suggesting that even you know, uh or uh exclusive of sort of how volume plays out. You'd expect that business performance to be a Tailwind into 26. And, and like, is there any sense of magnitude as to sort of, you know, how much that could help next year?

We we do Joe, we we do think that business performance will be a positive heading into 26. You're, you're exactly right. You know, the big unknown and the Big Driver obviously for us and for the industry is production volumes. So we'll be, you know obviously you know watching that closely as we go through the next couple months. We're right now just in the final stages of finalizing, the 26 plan, you know, we'll do that, you know, with the management team with our board. So again premature for me to comment on specifics about it, other than to say that we think the momentum that we're establishing here in 25 continues into 26 and you know, business performance will be a Tailwind

Okay, thank you.

Thank you. The next question comes from. Colin Langan with Wells, Fargo. Your line is open.

Oh great. Thanks for taking my questions. Uh just on the guidance guidance uh for sales Rose by 500 adjusted Ava by only 25 million. Any color on the low conversion is that? Because most of the increases effects related on the sales side, just any color there.

That's right. Colin, it's it's, you know, if you think about it. Um, you know, if I look at my translational impact in terms of the top line, that's, that's the majority, obviously, you know, certain of that pulls through it very low margins over in Europe, for example. And so that's that explains the the difference there between the sales and the actual impact on ibida.

Got it, that makes sense. Um,

And and 1 of your competitors just announced. They won the structures business on the app series. Uh and flagged that the F series jet is is ongoing uh, for bid, um, I believe the F-150 jet is your largest platform. I mean, do you think having the structures would be an advantage to winning the Jet and any colors that you could provide on the bid process is the F-150 and the Superduty up for bids. So, maybe there's even opportunity for you actually, uh, any color there that you could provide.

Yeah, this is Jerome. So thanks for the question. I think.

you know, I, I don't want to, you know, comment in terms of how forward sources or in terms of

You know what they have out forbidden? What they don't have out forbid I think

You may be taking the question a second half and then I'll go to the first half. You know what we're focused on is providing solutions for our customers and when it comes to the F-150, you know, that's a very important platform for us. And what we want to do is always be laser focused on providing solutions, for Ford Motor Company and for Ford's customers that provide value for them and ensure that we're giving them the best product for the world's best selling truck. You know, for significant number of years running and that's what we're laser focused on doing. And we're going to continue to do. And we think that gives us

A favorable opportunity to win that business and retain that platform.

and I think we feel good about where we stand and, you know, and the bid process with them,

And that's what we're focused on doing. I we're not going to speculate on, you know, where it stands and and what Ford is going to do from that standpoint.

You know, I do think it's worth correcting. There was, you know, an article that was published by 1 of the analysts that said, you know, the F-150 medals as part of adyant Crown Jewel. That's just simply not true. You know, the we haven't had the F-150 medals since the last cycle and, you know. So we haven't produced that now, for, almost I think,

Going on 6 years, 7 years. Um, and so it's, you know, it's worth noting that you know, the loss of the F-150, medals does not impact adyen, it's not a loss of market share. It's it's not a shift of market share from that standpoint. Um, and in terms of, you know, does having the medals enable you to win the jet?

The way, you know, our customers Source, certain customers at the benefits, certain customers. It's not

Independent sourcing events, and that's how we, you know, provide value to Ford. We view jit trim, um, and foam, and our ability to engineer that as an individual event. And that's how we provide value to them, um, without metals. And that's how we provide the product today and we were able to win the product today without having the metals. We think we're very confident, we can do that in the future.

Got it. All right, thanks for taking my questions.

Thank you. Next question is from Edison you with Deutsche Bank, your line is open.

Hey, good morning. Thanks for taking a question. Um, on the housekeeping, I think that equity income took you down a little bit. Can you maybe just go over what’s driving that for the guidance?

The volume.

Some of the equity income, obviously, Edson is impacted again. We've mentioned a couple of times throughout the year on our quarterly calls that we have renegotiated the pricing agreement with Kyper, right? So that would impact our equity income. There's just, you know, what I'd call, you know, FX that would impact, you know, certain pieces of that, right? So it's just, you know, I'd say little things throughout. But again, when I look at the total piece for equity income, still, um, very strong.

Gotcha.

