Q3 2026 Adient PLC Earnings Call

Speaker #1: Welcome to audience Q3 2026 earnings call. Parties will be on the listen-only mode until the question-and-answer session of today's call. I'd like to inform all participants that today's call is being recorded.

Speaker #1: If you have any objections, you may disconnect at this time. I would now like to turn the call over to Linda Conrad. Thank you, and you may begin.

Speaker #2: Thank you, Shirley. 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 edience.com.

Speaker #2: This morning, I'm joined by Jerome Dorlag, ADIAN's 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.

Speaker #2: Mark will then review our Q3 financial results and our outlook for the remainder of our fiscal year. After the prepared remarks, we will open the call to your questions.

Speaker #1: Welcome to Adient's third quarter 2026 earnings call. Parties will be on the listen-only mode until the question-and-answer session of today's call. I'd like to inform all participants that today's call is being recorded.

Speaker #2: 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.

Speaker #1: If you have any objections, you may disconnect at this time. I would now like to turn the call over to Linda Conrad. Thank you, and you may begin.

Speaker #2: 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.

Speaker #2: Thank you, Shirley. 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 adiant.com.

Speaker #2: 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-gap information that we believe is useful in evaluating the company's operating performance.

Speaker #2: This morning, I'm joined by Jerome Dorlack, Adient's 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.

Speaker #2: Reconciliations for these non-gap measures to the closest gap equivalent can be found in the appendix of our full earnings release. And with that, it is my pleasure to turn the call over to Jerome.

Speaker #2: Mark will then review our Q3 financial results and our outlook for the remainder of our fiscal year. After the prepared remarks, we will open the call to your questions.

Speaker #3: Thanks, Linda. Good morning, everyone, and thank you for joining us today. I'll begin with the business update on our Q3 performance, as well as provide an update on how we are managing through the current operating environment and why we remain confident in the strength of ADIAN's operating model.

Speaker #2: 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.

Speaker #2: 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.

Speaker #3: Before that, though, I want to take a moment to recognize our global team. Their unrelenting focus on execution, launch discipline, customer responsiveness, and operational performance is what reinforces ADIAN's position as a supplier of choice.

Speaker #2: 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-gap information that we believe is useful in evaluating the company's operating performance.

Speaker #3: Our strong relationship with our customers continues to drive new business awards and support the durability of our revenue base. I would also like to thank our customers for their continued trust and partnership.

Speaker #2: Reconciliations for these non-gap measures to the closest gap equivalent can be found in the appendix of our full earnings release. And with that, it is my pleasure to turn the call over to Jerome.

Speaker #3: Their confidence in ADIAN and their willingness to rely on us on some of their most important vehicle programs is something that we never take for granted.

Speaker #3: Thanks, Linda. Good morning, everyone, and thank you for joining us today. I'll begin with the business update on our third quarter performance, as well as provide an update on how we are managing through the current operating environment and why we remain confident in the strength of Adient's operating model.

Speaker #3: We remain committed to earning that trust every day through flawless execution, innovation, and operational excellence. With that, let's turn to the Q3 summary page.

Speaker #3: Our Q3 performance aligned with our internal expectations. Even as external conditions pressured near-term results, consolidated revenue was approximately 3.9 billion dollars, up 5% year over year.

Speaker #3: Before that, though, I want to take a moment to recognize our global team. Their unrelenting focus on execution, launch discipline, customer responsiveness, and operational performance is what supplier of choice.

Speaker #3: While the adjusted EBITDA was 225 million dollars, flat compared with prior year. The point I want to highlight is that the pressure we are seeing this year has been largely external and, in our view, temporary.

Speaker #3: Our strong relationship with our customers continues to drive new business awards and supports the durability of our revenue base. I would also like to thank our customers for their continued trust and partnership.

Speaker #3: Their confidence in Adient, and their willingness to rely on us for some of their most important vehicle programs, is something that we never take for granted.

Speaker #3: Vehicle production remained relatively stable overall, but certain customer programs have faced headwinds, and the Middle East conflict drove macro-related pressure. Including elevated commodity and freight costs and lower exports into the Middle East, primarily from Asia, outside of China.

Speaker #3: We remain committed to earning that trust every day through flawless execution, innovation, and operational excellence. With that, let's turn to the Q3 summary page.

Speaker #3: When commodities and freight, specifically costs remain elevated, we are beginning to see signs of stabilization. Overall, we see these headwinds as manageable. Most importantly, our business performance remains solid.

Speaker #3: aligned with our internal expectations. Even as external conditions pressured near-term results, consolidated revenue was approximately 3.9 billion dollars, up 5% year over Our third quarter performance year.

Speaker #3: The operating model is delivering, our book of business remains strong, and we believe ADIAN is well positioned to capitalize on top-line growth as the external environment normalizes.

Speaker #3: While the adjusted EBITDA was 225 million dollars, flat compared with prior year. The point I want to highlight is that the pressure we are seeing this year has been largely external and, in our view, temporary.

Speaker #3: We also demonstrated our disciplined approach to capital allocation during this quarter. We returned 30 million dollars to shareholders through share repurchases in Q3, bringing year-to-date repurchases to 55 million dollars, and we remain committed to our balanced capital allocation strategy as we move through Q4.

Speaker #3: Vehicle production remained relatively stable overall, but certain customer programs have faced headwinds, and the Middle East conflict drove macro-related pressure. Including elevated commodity and freight costs and lower exports into the Middle East, primarily from Asia, outside of China.

Speaker #3: Stepping back, Q3 was another quarter where the team executed well through volatility. The near-term headwinds put downward pressure on reported results, but the underlying performance of the business remained solid.

Speaker #3: When commodities and freight, specifically costs remain elevated, we are beginning to see signs of stabilization. Overall, we see these headwinds as manageable. Most importantly, our business performance remains solid.

Speaker #3: And our operating model continues to position us well for future growth and shareholder value creation. Moving now to the regional update on slide 5.

Speaker #3: The operating model is delivering, our book of business remains strong, and we believe Adient is well positioned to capitalize on top-line growth as the external environment normalizes.

Speaker #3: As we look across the business this quarter, what stands out is the resilience of our regions to deliver. Even as conditions remain mixed across the global automotive industry, each of our regions is managing through a combination of external pressures, customer-specific volume fluctuations, and ongoing geopolitical impacts.

Speaker #3: We also demonstrated our disciplined approach to capital allocation during this quarter. We returned $30 million to shareholders through share repurchases in Q3, bringing year-to-date repurchases to $55 million, and we remain committed to our balanced capital allocation strategy as we move through Q4.

Speaker #3: At the same time, we are seeing encouraging evidence the actions we've taken to strengthen the business are translating into resilient performance and positioning us well for the future.

Speaker #3: Stepping back, Q3 was another quarter where the team executed well through volatility. The near-term headwinds put downward pressure on reported results, but the underlying performance of the business remained solid.

Speaker #3: Starting with the Americas, the region delivered a solid quarter supported by strong operational execution, favorable customer mix, and disciplined cost management. We achieved sales growth and margin expansion despite temporary operational inefficiencies and customer-driven interruptions.

Speaker #3: And our operating model continues to position us well for future growth and shareholder value creation. Moving now to the regional update on slide 5.

Speaker #3: As we look across the business this quarter, what stands out is the resilience of our regions to deliver. Even as conditions remain mixed across the global automotive industry, each of our regions is managing through a combination of external pressures, customer-specific volume fluctuations, and ongoing geopolitical impacts.

Speaker #3: The team remains focused on controlling what we can control including managing through elevated commodity and freight costs related to the Middle East conflict. At the same time, we are engaged in constructive discussions with customers around onshoring opportunities, while we have nothing new to announce today, we believe ADIAN is well positioned to benefit from these trends over time given our North America manufacturing footprint, engineering capabilities, and strong embedded and durable customer relationships.

Speaker #3: At the same time, we are seeing encouraging evidence the actions we've taken to strengthen the business are translating into resilient performance and positioning us well for the future.

Speaker #3: Starting with the Americas, the region delivered a solid quarter, supported by strong operational execution, favorable customer mix, and disciplined cost management. We achieved sales growth and margin expansion despite temporary operational inefficiencies and customer-driven interruptions.

Speaker #3: Moving now to EMEA. The environment remains challenging. Lower customer production levels and ongoing market softness are pressuring volumes and profitability. That said, we are seeing the benefits of the restructuring and operational actions we've implemented over the past several years take hold.

Speaker #3: The team remains focused on controlling what we can control, including managing through elevated commodity and freight costs related to the Middle East conflict. At the same time, we are engaged in constructive discussions with customers around onshoring opportunities.

Speaker #3: Business performance is improving, cost discipline remains strong, and we are working closely with customers to navigate the current environment. We also have line of sight on the rolloff of our underperforming metals business, which we view as a positive contributor as we move into fiscal year 27.

