Welcome, and thank you for standing by. At this time, all participants are in a listen-only mode. [Operator Instructions] Today’s conference is being recorded. [Operator Instructions] I will now turn the meeting over to Michael Heifler. Thank you, sir. You may begin.

Thank you, Denise. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the Investor section of our website at adient.com. 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. Mark will then review our Q2 financial results and our outlook for the second half of our fiscal year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome and Mark, there are a few items I’d like to cover. First, today’s conference call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore, involve risks and uncertainties. I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to Slide 2 of the presentation for our complete Safe Harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company’s operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. And with that, it’s my pleasure to turn the call over to Jerome.

Thanks, Mike. Good morning, everyone, and thank you for joining us today. We will review our strong second quarter results, share our perspectives and analysis on tariffs and explain how we are addressing the situation through leveraging our global footprint and working with our customers to add value. At a high level, the Adient business model is strong and resilient, and our team has built positive momentum going into the second half of fiscal 2025. I will walk you through these topics in more detail and then turn it over to Mark to review the Q2 financials and dynamics for the balance of the year. Turning now to Slide 4, our positive momentum accelerated in Q2 with improved business performance versus a year ago across all regions, allowing us to mitigate ongoing customer volume and mixed headwinds in EMEA and Asia. In Americas, we outperformed industry volumes and saw strong year-over-year margin improvement as we drove additional efficiencies and had favorable comparisons with last year’s heavy launch calendar. As a result, we were able to improve total company adjusted EBITDA margins by 40 basis points. We achieved $233 million of adjusted EBITDA. Importantly, Q2 results underscore the Adient team’s deep commitment to operational excellence and solid execution and demonstrate the resilience of our operating model during times of volume pressure and macro volatility. In fact, looking at our Q2 performance over a three-year period, our EBITDA results have improved by $18 million and our margins have expanded 90 basis points on $300 million of lower sales. While lower customer volumes have played a significant role, we have also made a conscious decision to focus on more profitable business and to invest in innovation, automation, modularity and other efficiency measures. This strategy is paying off with a stronger, more profitable business…

Thanks, Jerome. Let’s jump into the financials on Slide 12. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side. We will focus our commentary on the adjusted results, which exclude special items that we view as either one-time in nature or otherwise skew important trends in underlying performance. One item to note, as Jerome mentioned earlier, was a triggering event which occurred during the quarter which required a quantitative impairment analysis, primarily due to the significant decline in the market value of Adient shares resulting from uncertainties surrounding vehicle production volumes amongst other factors. As a result of the quantitative assessment, a $333 million non-cash goodwill impairment was recorded in the EMEA reporting unit. Details of all adjustments for the quarter are included in the appendix of the presentation. Moving on, high level for the quarter. Adjusted EBITDA for the quarter was $233 million, up 3% year-on-year. We expanded EBITDA margins 40 basis points year-over-year to 6.5%. This improvement reflected outstanding business performance in the quarter, despite a $139 million decrease in revenue from lower customer volumes in FX versus a year ago. As Jerome mentioned, we continued to demonstrate the resilience of the Adient operating model and ability to mitigate external pressures. Worth noting that our underlying equity income remains quite strong, particularly in our Asia-Pacific segment, despite this quarter’s results being negatively impacted by $6 million from the same period a year ago due to the restructured pricing agreement within Adient’s Keiper joint venture. Adient reported adjusted net income of $58 million or $0.69 per share. I’ll cover the next few slides rather quickly, since details for the results are included on the slides. This should ensure we have adequate time for Q&A. Starting…