And then just on the uh, I guess the, the performance versus the industry. Um, I know you mentioned, you have several China wins coming any sense on what we can kind of get to to parody, um, in in the China Market as, as, you know, some of this new business launches with, with byd and and other Chinese customers

I mean, I think the last part of your your question really highlights that a lot of its going to come down to, you know, how does how does BU perform in the market. I think we've been very transparent in terms of what our our market share is with byd. Um you know today we announced the wind on the denza D9 trim. You know, we've been very focused in terms of going after component wins with byd.

You know the makeup of our business and where we see profit and cash generation, we do very well on components and we've been doing very, very well with byd on components that obviously doesn't have the Top Line.

Say Revenue generation as a digit piece of business would. So a lot of it will come down to customer mix and how byd continues to grow their. You know that said I think if you look at our wind profile where we've been winning this year, we would expect to see as we get into 26 back, half and then 27. When we see significant launches, you know, we'll get back to more of kind of a parody type of run rates. Now again, a lot of that will be contingent upon

Yes, BYD continues to outpace the market there, as they've done. It will be hard to have parity. I'm just giving our mix that said. We don't necessarily see that continuing moving forward.

Understood, thank you.

Yeah, thank you for the question. Thanks.

Up. Next is Emmanuel Rosner. With wolf research, your line is open.

Great, thank you so much. Um, just wanted to follow up on the uh the reshoring. Onshoring, uh opportunity. Can you help us on this end? Um or you know or how to quantify the competitive Advantage you have from having

Uh, the local footprint. So, maybe just some sense of how much does a jit plant cost. Like if someone had the business itself where they had to build it in the US, how much would that cost them or or how much of a, you know, competitive Advantage? You have some not having to do it.

Yeah, I think it's I think it's cost but it's also intimacy with your customer. So the you know, the cost is 1 aspect and, you know, a jet plant when you think about investment whether that's Brownfield or Green Field, you know, the lines that you have to put in, you're, you know, somewhere between 20 and 30 million dollars give or take a bit.

But cost is 1 thing. But there's the intimacy that you have with your customer, you know, when you think about servicing that Vehicle Assembly Plant, you know, the fact that you have this track record of delivery, you know, we've talked a lot about the fact that you have a broadcast window of between 120 to 180 minutes.

Where your, you know, having to manage the complexity associated with it. You know, if you look at audeze delivery track record, the fact that, you know, we are a supplier of choice to our customers. We've demonstrated our ability to meet those windows of delivery. 100%, you know, on time, 100% successful launch rate

That capital expenditure, when you think about, you know, running it through amortization.

And it's, you know, more than just the incremental piece of it. When you, when you have to think about that. Um, you know, there's the engineering that will then go along with it. There's the rebuilding of the relationship. There's the fact that they would have 2 points of inducement for a seating supplier, then, which is a big tear up for a Vehicle Assembly Plant.

So when you have, you know, a a seeding plant that's next to a Vehicle Assembly Plant.

That's a significant competitive Advantage when you're performing. And that's why, you know we talk a lot about

Focus on performance, you know, so much of this business is doing a thousand things, right? Every minute, every day in a jet plant. And that's, you know what our model really comes down to. So it's just, it's so much more than just that capital investment. It's the level of service we provide, for our customer that relationship between our seating plants and the Vehicle Assembly Plant.

Got it. Um, thank you. Um, and then uh focusing on your, you know, cost performance. Um can you just

puts back into context where adding is 9 terms of uh, you know, current margin and and how much more

Cost performances, there are cost opportunities there, uh, compared to your initial plan to, uh, improve margins.

Look at it a manual. I I look at it this way, right? If I look at and I I'll go by the regions, right? If I look at, you know, total company for example, we've given you know, directional commentary that we'd like to be somewhere around an 8% ibida margin company right give or take you know and you know timing Etc volumes but that's that's the Target, right? And so then when I look at it from a geographical perspective, you know, America's you know printing you know, somewhere in that 6 percentage range this year, right? We're we're 10 months through the 12-month fiscal year, right? So they're going to come in somewhere around that 6%. I think, if you look at, you know, the APAC region, right? They continue to print double digit margins. Um, I look at them as being.