Speaker #3: While we have nothing new to announce today, we believe Adient is well positioned to benefit from these trends over time given our North America manufacturing footprint, engineering capabilities, and strong embedded and durable customer relationships.

Speaker #3: While there is still work to do, the team remains focused on improving the quality of the business and driving further operational progress. Moving to Asia.

Speaker #3: Moving now to EMEA. The environment remains challenging. Lower customer production levels and ongoing market softness are pressuring volumes and profitability. That said, we are seeing the benefits of the restructuring and operational actions we've implemented over the past several years take hold.

Speaker #3: China remains a dynamic market. While the broader market has softened, our business once again outperformed and continues to benefit from strong positions with many of the customers gaining share in the market today.

Speaker #3: Customers such as NIO, NLEAP Motor, supported by new launches, premium content programs, and continued customer confidence in ADIAN's capabilities. In addition, our mix is rapidly moving closer to the industry profile.

Speaker #3: Business performance is improving, cost discipline remains strong, and we are working closely with customers to navigate the current environment. We also have line of sight on the rolloff of our underperforming metals business, which we view as a positive contributor as we move into fiscal year 27.

Speaker #3: We're approximately 70% of production is represented by local OEMs. While that shift has created some expected margin pressure, the impact is occurring more gradually than we initially anticipated.

Speaker #3: While there is still work to do, the team remains focused on improving the quality of the business and driving further operational progress. Moving to Asia.

Speaker #3: As a result, we do expect some additional margin impression as we move into fiscal year 27. While attention is typically focused on China, it's also important to highlight the strength of our business across the rest of Asia which generates nearly 2 billion dollars in annual revenue, we are a leading seeding supplier in the region, and our combination of scale, customer diversity, and disciplined execution provides a solid foundation for continued profitable growth.

Speaker #3: China remains a dynamic market. While the broader market has softened, our business once again outperformed and continues to benefit from strong positions with many of the customers gaining share in the market today.

Speaker #3: Customers such as NIO, NLEAP Motor, supported by new launches, premium content programs, and continued customer content confidence in Adient's capabilities. In addition, our mix is rapidly moving closer to the industry profile.

Speaker #3: For additional context, we have included an overview of this business in the appendix that we would encourage you to review. The strengths of our Asia business outside of China combined with our strong competitive position within China continues to support attractive earnings and cash flow generation.

Speaker #3: We're approximately 70% of production is represented by local OEMs. While that shift has created some expected margin pressure, the impact is occurring more gradually than we initially anticipated.

Speaker #3: Asia remains an accretive region for ADIAN, and will continue to be an important contributor to our long-term growth, profitability, and shareholder value creation. When we step back and look across the portfolio, we see a business that is executing well, the Americas is building momentum, EMEA is making measurable progress despite a challenging environment, and Asia is selectively growing with market leaders while maintaining profitability and supporting our long-term growth strategy.

Speaker #3: As a result, we do expect some additional margin improvement as we move into fiscal year '27. While attention is typically focused on China, it's also important to highlight the strength of our business across the rest of Asia, which generates nearly $2 billion in annual revenue.

Speaker #3: We are a leading seeding supplier in the region, and our combination of scale, customer diversity, and disciplined execution provides a solid foundation for continued profitable growth.

Speaker #3: For additional context, we have included an overview of this business in the appendix that we would encourage you to review. The strength of our Asia business outside of China, combined with our strong competitive position within China, continues to support attractive earnings and cash flow generation.

Speaker #3: These regional trends reinforce our confidence in the strength of our operating model. The quality of our customer relationships, and our ability to create sustainable, shareholder value, over the long term.

Speaker #3: Moving to slide 6, I would like to spend a moment on what sits behind these results. Because our performance is not accidental, it is intentional.

Speaker #3: Asia remains an accretive region for Adient and will continue to be an important contributor to our long-term growth, profitability, and shareholder value creation. When we step back and look across the portfolio, we see a business that is executing well, the Americas is building momentum, EMEA is making measurable progress despite a challenging environment, and Asia is selectively growing with market leaders while maintaining profitability and supporting our long-term growth strategy.

Speaker #3: Direct product of ADIAN's position as a supplier of choice, and that status is earned every day across four dimensions: it starts with launch execution, consistent flawless launches, are the foundation for everything else.

Speaker #3: Our proven ability to deliver complex programs on time with strong quality and responsiveness is what earns the confidence of our customers. This has reinforced by our engineering and innovation.

Speaker #3: These regional trends reinforce our confidence in the strength of our operating model. The quality of our customer relationships, and our ability to create sustainable, shareholder value, over the long term.

Speaker #3: We are involved in early vehicle development, bringing innovative products that support content growth, and partnering with customers to take cost out of the value stream.

Speaker #3: We strengthen that foundation further with our world-class footprint, which allows us to support customers globally. Collectively, this is what allows us to execute on programs consistently across regions with the scale and operational flexibility our customers need.

Speaker #3: Moving to slide 6, I would like to spend a moment on what sits behind these results. Because our performance is not accidental, it is intentional.

Speaker #3: It is the direct product of Adient's position as a supplier of choice, and that status is earned every day across four dimensions: it starts with launch execution, consistent flawless launches, are the foundation for everything else.

Speaker #3: Supplier of choice status matters. It converts directly into tangible business wins deeper customer relationships, and long-term shareholder value. Nowhere is that clearer than in customer recognition, and this quarter gave us several standouts.

Speaker #3: Our proven ability to deliver complex programs on time with strong quality and responsiveness is what earns the confidence of our customers. This is reinforced by our engineering and innovation.

Speaker #3: We were recently honored by both Toyota and Mitsubishi for being an outstanding supplier. And we are especially proud of the ADIAN team and the Americas for once again being named GM Supplier of the Year for the fifth consecutive year.

Speaker #3: We are involved in early vehicle development, bringing innovative products that support content growth, and partnering with customers to take cost out of the value stream.

Speaker #3: We strengthen that foundation further with our world-class footprint, which allows us to support customers globally. Collectively, this is what allows us to execute on programs consistently across regions, with the scale and operational flexibility our customers need.

Speaker #3: Which reinforces the strength of our relationship and the confidence customers have in ADIAN's execution. That same trust supported the recent Chevrolet Equinox Conquest and onshoring win we announced last quarter.

Speaker #3: Furthermore, in China, ADIAN recently received NIO's highest supplier recognition, the Guardianship Award. This reflects more than a decade of mutual trust and collaboration with NIO.

Speaker #3: Supplier of choice status matters. It converts directly into tangible business wins deeper customer relationships, and long-term shareholder value. Nowhere is that clearer than in customer recognition, and this quarter gave us several standouts.

Speaker #3: ADIAN was also named to NIO's primary and preferred partner list, recognizing us as NIO's primary seeding supplier. ADIAN also received Chery's highest supplier recognition, the Excellent Supplier Award, in recognition of our outstanding launch execution and support for the KP31 pickup export program.

Speaker #3: We were recently honored by both Toyota and Mitsubishi for being an outstanding supplier. And we are especially proud of the Adient team and the Americas for once again being named GM Supplier of the Year for the fifth consecutive year.

Speaker #3: Which reinforces the strength of our relationship and the confidence customers have in Adient's execution. That same trust supported the recent Chevrolet Equinox Conquest and onshoring win we announced last quarter.

Speaker #3: That award ties directly back to the importance of launch execution already mentioned. Customer recognition is the leading indicator. Being a trusted partner ultimately results in new business awards.

Speaker #3: On the next slide, we will walk you through a few of those as well as a few premium program launches. Slide 7 highlights several proof points that support ADIAN's future growth and durable revenue visibility.

Speaker #3: Furthermore, in China, Adient recently received NIO's highest supplier recognition, the Guardianship Award. This reflects more than a decade of mutual trust and collaboration with NIO.

Speaker #3: Adient was also named to NIO's primary and preferred partner list, recognizing us as NIO's primary seeding supplier. Adient also received Chery's highest supplier recognition, the Excellent Supplier Award.

Speaker #3: They reflect the strength of our customer relationships, our engineering capabilities, and our ability to launch complex seeding programs across regions. We are winning business where our customers need a partner that can support them from design and engineering through launch and production.

Speaker #3: And recognition of our outstanding launch execution, and support for the KP31 pickup export program. That award ties directly back to the importance of launch execution already mentioned.

Speaker #3: There are a couple of themes here worth calling out. First, our platform wins reinforce the long-cycle nature of our revenue. Programs such as the Ram Dakota, Honda Pilot, and Tata Nexon are not only important awards for ADIAN, but they are also important platforms for our customers.

Speaker #3: Customer recognition is the leading indicator. Being a trusted partner ultimately results in new business awards. On the next slide, we will walk you through a few of those as well as a few premium program launches.