Thanks, Mark. With that, I wanted to give just a little bit of additional color on the guide and why we handled the guide the way we did. First, it was really enabled by a strong start to the year, which is driven by our 70,000 associates around the world, our customers and suppliers. So, I want to thank them for allowing us to do that. Secondly, I think it’s important to understand how Adient views the tariffs and how we break that down. And it’s really, I’d say, three orders of magnitude or three buckets. The first order is the direct impact that we see. And I think we’ve tried to lay out for you today with a level of transparency how that direct impact is flowing through to us, both in terms of, where we see it coming in terms of the regions and how it’s managing through Annex 1, where we see Annex 1 exposure, where we have USMCA exposure, the fact that we’re 95% covered out, where we see recovery, the fact we’re already 75% recovered, we have 25% roadmap. And then the fact that we can move through the rest of the year with action plans and drive that recovery. The second order then being what it means to our customers and how our customers have to manage that. They’ve gone through and made their announcements this week, so we won’t cover that off. But there is an element, whether that be through the 2.5% MSRP discount, we have to see what that means to us. Then in the midterm, as they start to reshore production, we’re already engaged with certain Japanese customers and a German OE. And there will be, I think, announcements to come. We just don’t have anything today that allow Adient…

Thank you.

Denise, can we please start the Q&A?

Yes. Thank you. [Operator Instructions] Our first question today comes from Joe Spak with UBS. Your line is open.

Can you hear me?

Hi, Joe. Yes.

Hi. Thanks for all the additional color there. I guess just one quick one on tariffs. You’ve made good progress here, right? The resolved versus the 75%, roadmap 25%. I’m assuming resolved means you basically have agreements for price recoveries or that’s the majority of that. Is the roadmap portion more what you were talking about, about finding some cost offsets or resourcing or are there still some potential price negotiations involved in the roadmap portion as well?

Yeah. I’d say it’s a mix of both, Joe, from that standpoint. So, there’s still ongoing price negotiations. There are -- certain customers have systems that require us to submit documentation given there still are things on boats coming over from China, bill ladings haven’t been delivered yet. So, we need to be in systems for recoveries without getting into too much minutia from that standpoint. So, there’s things that need to be submitted and negotiated and just need to be rolled through. So, it’s a mix of both, still resourcing that needs to occur and also negotiations that need to be concluded.

Okay. That’s helpful. And then, just in EMEA, I think it was -- I know there’s still some challenges there, but it looks like there was -- it was a pretty good quarter, at least relative to some expectations and with some still some volume headwinds. And I know you called out some business performance. Is there anything unusual in that that sort of drove the quarter a little bit better, especially relative to, maybe quarter-over-quarter?

Yeah. Joe, good question, good observation. I’d say one quarter does not make a trend, right? So, I wouldn’t take that number and annualize it. I’d say that we are encouraged because we are seeing, obviously, business performance turned positive over there. We’re getting the benefits of certain of the restructuring actions we’ve taken. But again, things are lumpy, especially as you think about commercial actions and recoveries with customers. So, again, that lumpiness, I wouldn’t peanut butter that 4% margin that we just printed across third quarter or fourth quarter, right? So, it’s going to be some variability as we go through the rest of the year.

But I -- Mark, I think you did mention last year that you thought the first half of this fiscal year would be sort of a bottoming event for profitability in that region. Is that still the case? So, if you, if you average the -- you’re saying the first half is a little bit over 3%, should we expect it that it improves off that level from here?

Yeah. I wouldn’t say that, Joe. I’d say that, you’re right. 3% was the average over the first half of the year, right? If you just remember last year, I think we did about 3%, just over 3%. When we came into this year, we said, hey, listen, this year is going to be pretty much similar to that, right? You really don’t see that inflection point until we get into 2026, which is when we start to see certain of the underperforming metals business roll off. We see the new business roll on. So, I’d still frame it up in that piece.

Okay. Thank you.

Thank you. The next question comes from Emmanuel Rosner with Wolfe Research. Your line is open.

Great. Thank you so much. First question is really around just making sure I understand your direct tariff exposure. So, 95% of what you produce in Mexico and Canada is USMCA compliant. So, that stuff would technically have tariffs, but I guess for now USMCA parts are not being tariffed. And then when you mentioned the add-ins parts that are not listed in Annex 1, this would relate to what geography?