You know, able to continue to print double digit margins, they'll continue to grow the Top Line. Um, Europe obviously, it's going to be troughing, we've indicated a couple of times on our on a quarterly calls this year that we expect the Europe performance to trough in 2025, right? You know next year you know business performance you know should be a Tailwind. As I think about some of the restructuring that comes on, we should get some positive mix that. I think about the balance and balance out of projects.

Um, programs.

So you know, total company. Can I see us? Moving from that 6 percentage range up towards 8? Yes, I do think that that means that America continues to grow their margins. I think that you'll get see sustainability with an APAC double digits. And then obviously, that would mean Europe has to go from call it. You know, that 2 and a half to 3% margin probably to somewhere 5 or 6%, right? And that's sort of what you should think of, in terms of opportunity by region to get total company. You know, call it a couple hundred basis points, more of margin growth,

And I think what's important is, along the way, it's just the free cash flow generation potential of the company.

You know, we we continue to remain that capex. Number somewhere between, you know, 260 to 300

And we talked today about the European restructuring and we think we've got to kind of ring fence over the next 2 to 3 years line of sight. Um our cash tax profiles attractive and so we our laser focused on cash generation and then how we deploy um that c you know, that cash that we're generating in a balanced manner.

Great. Thank you.

Thank you. The next question comes from

Hi, uh, good morning everybody. Um, just on on tariff saying Commodities and and I guess starting with commodities, I, I believe the previous guidance had assumed

Neutral impacts for both. And like, on the commodity side, the Year date headwind is 30 million. Are you reporting that number on a net of recovery basis? Meaning that, you know, the the Commodities bucket is trending worse than what you previously had anticipated? Or was it all? Or was it the guidance always assuming?

As as is taking taking place.

Just just wondering.

Yeah, so James, when we talk about Commodities its net, right? But again, you know, important to note that when we do get recoveries, and whether it's recoveries for a Commodities or recoveries for tariffs, for example, you know, you are going to get it within a basket of goods, right? So, you are going to get what I would say, a a mixed bag of where the recoveries come from, but on a net basis, that's that's the way you should be thinking about that.

okay, so so it's, you know, in terms of, I mean,

Based on what your ethics assumptions are. It seems as though the full year core sales are running like a point and a half better than your original or your prior guidance.

And the the weaker flow through on the better revenue is due to these lingering Commodities and and tariff. Headwinds. Yeah, is that. That's the way I look at it is, is this way James, when we gave our our guidance back in November, right? And we were walking from the 880 to the midpoint of 875. We said, volume and mix was going to be a negative for us. Call it somewhere around that 80 million range econ was going to be a net negative for us. Again broad brush numbers. Call it around, you know, 20 million headwind and then business performance was going to be the positive driver. Call it close to 100 Wright.

With our new guide writing, again, we're walking, as I indicated, it's it's fairly close to what we guided to, I mean, we're coming out to 875.

Point, you know, since then FX, I'd say is a slight negative.

Volume mix is pretty much flat with where we thought it would be and then business performance is actually improved because now we're actually picking up about 15 million dollars of what I'd call tariff impact for the full year. So those those are your big primary buckets that you should be thinking of

Got it. Okay, that—that's—that's.

very helpful and then just touching back on on core sales and and your positioning in China, um, if for for the age of pack region, and, and your JVS

Is there?

Better line of sight to stability for, for next year, on the top line with, you know, with the company set up for growth or is it more of a, you know, a focus on driving strong profitability, which, you know, we are seeing in the in the Asia Pac region this year.

Yeah, I think it's I think. I mean, thanks for the question. Its

It's 1 that we're going through right now as we're looking and trying to set up our 26 plan.

A lot of it will come down to launch Cadence of the local China OES. And you know there were certain launches that were even supposed to take place this year. Um that were delayed as they looked at their software stack and we're trying to keep their software stack in particular AAS.

Competitive. And so, they pushed some of those out into '26. You know, if those launches hit and the timing flows through, you know, we'll return to, as we talked about earlier. Um, I think from, you know, it was Edison's question, you know, somewhere around parity, pending again. What BYD does from a growth standpoint, but if those launches get delayed, you know, it could be a year that will be, um, I wouldn't say down like this year was, maybe a year that's slightly contracted for the market. Still growth relative to year-over-year. So, a lot of it will just come down to the launch cadence of the local China OEs, and a lot of that, I think, again will probably be driven from their software stack readiness, in particular AAS.

Thank you.