Speaker #3: Being selected on these programs reflects the trust our customers place in ADIAN and helps strengthen our long-term position on vehicles that are central to their future plans.

Speaker #3: Slide 7 highlights several proof points that support Adient's future growth and durable revenue visibility. They reflect the strength of our customer relationships, our engineering capabilities, and our ability to launch complex seeding programs across regions.

Speaker #3: We also want to highlight the commercialization of innovation and its growth across customers. As an example, ProForce Massage Flow is moving from concept to production across multiple customers in Asia as shown with the recent awards on the Changan Avatar D518 and the Dongfang Voyah H77B.

Speaker #3: We are winning business where our customers need a partner that can support them from design and engineering through launch and production. There are a couple of themes here worth calling out.

Speaker #3: And finally, our launch execution remains a competitive advantage. In EMEA, we are supporting vertically integrated launches with global OEMs including the Volvo EX60 and Mercedes-Benz AMG EAGT.

Speaker #3: First, our platform wins reinforce the long-cycle nature of our revenue. Programs such as the Ram Dakota, Honda Pilot, and Tata Nexon are not only important awards for Adient, but they are also important platforms for our customers.

Speaker #3: In Asia, we are launching complete seat systems featuring premium content such as zero-gravity seating and power swivel on the Leapmotor D99. Taken together, these wins show the foundation of ADIAN's operating model as delivering tangible commercial outcomes.

Speaker #3: Being selected on these programs reflects the trust our customers place in Adient, and helps strengthen our long-term position on vehicles that are central to their future plans.

Speaker #3: We also want to highlight the commercialization of innovation and its growth across customers. As an example, ProForce Massage Flow is moving from concept to production across multiple customers in Asia as shown with the recent awards on the Changan Avatar D518 and the Dongfeng Voyah H77B.

Speaker #3: We are leveraging engineering manufacturing scale vertical integration and customer trust to secure higher value business and support future content growth. That is what gives us confidence in the durability of our revenue stream and our ability to convert execution into long-term value creation.

Speaker #3: And finally, our launch execution remains a competitive advantage. In EMEA, we are supporting vertically integrated launches with global OEMs including the Volvo EX60 and Mercedes-Benz AMG EAGT.

Speaker #3: Let's take a closer look at a specific example on slide 8. As you may recall, we mentioned the launch of the all-new Nissan Algrand last quarter.

Speaker #3: It is worth spending a minute talking about this program because it represents the breadth of capabilities that ADIAN brings to its customers. The Algrand is Nissan's first major redesign of this platform in more than a decade.

Speaker #3: In Asia, we are launching complete seat systems featuring premium content such as zero-gravity seating and power swivel on the Leapmotor D99. Taken together, these wins show the foundation of Adient's operating model as delivering tangible commercial outcomes.

Speaker #3: And is an important program in the premium MPV segment. For ADIAN, this program showcases how we help customers differentiate their vehicles through content-rich seating solutions.

Speaker #3: We are leveraging engineering, manufacturing scale, vertical integration, and customer trust to secure higher value business and support future content growth. That is what gives us confidence in the durability of our revenue stream and our ability to convert execution into long-term value creation.

Speaker #3: The vehicle includes zero-gravity seating, enhanced comfort and adjustability features, and a unique third-row architecture that combines passenger flexibility with cargo functionality. In addition, this program showcases ADIAN's ability to provide our customers with vertical integration which optimizes seating design and manufacturability across home, trim, and JIT resulting in improved cost and quality for our customers.

Speaker #3: Let's take a closer look at a specific example on slide 8. As you may recall, we mentioned the launch of the all-new Nissan Algrand last quarter.

Speaker #3: It is worth spending a minute talking about this program because it represents the breadth of capabilities that Adient brings to its customers. The Algrand is Nissan's first major redesign of this platform in more than a decade.

Speaker #3: Looking a bit more internally at ADIAN's and the how of what we do. The Algrand program also highlights our ability to drive manufacturing process innovation.

Speaker #3: And it is an important program in the premium MPV segment. For Adient, this program showcases how we help customers differentiate their vehicles through content-rich seating solutions.

Speaker #3: A few examples of this is that the program has AI-enabled weld inspection, fully automated rail assembly, automated loading and unloading at the end of line, and seat inspection.

Speaker #3: The vehicle includes zero-gravity seating, enhanced comfort and adjustability features, and a unique third-row row architecture that combines passenger flexibility with cargo functionality. In addition, this program showcases Adient's ability to provide our customers with vertical integration which optimizes seating design and manufacturability across home, trim, and jit resulting in improved cost and quality for our customers.

Speaker #3: Our commitment to manufacturing process innovation helps improve quality, consistency, and operational performance. If you have a chance after the call, I'd encourage you to take a look at the short video linked on this page.

Speaker #3: Which shows an example of our AI weld inspection process in action and provides a practical example of how we're applying automation and artificial intelligence on the plant floor not only to improve quality but also reduce costs to improve the competitive position of ADIAN and its customers.

Speaker #3: Looking a bit more internally at Adient and the how of what we do, the Algrand program also highlights our ability to drive manufacturing process innovation.

Speaker #3: Innovation at ADIAN is not just about a few new features. It's about integrating engineering manufacturing automation and launch execution to help our customers win in the marketplace while enhancing the strength of our operating model.

Speaker #3: A few examples of this are that the program has AI-enabled weld inspection, fully automated rail assembly, automated loading and unloading at the end of the line, and seat inspection.

Speaker #3: Our commitment to manufacturing process innovation helps improve quality, consistency, and operational performance. If you have a chance after the call, I'd encourage you to take a look at the short video linked on this page.

Speaker #3: Moving to slide 9, in closing, before I hand it over to Mark, I want to come back to a point I made earlier. ADIAN is executing through a volatile environment, external cost pressures, customer-driven disruptions, and uneven market conditions are creating near-term headwinds.

Speaker #3: Which shows an example of our AI weld inspection process in action and provide the practical example of how we're applying automation and artificial intelligence on the plant floor not only to improve quality but also reduce costs to improve the competitive position of Adient and its customers.

Speaker #3: But the underlying performance of our business remains resilient. Across the portfolio, we're focused on controlling what we control. That means advancing regional improvement plans, driving operational excellence, and investing in actions that strengthen the business over the long term.

Speaker #3: Innovation at Adient is not just about a few new features. It's about integrating engineering manufacturing automation and launch execution to help our customers win in the marketplace while enhancing the strength of our operating model.

Speaker #3: A good example is how we're responding to the production volatility we're seeing on certain customer programs. In particular, full-size pickup trucks. Rather than simply absorbing these inefficiencies, we're accelerating investments in automation, digital manufacturing, and advanced material handling technologies.

Speaker #3: Moving to slide 9, in closing, before I hand it over to Mark, I want to come back to a point I made earlier. Adient is executing through a volatile environment, external cost pressures, customer-driven disruptions, and uneven market conditions are creating near-term headwinds.

Speaker #3: These initiatives are helping us improve productivity, increase operational flexibility, and reduce labor intensity. As well as better manage fluctuations in customer production schedules. Those are the kinds of self-help actions that enhance our competitiveness and strengthen our operating model regardless of the external environment.

Speaker #3: But the underlying performance of our business remains resilient. Across the portfolio, we're focused on controlling control. That means advancing regional improvement plans, driving operational excellence, and investing in actions that strengthen the business over the long term.

Speaker #3: On the regional progress, the Americas is building momentum and EMEA is making progress to restructuring and customer collaboration and Asia remains a creative to ADIAN supported by strong customer relationships and growth with market leaders, creating a world-class competitive moat.

Speaker #3: A good example is how we're responding to the production volatility we're seeing on certain customer programs. In particular, full-size pickup trucks. Rather than simply absorbing these inefficiencies, we're accelerating investments in automation, digital manufacturing, and advanced material handling technologies.

Speaker #3: At the same time, customer recognition, launch execution, and new business awards reinforce the strength of our operating model and support our confidence in the outlook.

Speaker #3: These initiatives are helping us improve productivity, increase operational flexibility, and reduce labor intensity. As well as better manage fluctuations in customer production schedules. Those are the kinds of self-help actions that enhance our competitiveness and strengthen our operating model regardless of the external environment.

Speaker #3: Our focus remains on finishing fiscal year 26 strong, delivering our commitments and positioning ADIAN for success in fiscal year 27 and beyond. With that, I will hand it over to Mark to walk us through the financial results and outlook.

Speaker #1: Thanks, Jerome. Let's turn to the financials on slide 11. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side.

Speaker #3: On the regional progress, the Americas is building momentum and is making progress on restructuring and customer collaboration, and Asia remains accretive to Adient, supported by strong customer relationships and growth with market leaders, creating a world-class competitive moat.