So, I think what we’ve said is roughly 95%, so don’t hold us to exactly 95%, is of our parts that we import or move across the border from Canada and Mexico into the U.S. are USMCA compliant. And so, under current policy, that’s correct, they’re not subject to the 25% tariff rule. And if that were to change, then obviously we’d have to deal with the issue. And then Annex 1, the way Annex 1 is scoped out, Annex 1 basically carves out those parts and says even if they are USMCA compliant, they are subject to a 25% tariff. However, we don’t have any parts that fall under that Annex 1 that we produce today, and we have very little controlled material that would fall under Annex 1. It’s almost all directed. And so, we would be covered off due to the directed nature and the nature of just the way seating is actually constructed from that standpoint. It is worth noting though, Emmanuel, that the Annex 1 tariffs that were supposed to go into effect May 3rd actually have been delayed as the system is not steady at this point. Now, I will say the disadvantage of having your components not falling under Annex 1 is that then they’re subject to the stacking effect of IEEPA and the reciprocal tariff, which is why we get hit with the 145% tariff out of China. And that’s why China is our largest exposure region at the moment. And that’s really why we tried to provide that visibility into our exposures. And you can see that monthly run rate on the graph of China being our largest exposure region. And again, we’re not trying to overwhelm you with detail, but I do think it’s important to understand that differentiation into just what is Annex 1, what’s USMCA, what’s IEEPA, what’s 232 and reciprocal and all of that.

Yeah. No. I appreciate the -- appreciate all the detail. Then I guess taking a step back in terms of your margin outlook and then where it fits within the longer-term goals and progression, can you maybe just remind us how much more opportunity there is for some of these cost and efficiency actions and how do you think about, I guess, the self-help and the part that you control and timing of further benefits?

Yeah. So good question, Emmanuel. So we printed 6% last year total company. We said there’s going to be put and takes this year, right? We see America’s continuing to improve their margin profile. We just spoke about Europe for the next year or so, kind of in that, call it 3%, which we printed yesterday. And then obviously our APAC region continues to print double-digit margins. We expect that to continue. When we look at what we’re benchmarking, what we’re targeting, right, clearly we think there’s significant opportunity in front of us. We’ve said in the past, whether or not that’s 7.5%, 8%, that’s typically what people are looking at. That’s what we think we could achieve. Clearly there’s a lot that we could do to get there. Some of it’s what we spoke about before, whether it’s restructuring over in Europe, getting the benefits of that. I would caution people that the dollars that we spend over in Europe is not a one-for-one in terms of creative to our EBITDA, as certain of that just goes against lower volumes in the region. We do have the positive impact of balance in, balance out, especially with the lower margin metals business rolling out over there. We’ve got new products, new wins that are coming on over there that have higher margins. So when you add that all up, do I think that there’s a couple 100 basis points of opportunity versus where we were in 2024? Absolutely. And you could see that within our business performance so far in the first half of this year. And so that’s really what the team is targeting and marching towards.

Great. Thank you.

Thank you.

Thank you. The next question comes from James Picariello from BNP Paribas. Your line is open.

Hey, guys. Sorry if I missed this, but have you quantified the change in FX assumptions with your guidance and just what you are assuming for the market and just the implied core sales relative to your market assumptions?

Yeah. So good question, James. So, for FX, right, basically there’s been a lot of volatility around FX, obviously, over the last month, six weeks, et cetera. So what we did is we looked at our prior outlook, and I think for the euro, which is one of the bigger ones for us, we kept that constant somewhere in that $1.06 [ph], which is where we were last guide. Clearly, with the euro trading around that $1.08 [ph] now, there could be some translational upside if we go through and rates hold. We just felt with the volatility around the rates at this point, it was prudent to keep it consistent to where our prior guide was.

Got it. That’s helpful. And then just I think we probably have too many factors to focus on given the environment, but it wasn’t too long ago we were asking Adient about capital allocation, whether it’s share buybacks or participating in some form of industry consolidation. Just wondering what the mindset is at this point, understanding that I think we all have a lot of macro uncertainty to navigate very near term.