Yeah, thanks for the questions.

Thank you. And as a reminder, if you would like to ask a question, please press star 1.

The next question comes from Dan Levy with Barclays. Your line is open.

Hi, good morning, thank you for taking questions. Um,

wanted to First double-click uh earlier on on response you gave earlier Mark, um the margin side and specifically on Europe and I think

Uh earlier in the call. Uh you know Jerome you mentioned that you think Europe can get to Mid single digits.

EBIT margins. Um, can you just unpack what specifically needs to play out to achieve that? What's a reasonable timing? How much more restructuring do you think you need to do to get that cost structure in line?

Yeah, great. Great question, Dan and thanks.

5 to 26.

Right. We're getting some positive traction on the restructuring that we've already announced. And that we're, we're executing.

Clearly, the biggest driver there is having stability in production, right? So, you know, as we continue to see production stabilized which which we have recently, as we continue to win new business right in general mentioned a couple of new platforms uh this morning. In terms of that we won, you know, when those start to roll on, right? Those are all drivers that you know, provide a Tailwind as we get into uh emia. So again those are the let's say the elements or the the lovers that actually give us confidence that we can go from you know call it that 2 and a half to 3% trough which we're facing this year to somewhere in that you know call it 5 5 and a half percent range over the next. You know, it's not going to happen overnight, you know, restructuring is is a multi-year restructuring plan. So, you know, when you start looking at incrementally, you know, you're probably talking 2 or 3 years out before you can get to something that would resemble, you know, those type of margins.

With re, you know, uh, for your last question. Just, in terms of how much restructuring is left, we have indicated that, you know, we would expect 2026 to be another heavy restructuring year.

We have an announced anything other than what we have now assists here, but we do know that certain programs are rolling off. We also know there's going to have to be some capacity alignments there. So, you know, something probably in the same zip code is what we're facing this year.

Okay, thank you. That's helpful, caller. Um,

Second question is I want to go back to the reshoring theme and uh to blend that with the the question you frequently faced on vertical integration.

And with automakers now uh doing reshoring or pursuing, some reshoring, how much more are they looking at vertical integration? If at all perhaps to get better cost Dynamics because they have additional costs on their end that they need to get to the vertical integration play into this at all and where you positioned on that?

Yeah, I think.

I think, if anything, it's, you know, becomes slightly Des synergistic, um, because they're looking to possibly disaggregate value chains more um, depending on which

You know, which onshore and opportunity it takes. I think our core products are Jet Trim and foam.

You know, that really lends itself well, to be vertically integrated and, you know, we pour more foam than anyone does in the, you know, in the US market in the North American market and we sell more trim than anyone does in the North American market. And when you can bring that together with your jet footprint and you can, you know, be extremely agile and be extremely Nimble, you know, that's where we're seeing. I think significant momentum.

you know, when you try to bring into that,

Things such as you know, whether it's the Comfort Systems or things along those lines, you start to run into some challenges.

Because the customers now are looking to, you know, see where they can disaggregate those things. You saw, you know, going back to the F-150 the announcement. I think during it would have been Jen therms earnings call on what you know they announced with their win again. You know I don't want to talk about Ford sourcing pattern but that announcement is already been made. You know they fully disagreed that

Um, and our customers want to move fast. I think if you try to box them in with a fully integrated value chain,

On things that they don't traditionally Source fully, um, aggregated, you know, they just they look at it and go. Well that's not how I want to do it. I want to move fast. I want to move in a in a more efficient way. They may give you sourcing control over it um but it it's yeah, sourcing control. They then just want, you know, I think what will be at the end, the quickest solution to get there. And if you don't have the footprint or you don't have a solution to give them,

They're not going to let you force on to them. They fully integrated 1 just because it's fully integrated. Um, jit, trim and foam. Yes. And we've seen we've seen success in our Metals footprint. We talked about that on the last call where we've been able to utilize some of our Global Metals footprint, but not necessarily on the other components. Have we seen a big play?

Thank you. That's a couple colors.

Okay, thanks, Dan. I want to thank everyone once again for your interest in adding. If you have any follow-up questions, please feel free to reach out to me today. Also, I'd like to acknowledge that we will be in New York City next week, participating at the JP Morgan Autos Conference, and hope to see many of you then.

And with that Denise, we can close out the call.

You may disconnect.