Speaker #1: My comments will focus on the adjusted results, which excludes special items that we view as either one-time in nature or otherwise not reflective of the underlying performance of the business.

Speaker #1: Full details on these adjustments are included in the appendix of the presentation for reference. That said, moving to the right side, high-level for the quarter.

Speaker #3: At the same time, customer recognition, launch execution, and new business awards reinforce the strength of our operating model and support our confidence in the outlook.

Speaker #1: Sales for the quarter were 3.9 billion up 5% year over year, reflecting favorable FX, strong volumes, particularly in the Americas and Asia, and solid commercial discipline.

Speaker #3: Our focus remains on finishing fiscal year '26 strong, delivering our commitments, and positioning Adient for success in fiscal year '27 and beyond. With that, I will hand it over to Mark to walk us through the financial results and outlook.

Speaker #1: Adjusted EBITDA was 225 million, relatively flat year on year, reflecting the impacts from the Middle East conflict related. Costs and temporary operating headwinds which we'll get into further in a couple of slides.

Speaker #2: Thanks, Jerome. Let's turn to the financials on slide 11. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side.

Speaker #1: Equity income was lower year over year as a result of lower volumes with certain customers in China primarily driven by softer demand on ICE vehicles.

Speaker #2: My comments will focus on the adjusted results which exclude special items that we view as either one-time in nature or otherwise not reflective of the underlying performance of the business.

Speaker #1: Adjusted net income was flat year over year at 38 million, or 48 cents per share. Let's dive into the quarter beginning with revenue. Turning to slide 12, consolidated revenue increased 5% year over year to approximately 3.9 billion, reflecting favorable volumes, pricing, and foreign exchange.

Speaker #2: Full details on these adjustments are included in the appendix of the presentation for reference. That said, moving to the right side, high-level for the quarter.

Speaker #2: Sales for the quarter were 3.9 billion up 5% year over year reflecting favorable FX, strong volumes particularly in the Americas and Asia, and solid commercial discipline.

Speaker #1: Looking at regional performance, the Americas outperformed the market, benefiting from strong volumes of key customers, pricing, and recent program launches. While we're pleased with the momentum, we would expect that the level of outgrowth to moderate into fiscal year 27 as certain lower margin third-party metals business rolls off, which is consistent with our portfolio optimization strategy.

Speaker #2: Adjusted EBITDA was 225 million dollars relatively flat year on year reflecting the impacts from the Middle East conflict related. Costs and temporary operating headwinds which we'll get into further in a couple of slides.

Speaker #2: Equity income was lower year over year as a result of lower volumes with certain customers in China primarily driven by softer demand on ICE vehicles.

Speaker #1: In EMEA, sales remained below market levels, primarily reflecting customer mix. As Jerome noted earlier, this remains a difficult volume environment across the region. We are managing through that directly with our customers, staying closely engaged on current production dynamics, and taking the actions necessary to support performance as market conditions evolve.

Speaker #2: Adjusted net income was flat year over year at 38 million dollars or 48 cents per share. Let's dive into the quarter beginning with revenue.

Speaker #2: Turning to slide 12. Consolidated revenue increased 5% year over year to approximately $3.9 billion, reflecting favorable volume, pricing, and foreign exchange. Looking at regional performance, the Americas outperformed the market, benefiting from strong volumes of key customers, pricing, and recent program launches.

Speaker #1: China remained a significant source of growth, consolidated sales increased approximately 33% year over year, despite a softer market driven by strong production ramp-ups, that customers such as NIO, Leap Motor, and Nissan.

Speaker #2: While we're pleased with the momentum, we would expect that the level of outgrowth to moderate into fiscal year 27 as certain lower margin third-party metals business rolls off which is consistent with our portfolio optimization strategy.

Speaker #1: While launch-related growth will naturally moderate over time, these programs reinforce our strategy of aligning with customers that are gaining share and expanding and attractive growth segment.

Speaker #1: The rest of Asia underperformed the broader market, primarily due to customer mix as certain customers faced greater volume pressures than the overall region. On the unconceded consolidated side, sales declined approximately 17% year over year, primarily in China, reflecting lower volumes on legacy ICE vehicle platforms as the market shifts towards NEVs, as well as modest impacts from Middle East-related disruptions.

Speaker #2: In a mail, sales remained below market levels primarily reflecting customer mix. As Jerome noted earlier, this remains a difficult volume environment across the region.

Speaker #2: We are managing through that directly with our customers staying closely engaged on current production dynamics and taking the actions necessary to support performance as market conditions evolve.

Speaker #2: China remained a significant source of growth consolidated sales increased approximately 33% year over year despite a softer market. Driven by strong production ramp-ups that customers such as Neil, Leap Motor, and Nissan.

Speaker #1: Importantly, this trend largely reflects customer mix dynamics rather than any change in our competitive position. Overall, the key takeaway is that we're continuing to grow where the market is growing.

Speaker #1: Our customer portfolio launch cadence and exposure to leading programs that support above-market growth in our consolidated business, even as we navigate differing regional and customer-specific dynamics.

Speaker #2: While launch-related growth will naturally moderate over time, these programs reinforce our strategy of aligning with customers that are gaining share and expanding and attractive growth segment.

Speaker #2: The rest of Asia underperformed the broader market primarily due to customer mix, as certain customers faced greater volume pressures than the overall region. On the unconsolidated side, sales declined approximately 17% year over year, primarily in China, reflecting lower volumes on legacy ICE vehicle platforms as the market shifts towards NEVs, as well as modest impacts from Middle East-related disruptions.

Speaker #1: Moving on to slide 13, Q3 adjusted EBITDA was 225 million, or 5.7% of sales. During the quarter, we absorbed approximately 32 million dollars of temporary operating-related to Middle East conflict and customer-supplier-driven disruptions, reflecting higher net input costs related for commodities freight and operational inefficiencies.

Speaker #1: Excluding those items, EBITDA margin would have been in the mid-6% range, about 80 basis points higher than our reported results, in our above our prior year levels.

Speaker #2: Importantly, this trend largely reflects customer mix dynamics rather than any change in our competitive position. Overall, the key takeaway is that we're continuing to grow where the market is growing.

Speaker #1: We believe that the this better reflects the strength of the underlying business and the progress we're making through operational execution, commercial discipline, and ongoing self-help actions.

Speaker #2: Our customer portfolio launch cadence and exposure to leading programs that support above market growth in our consolidated business even as we navigate differing regional and customer-specific dynamics.

Speaker #1: While these external pressures weighed on results, the operating model performed as expected supporting our confidence in the business and our ability to deliver on our commitments.

Speaker #2: Moving on to slide 13, Q3 adjusted EBITDA was 225 million or 5.7% of sales. During the quarter, we absorbed approximately 32 million dollars of temporary operating related to Middle East conflict and customer supplier-driven disruptions reflecting higher net input costs related for commodities freight and operational inefficiencies.

Speaker #1: As per our final usual format, the appendix waterfalls provide an additional insight into the regional details I'll walk through these relatively quickly. In the Americas, adjusted EBITDA increased 13 million dollars year over year, to 125 million dollars.

Speaker #1: Supported by favorable volumes, partially offset by temporary customer and supplier-driven inefficiencies, and Middle East conflict-related costs. In EMEA, adjusted EBITDA declined 7 million dollars to 14 million.

Speaker #2: Excluding those items, EBITDA margin would have been in the mid-6% range about 80 basis points higher than our reported results in our above our prior year levels.

Speaker #2: We believe that this better reflects the strength of the underlying business and the progress we're making through operational execution, commercial discipline, and ongoing self-help actions.

Speaker #1: Volume mix remained a headwind, but business performance improved through restructuring benefits and SG&A discipline which helped offset part of the regional pressure. In Asia, adjusted EBITDA was 107 million dollars, down 6 million year over year, the region remained highly profitable but results reflected lower equity income expected mixed margin compression in China lower ICE vehicle demand and higher launch investment to support our growth plans.

Speaker #2: While these external pressures weighed on results, the operating model performed as expected supporting our confidence in the business and our ability to deliver on our commitments.

Speaker #2: As per our final usual format, the appendix waterfalls provide an additional insight into the regional details I'll walk through these relatively quickly. In the Americas, adjusted EBITDA increased 13 million dollars year over year to 125 million dollars.

Speaker #1: Overall, the results reinforce the same message Jerome delivered in his opening remarks. The business is executing well through volatility, temporary external pressures are weighing on near-term results, but the underlying operating performance remains resilient.

Speaker #2: Supported by favorable volumes partially offset by temporary customer and supplier-driven inefficiencies and Middle East conflict related costs. In a mail, adjusted EBITDA declined 7 million dollars to 14 million.

Speaker #1: And we remain focused on delivering our full-year commitments. Let's move now to our cash flow walk on slide 14. We generated 138 million dollars of free cash flow in the third quarter, bringing year-to-date free cash flow to 161 million dollars.