Yeah. So, again, nothing has changed from our perspective just in terms of how we view capital allocation, right? We’re going to take a measured approach. Clearly, we’re going to continue to invest in the business, certain that capital is going to have to be allocated towards restructuring Europe. We’ve been very transparent about that. Clearly, we generate free cash flow. So we said that we’ll return value to our shareholders through share repurchases. Obviously, when we think about share repurchases, right, we’ve said all along that we’d look at a couple of elements to see whether or not it makes sense. We’d look at the overall macros to see whether or not we had clarity and certainty there. Clearly, this past quarter, right, there was a lot of uncertainty with vehicle builds, what could happen to vehicle builds in the future. And we also said that we’d look at Adient’s in cash generation, right? And so as I indicated in my prepared remarks, our cash typically comes in the second half of the year. And so again, as we go through the second half of this year, I think we’ll look at the overall macros. We’ll see whether or not there’s any more clarity just in terms of vehicle demand production. We’ll look at our cash generation, and then we’ll make the determination in terms of timing of repurchases and the magnitude of repurchases. But overall, nothing has changed with our philosophy when it comes to capital allocation.

Yeah. And just to follow on Mark’s comments, I think, as it pertains to capital allocation, and with the additional color, given just on how Adient’s what I call platform mix and regional mix stacks up, that allows us greater clarity when it comes to that capital allocation. Just given our lesser dependency on export volume out of Europe and Asia, our USMCA compliance, the large amount of directed content we have lessens some of our dependency on customer recoveries. If we can reach a trade settlement with China, just it helps us add certainty in some of those capital allocation decisions we have to make. Hopefully, that answers your question, James.

Yeah. Much appreciated. Thank you.

Yeah. Thank you for the questions.

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

Oh! Great. Thanks for taking my question. Just to follow up on that, there was about a month ago media reports that you were considering acquiring ZF Lifetec business, or at least a better. I mean, I don’t know what you could comment on that. Any comment on that would be welcome. But just in general, do you think something like that, a passive safety, does have strategic overlap? Would you be at this point, given the market uncertainty, willing to buy, to do a larger deal? Any color there?

I mean, so we can’t comment, obviously, on ongoing M&A transactions.

Yeah.

Just wouldn’t be prudent to do so. In terms of the strategic overlap between seating and safety, a large amount of safety content we’re responsible for integrating today into our products, and certainly the trends between the two we see migrating together in the future. That said, we have to see how the market develops and our main goal is to add value for our shareholders and for our customers and that’s what we’re singularly focused on from that standpoint. And that’s how we view any potential acquisition is through that lens. Does it add value for our shareholders, and does it add value for our customers? And that’s how we look at things.

Got it. And just circling back on the tariffs and I was a little surprised by the comment on Annex 1. I mean, what does that mean for your parts? I think the slide says that you pay 145% on China. If you’re not in Annex 1, you -- what kind of tariff are you then looking at for parts coming out of Mexico? And why would a supplier like you not fit in to the qualification?