Speaker #2: Volume mix remained a headwind but business performance improved through restructuring benefits and SG&A discipline which helped offset part of the regional pressure. In Asia, adjusted EBITDA was 107 million dollars down 6 million year over year.

Speaker #1: There are a few important items to keep in mind as you think about our year-to-date cash performance. As you'll recall, our free cash flow generation is heavily weighted in the back half of the year due to seasonality of our business.

Speaker #2: The region remained highly profitable but results reflected lower equity income expected mixed margin compression in China lower ICE vehicle demand and higher launch investment to support our growth plans.

Speaker #1: This quarter benefited from approximately 45 million dollars of customer payment timing which we expect to reverse in the fourth quarter and reflected in our outlook.

Speaker #2: Overall, the results reinforce the same message Jerome delivered in his opening remarks. The business is executing well through volatility. Temporary external pressures are weighing on near-term results, but the underlying operating performance remains resilient.

Speaker #1: Year-to-date free cash flow has benefited from strong operational execution, disciplined working capital management, and lower restructuring cash spending compared to the prior year. As a reminder, we had a non-recurring tax settlement that was paid out last quarter and we've had an increase in capital expenditures this year to support growth initiatives.

Speaker #2: We remained focused on delivering our full-year commitments. Let's move now to our cash flow walk on slide 14. We generated $138 million of free cash flow in the third quarter, bringing year-to-date free cash flow to $161 million.

Speaker #1: I would also note that our teams have done an excellent job proactively managing cash generation across the business. We've accelerated certain customer recoveries and tooling-related collections where possible, and remain focused on working capital discipline, which helps strengthen our cash position entering the final quarter of the year.

Speaker #2: There are a few important items to keep in mind as you think about our year-to-date cash performance. As you'll recall, our free cash flow generation is heavily weighted in the back half of the year due to seasonality of our business.

Speaker #1: Turning to slide 15, our balance sheet remains strong and flexible which is critical in today's operating environment. At quarter-end, we had approximately 1.8 billion of total liquidity including 924 million of cash and roughly 834 million of available revolver capacity giving a substantial financial flexibility to manage volatility support the business and remain disciplined in our capital allocation.

Speaker #2: This quarter benefited from approximately 45 million dollars of customer payment timing which we expect to reverse in the fourth quarter and reflected in our outlook.

Speaker #2: Year-to-date free cash flow has benefited from strong operational execution, disciplined working capital management, and lower restructuring cash spending compared to the prior year. As a reminder, we had a non-recurring tax settlement that was paid out last quarter, and we've had an increase in capital expenditures this year to support growth initiatives.

Speaker #1: As I highlighted on the previous slide, it's important to note that the quarter-end cash balance included the approximate 45 million dollars of customer payment timing which we expect to reverse in the fourth quarter.

Speaker #2: I would also note that our teams have done an excellent job proactively managing cash generation across the business. We've accelerated certain customer recoveries and tooling-related collections where possible, and remained focused on working capital discipline.

Speaker #1: The progress we've made strengthened the business was also recognized externally with Moody's upgrading Adyen's corporate credit rating to BA3 during the quarter. We view that as a validation of our improved balance sheet consistent execution and disciplined financial management.

Speaker #2: Which helps strengthen our cash position entering the final quarter of the year. Turning to slide 15, our balance sheet remains strong and flexible, which is critical in today's operating environment.

Speaker #1: Our leverage ratio ended the quarter at 1.7 times comfortably within our targeted range of 1.5 to 2 times also mentioned that we have no near-term debt maturities.

Speaker #2: At quarter end, we had approximately 1.8 billion of total liquidity including 924 million of cash and roughly 834 million of available revolver capacity giving a substantial financial flexibility to manage volatility support the business and remain disciplined in our capital allocation.

Speaker #1: We've also returned capital to our shareholders repurchasing approximately 1.3 million shares for 30 million dollars during the quarter. As always, we'll remain disciplined and balanced in how we deploy capital prioritizing long-term shareholder value while maintaining financial flexibility to support the business.

Speaker #2: As I highlighted on the previous slide, it's important to note that the quarter-end cash balance included the approximately $45 million of customer payment timing, which we expect to reverse in the fourth quarter.

Speaker #1: Overall, we believe we're entering the final quarter of the year from a position of strength with a healthy balance sheet ample liquidity and flexibility to navigate a dynamic operating environment.

Speaker #2: The progress we've made strengthened the business was also recognized externally with Moody's upgrading Adient's corporate credit rating to BA3 during the quarter. We view that as a validation of our improved balance sheet consistent execution and disciplined financial management.

Speaker #1: Turning to our updated outlook for fiscal '26, we are increasing our revenue guidance to approximately 15 billion dollars primarily reflecting improved customer production schedules and to a lesser extent favorable foreign exchange.

Speaker #2: Our leverage ratio ended the quarter at 1.7 times comfortably within our targeted range of one and a half to two times also mentioned that we have no near-term debt maturities.

Speaker #1: The higher revenue outlook is supported by recent launch activity growth with key customers and expected strong execution across the business. At the same time, we are maintaining our adjusted EBITDA guidance of approximately 885 million dollars and free cash flow guidance of approximately 130 million dollars.

Speaker #2: We've also returned capital to our shareholders repurchasing approximately 1.3 million shares for 30 million dollars during the quarter. As always, we'll remain disciplined and balanced in how we deploy capital prioritizing long-term shareholder value while maintaining financial flexibility to support the business.

Speaker #1: While underlying operational performance remains solid, persistent headwinds resulting from the ongoing Middle East conflict such as elevated commodity and freight costs are expected to pressure near-term results.

Speaker #2: Overall, we believe we're entering the final quarter of the year from a position of strength with a healthy balance sheet ample liquidity and flexibility to navigate a dynamic operating environment.

Speaker #1: As we enter Q4, our priorities remain clear. Execute for our customers, manage the factors within our control, deliver on our commitments, and position Adyen to create value in fiscal year '27 and beyond.

Speaker #2: Turning to our updated outlook for fiscal 26, we are increasing our revenue guidance to approximately 15 billion dollars primarily reflecting improved customer production schedules and to a lesser extent favorable foreign exchange.

Speaker #1: Before we open the line for questions, I want to spend a few moments on slide 17 and briefly share our thoughts on a few of the key drivers likely to impact fiscal year '27 results.

Speaker #2: The higher revenue outlook is supported by recent launch activity growth with key customers and expected strong execution across the business. At the same time, we are maintaining our adjusted EBITDA guidance of approximately 885 million dollars and free cash flow guidance of approximately 130 million dollars.

Speaker #1: We will issue formal guidance for fiscal '27 in November as in prior years. As the team continues to fine-tune and gain clarity on such items as vehicle production, foreign exchange, trade policy, input costs, capital expenditures, and restructuring.

Speaker #2: While underlying operational performance remains solid, persistent headwinds resulting from the ongoing Middle East conflict such as elevated commodity and freight costs are expected to pressure near-term results.

Speaker #1: That said, based on what we see today, we believe the business is positioned for above-market growth in the Americas and China supported by onshoring winds, recent new and conquest awards, and ramping programs with key customers.

Speaker #2: As we enter Q4, our priorities remain clear. Execute for our customers manage the factors within our control deliver on our commitments and position Adient to create value in fiscal year 27 and beyond.

Speaker #1: Especially with our continued progress with domestic Chinese OEMs in our Asia business. In the Americas, that growth will be partially offset by planned exit of certain low-margin third-party metals business.

Speaker #2: Before we open the line for questions, I want to spend a few moments on slide 17 and briefly share our thoughts on a few of the key drivers likely to impact fiscal year 27 results.

Speaker #1: We expect positive business performance to be driven by our focus on automation, restructuring, commercial discipline, and continuous improvement across all disciplines. From a capital allocation perspective, our priorities remain unchanged.

Speaker #2: We will issue formal guidance for fiscal 27 in November as prior years as the team continues to fine-tune and gain clarity on such items as vehicle production foreign exchange trade policy input costs capital expenditures and restructuring.

Speaker #1: We expect to maintain a strong and flexible balance sheet operate within our target leverage range and continue balancing investment and profitable growth with returning capital to our shareholders.

Speaker #2: That said, based on what we see today, we believe the business is positioned for above-market growth in the Americas and China, supported by onshoring winds, recent new and conquest awards, and ramping programs with key customers.

Speaker #1: As we've discussed, approximately 80 million dollars remain under our current share repurchase authorization given our balance sheet position and cash generation profile we expect the board to increase the authorization later this year.

Speaker #2: Especially with our continued progress with domestic Chinese OEMs in our Asia business. In the Americas that growth will be partially offset by planned exit of certain low margin third-party metals business.

Speaker #1: So while it's still early, the underlying indicators support our confidence in the positive momentum of the business as we look towards fiscal 2027. And with that, operator, we can move to the question-and-answer portion of the call.

Speaker #2: We expect positive business performance to be driven by our focus on automation restructuring commercial discipline and continuous improvement across all disciplines. From a capital allocation perspective, our priorities remain unchanged.

Speaker #2: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please unmute your line and press star one.

Speaker #2: You will be prompted to record your name. To withdraw your question, you may press star two. Again, press star one to ask a question and one moment please for our first question.

Speaker #2: We expect to maintain a strong and flexible balance sheet, operate within our target leverage range, and continue balancing investment and profitable growth with returning capital to our shareholders.

Speaker #2: Our first question comes from Joe Spack with UBS. You may ask your question.

Speaker #2: As we've discussed, approximately $80 million remains under our current share repurchase authorization. Given our balance sheet position and cash generation profile, we expect the board to increase the authorization later this year.

Speaker #3: Thanks. Good morning, everyone. Mark, maybe just to start on some of the higher Middle East costs and resins, and I just want to make sure I understand some of the commentary here.

Speaker #3: So I guess you're going to sort of try to go back and retroactively get some payment for the higher costs incurred. We'll see I guess how successful that is.

Speaker #2: So while it's still early, the underlying indicators support our confidence in the positive momentum of the business as we look towards fiscal 2027. And with that, operator, we can move to the question and answer portion of the call.

Speaker #3: But your other comment about stabilization, I just want to make sure I understand that secondarily. Does that mean that if that those price increases moderate from here you'll begin to be able to reprice for those higher prices so that's less of a headwind?

Speaker #1: Thank you. We will now begin the question and answer session. If you would like to ask a question, please unmute your line and press star one.

Speaker #1: You will be prompted to record your name. To withdraw your question, you may press star two. Again, press star one to ask a question and one moment please for our first question.

Speaker #3: And when should we expect that to occur? If it does stabilize.

Speaker #4: It's important, Joe. Yeah, good question. Good morning. I guess I'd look at it in two fronts, Joe. So first of all, the costs that we're incurring there you could break it up into two buckets.

Speaker #1: Our first question comes from Joe Spack with UBS. You may ask your question.

Speaker #3: Thanks. Good morning everyone. Mark, maybe just to start on some of the higher Middle East costs and resins and I just want to make sure I understand some of the commentary here.

Speaker #4: The Middle East costs, which for the quarter colored about 20 million dollars, that includes higher freight, fuel, and as you indicated, the resin costs or the commodity costs for our chemical foaming operations, right?

Speaker #3: So I guess you're going to sort of try to go back and retroactively get some payment for the higher costs incurred. We'll see I guess how successful that is.

Speaker #4: For the foaming operations, we do have pass-throughs and escalators in place with about 90% of that business, right? So those refunds or those recoveries will come.

Speaker #3: But your other comment about stabilization—I just want to make sure I understand that, secondarily. Does that mean that if those price increases moderate from here, you'll begin to be able to reprice for those higher prices?

Speaker #4: It'll obviously be on about a two-quarter lag is what we typically experience. And so with the war continuing, we would expect that to also continue into Q4, right, with some of the recovery starting obviously in Q4.

Speaker #3: So that's less of a headwind and when should we expect that to occur? If it does stabilize.

Speaker #4: So for full year, call those Middle East costs somewhere in that 35 to 40 million dollars. From where we are today. The other call it 10 or 12 million dollars that make up that 32 million that we called out this quarter is really the customer-driven costs, right?

Speaker #2: It's important, Joe. Yeah, good question. Good morning. I guess I'd look at it in two fronts, Joe. So first of all, the costs that we're incurring there you could break it up into two buckets.

Speaker #2: The Middle East cost us, for the quarter, about $20 million, and that includes higher freight, fuel, and—as you indicated—the resin costs, or the commodity costs, for our chemical foaming operations, right?

Speaker #4: And those would be just inefficient operating patterns at certain of our customers as they continue to work with what I'd call inefficient operating patterns there.

Speaker #4: So that was about 12 million for the quarter bringing that total to 32 million. So we would look as we go into Q4 those to start to subside, right?

Speaker #2: For the foaming operations, we do have pass-throughs and escalators in place with about 90% of that business, right? So those refunds or those recoveries will come.

Speaker #4: So net-net as I look at full year, that 32 million probably becomes somewhere around 35, 40 for the full year. Does that help?

Speaker #2: It'll obviously be on about a two-quarter lag, which is what we typically experience. And so, with the war continuing, we would expect that to also continue into Q4, right?

Speaker #3: Yeah. That does. And then the second question is I guess just on restructuring and I know you sort of it was on sort of your list of potential challenges, I guess, for next year.

Speaker #2: With some of the recovery starting obviously in Q4. So for full year, call those Middle East costs somewhere in that 35 to 40 million dollars.

Speaker #2: From where we are today, the other call it $10 or $12 million that make up that $32 million that we called out this quarter is really the customer-driven costs, right?

Speaker #3: I guess just to maybe start, is there an updated restructuring number for this year? I think you previously mentioned something like 120 million, but it looks like it's only 77 million year to date.

Speaker #2: And those would be just any efficient operating patterns at certain of our customers, as they continue to work with what I'd call inefficient operating patterns there.

Speaker #3: So I don't know if that means there's a large amount coming or maybe some things are coming a little bit better. And then just bigger picture with concern over some customers' restructuring in Europe, even though I know that's probably not necessarily happening next year, but just to help level set investors if you assume the worst case and you had to completely close a facility, what would that cost you like 30 million dollars or can you sort of ballpark frame what that would sort of cost so we can level set expectations?

Speaker #2: So that was about 12 million for the quarter bringing that total to 32 million. So we would look as we go into Q4 those to start to subside, right?

Speaker #2: So net as I look at full year that 32 million probably becomes somewhere around 35, 40 for the full year. Does that help?

Speaker #3: Yeah, that does. And then the second question is, I guess, just on restructuring. And I know you sort of had that on your list of potential challenges, I guess, for next year.

Speaker #4: Sure. I'll start and Jerome, feel free to jump in. So for the full year, we have not changed our outlook. So call that somewhere in that 120 million dollar range, right?

Speaker #4: As I look into '27, that's one of the elements that we said we still need to get clarity on. We're working with customers as they look at their platforms, they look at their end-of-production, where they're going to move production to.

Speaker #3: I guess just to maybe start, is there an updated restructuring number for this year? I think you previously mentioned something like 120 million, but it looks like it's only 77 million year to date.

Speaker #3: So I don't know if that means there's a large amount coming, or maybe some things are coming a little bit better. And then just bigger picture, with concern over some customers restructuring in Europe—even though I know that's probably not necessarily happening next year—but just to help level set investors: if you assume the worst case and you had to completely close a facility, what would that cost you, like $30 million? Or can you sort of ballpark, frame what that would sort of cost so we can level set expectations?

Speaker #4: That's the big wildcard, Joe. So you're absolutely right with your magnitude, right? If there's a certain platform that all of a sudden is in one of our facilities and it comes out, you could be looking at a bill of 30 million dollars.

Speaker #4: Or more. And that's why Jerome and I as we went through this year, we said we'd love to give you what the next one, two, three years of restructuring charges looks like so that you guys could have clarity.

Speaker #4: The problem is we just don't have that clarity yet from our customers. And so we'll continue to if there is restructuring to do it in a very efficient way, we've come up with I'd say different tactics in the back past where we've done long-distance JIT, for example, where we've been able to save on restructuring charges.

Speaker #2: Sure. I'll start and Jerome, feel free to jump in. So for the full year, we have not changed our outlook. So call that somewhere in that 120 million dollar range, right?

Speaker #2: As I look into 27, that's one of the elements that we said we still need to get clarity on. We're working with customers as they look at their platforms, they look at their end of production, where they're going to move production to.

Speaker #4: But that is really the big wildcard as we go into 2027.

Speaker #3: Is it fair to say that I mean, I know you sort of talked about sort of the more long-term normalized restructuring level is lower.

Speaker #2: That's the big wildcard, Joe. So you're absolutely right with your magnitude, right? If there's a certain platform that all of a sudden is in one of our facilities and it comes out, you could be looking at a bill of 30 million dollars.

Speaker #3: But is it fair to say that given timing and some of your initiatives and obviously some of the restructuring that you're doing now rolls off that it's unlikely to get worse?

Speaker #2: Or more. And that's why Jerome and I as we went through this year, we said we'd love to give you what the next one, two, three years of restructuring charges looks like so that you guys could have clarity.

Speaker #3: Or it's still fairly good?

Speaker #4: Yeah, I think it's just yeah, it's just probably too early to tell only because, again, I'm waiting to hear from our customers in terms of what their final plans are.

Speaker #2: The problem is we just don't have that clarity yet from our customers. And so we'll continue to, if there is restructuring, to do it in a very efficient way. We've come up with, I'd say, different tactics in the past, where we've done long-distance jet, for example, where we've been able to save on restructuring charges.

Speaker #4: Do I think that over time it should trend down? Yes, but it's going to be very lumpy because it's all going to be dependent on when certain of those programs actually end production.

Speaker #4: For certain of the regions like Americas, for example, Joe, they've done a great job at what I call self-funding, right? So if they have to shut a facility down, we've done very good at selling the plant, selling the facilities, right?

Speaker #2: But that is really the big wildcard as we go into 2027.

Speaker #3: But is it fair to say that—I mean, I know you sort of talked about the more long-term normalized restructuring level being lower.

Speaker #4: So there are what I'd say different offsets to that too that we also have to what I'd say fine-tune as we go through the next couple of months because there will be some asset sales.

Speaker #3: But is it fair to say that, given timing and some of your initiatives, and obviously some of the restructuring that you're doing now rolls off, that it's unlikely to get worse?

Speaker #4: There'll be some building sales, right, that we could lean on to help out with what I'd call the distributor cash that obviously gets put back to our owners.

Speaker #3: Or it's still too early?

Speaker #3: Okay. Thank you so much. I'll pass it on.

Speaker #2: Yeah, I think it's just—yeah, it's just probably too early to tell, only because, again, I'm waiting to hear from our customers in terms of what their final plans are.

Speaker #4: Thank you.

Speaker #1: Thank you. Our next question comes from Emanuel Rosner with Wolf Research. You may ask your question.

Speaker #2: Do I think that, over time, it should trend down? Yes, but it's going to be very lumpy because it's all going to be dependent on when certain of those programs actually end production.

Speaker #3: Oh, great. Thank you so much. My first question is on Asia and China. Just for China, can you just dimension first your exposure to exports from the region to other regions to what extent your sort of broadly in line with this sort of industry weight there or more or less?

Speaker #2: For certain of the regions like Americas, for example, Joe, they've done a great job at what I call self-funding, right? So if they have to shut a facility down, we've done very good at selling the plant, selling the facilities, right?

Speaker #3: And then on Asia, just with the direction of couple of points of lower just how do you think about it on the go forward basis, please?

Speaker #2: So there are what I'd say different offsets to that too that we also have to what I'd say fine-tune as we go through the next couple of months because there will be some asset sales, there'll be some building sales, right, that we could lean on to help out with what I'd call the distributor cash that obviously gets put back to our owners.

Speaker #4: I'll take the first one, Emanuel. Thank you very much for the questions. As far as our export exposure in China directly, we are below what the total market export rate is today.

Speaker #3: Okay. Thank you so much. I'll pass it on.

Speaker #4: A lot of that is driven by our historical joint ventures that we were engaged in when we wound those down. Yangfeng would have kept the large presence with a lot of the exporters there.

Speaker #2: Thank you.

Speaker #1: Thank you. Our next question comes from Emmanuel Rosner with Wolf Research. You may ask your question.

Speaker #3: Oh, great. Thank you so much. My first question is on Asia and China. Just for China, can you first dimension your exposure to exports from the region to other regions? To what extent are you sort of broadly in line with the industry there, or more or less?

Speaker #4: And now we focused more on certainly rotating our portfolio to the domestics, but then also rotating it towards domestic production that will remain in China that we view as more durable in the longer term.

Speaker #4: So we are under-indexed to total export volume in China. And I hope that answers your question on that part. And then I'll turn it over to Mark for the second one.

Speaker #3: And then on Asia, just with the direction of margins, year to date, maybe a couple of points of lower just how do you think about it on the go forward basis, please?

Speaker #2: Does that help, Emanuel?

Speaker #3: Yes, yes. Thank you.

Speaker #2: I'll take the first one, Emmanuel. Thank you very much for the questions. As far as our export exposure in China directly, we are below what the total market export rate is today.

Speaker #4: Yeah.

Speaker #2: And then for your second question, just in terms of the margin contraction there, obviously we've been very transparent as we've gone through the year there.

Speaker #2: We did say that's going to be very manageable. Call that 100 basis points or so. You've seen the outperformance there. So again, big picture, as long as I can continue to grow my top-line convert that into EBITDA and free cash flow, right?

Speaker #2: A lot of that is driven by our historical joint ventures that we were engaged in. When we wound those down, Yanfeng would have kept the large presence with a lot of the exporters there.

Speaker #2: And now we focused more on certainly rotating our portfolio to the domestics, but then also rotating it towards domestic production that will remain in China that we view as more durable in the longer term.

Speaker #2: I view that as very manageable. The teams also doing a very good job at mitigating how much of that margin contraction there is. They're using as Jerome indicated, whether it's automation, they're looking at different techniques, operating patterns over within the region over there.

Speaker #2: So we are under-indexed to total export volume in China. And I hope that answers your question on that part. And then I'll turn it over to Mark for the second one.

Speaker #2: So again, extreme focus on minimizing the impact of that contraction. I still look for that region. It's still a very what I'd say profitable region, very cash-generative region for us, and it will remain that way.

Speaker #4: Does that help, Emmanuel?

Speaker #3: Yes, yes. Thank you.

Speaker #2: Yep.

Speaker #3: Got it. And then just a question on free cash flow, please. So last quarter you had showed walk towards normalized free cash flow, which was maybe something like 100 million dollars more than what you have this year.

Speaker #4: And then for your second question, just in terms of the margin contraction there, obviously we've been very transparent as we've gone through the year there.

Speaker #4: We did say that's going to be very manageable. Call that 100 basis points or so. You've seen the outperformance there. So again, big picture, as long as I can continue to grow my top line convert that into EBITDA and free cash flow, right?

Speaker #3: About half of it is lower restructuring. And I understand that this is still TBD as we look into next year in terms of restructuring spend.

Speaker #4: I view that as very manageable. The teams also doing a very good job at mitigating how much of that margin contraction there is. They're using as Jerome indicated, whether it's automation, they're looking at different techniques, operating patterns over within the region over there.

Speaker #3: Was curious about sort of some of the outer buckets like out those would those still be on track to improve for 2027?

Speaker #4: Okay. I'll start with the response and then I'll hand it over to Mark. I think as we look at that normalized cash flow, and really then the distributable cash flow that we believe is the potential of that in, long-term, that is still our clear objective and where we clearly view that we can get to.

Speaker #4: I think as you begin to size up '27 and kind of turning back to what Joe's question was, restructuring will be an unknown that will sort through.

Speaker #4: On the capital expenditure side, which will be another large bucket, would anticipate a uptick in capital expenditure given just the growth that we're going to see that we talked about earlier.

Speaker #4: In the Americas, in China, and also our drive for automation. As we look to expand margins and drive margins higher, automation is going to be a key lever associated with that.

Speaker #4: And that's why we haven't called it out yet. What we expect capital expenditures to be because it's just too early to call based on some of our more recent wins and the timing associated with them.

Speaker #4: And when the capital will roll in. On the other buckets such as interest expense, we will continue to be prudent on our capital allocation program.

Speaker #4: And then it is worth noting as Mark said, taxes are notably higher this year. Due to a one-time payment that we had in one of our jurisdictions, we expect that to trend towards a more normal level as we get into already fiscal year '27.

Speaker #4: Mark, anything else to add?

Speaker #2: No, that's beautiful.

Speaker #3: Okay. You had one more bar in there, which was fiscal '25 pull ahead actions of 30 million. I assume that that's still that would still not recur going forward, right?

Speaker #4: Correct. Correct.

Speaker #3: Thank you.

Speaker #1: Thank you. Our next question comes from Rajat Gupta with JP Morgan. You may ask your question.

Speaker #2: Great. Thanks for taking the questions. I just wanted to follow up on just Asia and China margin. Question. You had expected like 100 basis points China margin compression this year.

Speaker #2: Curious if you could quantify how it was year-to-date and how we should think about just the fourth quarter and into 2027. I have a quick follow-up.

Speaker #4: Yeah, sure. So you're absolutely correct. We did indicate about 100 basis points of compression if I look at this year, I would expect us to track pretty close to that as we go through the balance of this year.

Speaker #4: Again, it's just when I think about the mix of vehicles, the launch of vehicles that come on, what's happening from the commercial side of the business, right?

Speaker #4: When you think about commercial recoveries that all plays into what I'd say the cadence of that margin as you progress through the year. And so again, it's going to be lumpy between quarters, but I think that 100 basis points is pretty much the bogey that we're looking for.

Speaker #2: Any lead into 2027 yet on the trajectory? For those margins?

Speaker #4: Yeah. Again, early days, we're still going through obviously certain of the fine-tuning there. I think what we do have very good insight is into the growth over there, what vehicles are going to be launching, what we're winning business with.

Speaker #4: As I indicated, we expect that to remain significantly above market over there. The team also right now is going through, I'd say, the fine-tuning for what they're going to be doing in terms of from an operational perspective, right?

Speaker #4: What type of automation tools they're going to implement at the plant, etc., right? So as they go through and fine-tune that, obviously that will weigh on the performance of whether or not we could contain the margins, even I'd say closer to less than 100 basis points, but too early, but I'd say that overall still very manageable in terms of what we see in the forecast for remainder of '26 and into '27.

Speaker #2: Understood. And just to follow up, maybe asking the China export question, in reverse, I'm curious what you're hearing from some of your European OEMs who export into China.

Speaker #2: Curious how has there been any change in launch timing, any delays that you're observing, just curious what the latest conversations have suggested and how you feel about the 2027 margin trajectory in the region.

Speaker #2: Thanks.

Speaker #4: Yeah. So you broke up a little bit. But I think part of the question was around exports in our European business into China. And given our profile yeah.

Speaker #4: So given our profile there and even if you go back several years where Europe was a net exporter, they're now a net importer. And our exposure to exported platforms into China was generally fairly low with the exception of S-class where we supplied all the components on S-class.

Speaker #4: That was a large exporter into China. Outside of that, I wouldn't say significant exposure or risk on a go-forward basis on vehicle platforms that are exported over into China.

Speaker #4: As far as the margin profile of our European business going forward, Mark already talked about we already have now, I think, clearer line of sight on metals projects that will start to roll off in fiscal year '27, which we'll present a tailwind for us.

Speaker #4: We also have positive balance in of other projects and then some of the restructuring actions that we're taking. Starting in '25, completed through '26, taking hold as well in '27.

Speaker #4: So all else being equal, we would expect to see margin expansion in our European operations next year.

Speaker #2: Understood. Thanks for all the color and good luck.

Speaker #1: Thank you. Our next question comes from Colin Langdon with Wells Fargo. You may ask your question.

Speaker #5: Oh, great. Thanks for taking my questions. Just a follow-up on Europe. I mean, on your slides, you indicated you expect outperformance in the Americas and Asia next year, but not Europe.

Speaker #5: Is that just purely the roll-off? Because you just mentioned a second ago that you have sort of backfill business there. Is that the roll-off of the metals business, or is there a customer mix issue that's kind of dragging the performance down?

Speaker #5: In any way to remind us of the size of the metals business, is that something like 500 million that's going to eventually roll off, or is it bigger or smaller?

Speaker #4: Yeah. Yeah. Colin, so that is primarily the driver next year. I'd say next year, you're probably talking about 90 million dollars of it rolling off, followed by 28, another chunk of it, probably a little bit bigger in 28 rolling off versus '27.

Speaker #4: But for planning purposes, yeah. 90 million next year, rolling off is what you should be penciling in.

Speaker #5: Yeah. And into the first part of your question, as Mark said, in particular, a portion of that is the metals business rolling off there.

Speaker #5: I do think it wouldn't necessarily refer to it as a customer mix issue, as much as it is it's been targeted by us on certain platforms.

Speaker #5: And where we've just deprioritized them or exited them. Coupled with certain vehicle assembly plants being idled in Europe where we had exposure to. So it's really a mix of all three of those, Colin.

Speaker #5: Got it. That makes sense. And then one of your top competitors talks a lot about automation. I noticed it was on your slides and in your commentary today.

Speaker #5: I mean, where do you think he stands in sort of the need to automate your production? And how do you think you are relative to your peers?

Speaker #5: Is that a disadvantage, or do you think you have some catching up to do? Do you think you need to spend more there to in automation?

Speaker #5: Any thoughts there?

Speaker #4: The first part of your question on it, I think automation in certain regions we operate in is an absolute necessity. If you look at some of the more recent union agreements that have been settled, that's all public information.

Speaker #4: You can see the wage inflation that we're facing. And we're committed to working to offset that through essentially looking at our supply chains, working with our partners in the plant, and automation where required.

Speaker #4: So automation is going to be a necessity moving forward. And that's part of if you go back to the color I added to Emmanuel's question on cash flows in '27, we will see an increase in automation spending in order to expand margins not just keep pace, but really drive it forward with earnest.

Speaker #4: In terms of how we're positioned versus our competitors, I think if you look across our portfolios, I believe we are competitively positioned across all of them.

Speaker #4: In terms of the technology we have available to us, the partners that we work with on the outside to drive the automation through. And where we're able to implement it at scale.

Speaker #4: I think what we need to be cognizant of is we are a very targeted and where we deploy automation, and making sure that we're not trading a variable cost, such as labor, that we can flex on some of our more unstable programs with a fixed cost that you then you're essentially stuck with, and it becomes a much more difficult commercial negotiation.

Speaker #4: So we've been very targeted in how we deploy automation in our jet factories. Based on kind of the run rate stability and ongoing prospects of some of those jet platforms.

Speaker #4: If you contrast that to trim metals and foam, where we're really, I'd say, leading our world-class in those areas, it has been a very aggressive deployment.

Speaker #4: Because we share those factories across multiple customers, we're better able to flex the fixed costs. Hopefully, that answers your question on automation.

Speaker #5: That's very helpful. Thanks for taking my questions.

Speaker #4: Yeah. No, thank you for the question as always.

Speaker #1: Thank you. Our next question comes from Dan Levy with Barclays. Your line is open. You may ask your question.

Speaker #6: Hi. Good morning. Thanks for taking the question. I wanted to start out with just what's going on with America's and the backlog. Maybe you could just talk to this very strong outperformance you saw in the third quarter, which I know you said is unlikely to recur.

Speaker #6: But the additional piece of this is you talked about above-market growth in the Americas. At one point in the past, you had mentioned that you could see America's growth over market at mid-single digits.

Speaker #6: You've also said at some point that there could be 400 million dollars of potential backlog opportunity in '27, which would equate to a pretty significant step-up of revenue.

Speaker #6: So maybe you could just go through some of the program revenue dynamics for the American business. Thank you.

Speaker #4: Yeah. I'll start, and then I'll hand it over to Mark. In the Americas business, on our high return on capital our high return on capital product lines and when we talk about those, we're thinking about jet trim and foam.

Speaker #4: I think we are we do have a line of sight to above-market growth on those. We talked about the backlog with the onshoring. A good deal of those onshoring winds were fully integrated or will become fully integrated in the 28 timeframe.

Speaker #4: So I think when we look at those product lines, we continue to see above-market growth. Is it 2%, 3%, or 5%? I think we'll have to see how mixed shapes up next year.

Speaker #4: And how quickly some of our truck platforms recover, that's going to be key. And I think we have to weigh against that when you look at the total region revenues is the wind-off of metals programs, which we've talked about.

Speaker #4: We continue to talk about that, and we will continue to see that as we move through fiscal year '27 and '28. So while the region as a whole may be slightly above market growth to potentially flat to market growth, in our high return on capital product lines, we will see above-market growth, which will lead to margin expansion and as we look at kind of net of automation deployment, expanding cash flows.

Speaker #6: Great. Thank you.

Speaker #4: Anything.

Speaker #6: As a follow-up, I wanted to just ask about some of the dynamics of mix and the conversion to revenue. So in the third quarter, we saw volume mix on the EBITDA line was negative two on 147 million dollars, incremental revenue.

Speaker #6: Maybe you could just explain that. But as we go into '27 and you have this step-up of America's backlog, you have a wind-down of revenue of programs where the margin was fairly low.

Speaker #6: What types of incremental margins we should expect on the revenue dynamics? Should it be theoretically higher than what you've seen in the past because you have this lower margin business rolling off?

Speaker #4: Yeah. I think I'll start there and Jerome, feel free to jump in. But what we've typically said is somewhere in that 16, 17 percent range is what I would look at for my incremental.

Speaker #4: And I wouldn't think that next year would be any different from that. I think when you look at this past year, for example, we've been absorbing certain of the Middle East costs, certain of the customer-driven costs, right?

Speaker #4: Despite some of the higher volumes there. So I think that gets behind us as we go into 2027. As Jerome mentioned, we will have some of that metals business rolling off.

Speaker #4: Next year, call that about 100 million dollars of metals business rolling off in the Americas. So again, I'd say that you're probably right around that 16, 17 percent incrementals as you see that revenue roll in next week, next year.

Speaker #6: Great. Thank you.

Speaker #4: Thank you.

Speaker #1: Thank you. At this time, I'll turn the call back over to the speakers.

Speaker #2: Thank you, Shirley. Thank you, everyone, for your interest in Adyant. We appreciate your interest. And if you have any follow-up questions, please don't hesitate to reach out.

Speaker #2: As a reminder, we will be in New York City next week at the JPMorgan conference. Hope to see many of you there. Thank you.

Speaker #2: And have a nice day.