So with -- this is really some of the detail that I think gets lost if you just read some of the high-level summaries. And I’m not -- keep in mind, Colin, I’m not implying that the homework isn’t being done. I just think it’s some of the reports by some of the consulting firms necessarily aren’t at the level of detail they need to be. So with Annex 1, it lists out all of the different HS Code s that are subject to Annex 1 parts. And in there, there’s things that are covered off that Adient just simply doesn’t ship across the border, which means that you’re not subject to the Annex 1 tariff then. So complete seats, as an example, are Annex 1. They’re covered off in Annex 1, but we don’t actually ship complete seats across the border. As you know, our business model is we have our JITs close to our customers. So, we don’t actually ship complete seats across the border. We build seats -- if we’re shipping seats to, I’ll take as an example, Toyota in Kentucky, we ship -- we build our seats by Toyota in Kentucky and we’re not shipping seats out of Mexico to Toyota in Kentucky. And so as a result, we’re not shipping parts that are on Annex 1. Some of the components that we may procure are in Annex 1, but they’re largely directed from that standpoint. So we would get 100% recovery due to the directed nature of them. And what that means then is that, recliners, as an example, the parts in the seat structure are not on Annex 1. And those parts come from China. And if you’re not on Annex 1, you’re then subject to this stacking effect, which means you get hit with the IEEPA tariff, which is the fentanyl tariff, and you get hit with the reciprocal tariff, which is the 125% tariff -- or the 120%, however that stacks up. So then you’re hit with immediately 145% tariff. And that’s why China is our largest exposure, because, as you know, we have our joint venture with Keiper and a couple of legacy parts there. And so, prior to all of these tariffs being laid in, we had about somewhere between just $6 -- roughly a $60 million buyout of China. If you think about our America’s business, our America’s business procures about $5 billion worth of stuff. I mean, $60 million on a $5 billion buy, it’s not significant. But when you put 145% tariff on it, it becomes an issue that the America’s team needs to deal with. And they’re dealing with it in a very effective manner, but it becomes a number that needs to be dealt with from that standpoint. And that’s the nuance between Annex 1, not Annex 1, and then the stacking effect of IEEPA with the reciprocal tariff. And you really need to go HS Code by HS Code.

Got it. And then for your parts coming out of Mexico, is the IEEPA and the Section 232 are pretty similar? Is it the same tariff anyway or is it actually higher because of some of the stacking?

No. They’ve largely removed the stacking effect now. I think last week they got rid of the stacking effect. So our parts coming out of Mexico now would just largely be 232 from that standpoint. But given our USMCA compliance…

Okay.

… we’re generally pretty clear of that now, which is why USMCA is so critical.

Okay. So your Annex 1 is mostly China. That is where you’re seeing the impact.

Not Annex 1, yes.

Not Annex 1. Okay. All right. Well, thank you very much.

Yeah.

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

Hi. Good morning. Thanks for taking the question. I just want to follow up on that. I think you made some references on the China tariffs you are incurring. How easily can you make rotations? Is it just these mechanisms for recliners, headrests? What’s the sourcing opportunity elsewhere? And then do you have a sense of how your competitors stack up on this? Is this something that others are incurring as far as importing these different mechanisms from China?

I mean, I would say if you break down our spend from China, there’s about, for better or worse, 40 part numbers that make up about 80% of that exposure. And of those 40 part numbers, about 20 of them, we have tangible plans that we’re working through at the moment. The other 20 we will drive customer recovery or we have customer recovery on. And the timeline to deal with those 20 that we’re moving is a, call it, a six-month to nine-month window. Maybe it prolongates to a year. And in the interim, there will be customer recovery agreements. And then some of those actually die out, Dan, in the September timeframe as some programs expire. So there’s a bleed down window just naturally as some programs die off. In terms of other customers, I can’t really comment on that. I don’t know what their exposure is. Some of them may have comfort systems. Some of them may have wire harnesses. Some of them may have tubes. I just don’t know.

Okay. Thank you. Second question is on restructuring. And I just wanted to ask if you could provide an update on the European restructuring. It sounds like you’re getting some benefits. I think some time ago you had said, you were talking about net savings of $50 million a year. Is that still intact? And I think you’re referencing here the opportunity to accelerate some of the restructuring. Maybe you could give us a sense of how much deeper you can go, you’re willing to go, because clearly it seems like, there is more opportunity on the European front??

Yeah. Dan, I’ll start, and then, Jerome, you could jump in if needed. Do we think there’s opportunity to accelerate? We’re looking at it from a very prudent manner. Dan, we want to make sure. We recognize that there is a cost of those R dollars that we’re spending over there, right? And so we have to spend it in a prudent manner. If there’s an opportunity for us to pull something ahead, if we think that it’s going to give us benefit, right, within a couple year payback, we’re going to take a look at that and do that. At this time, there’s nothing to announce. We’ve indicated, obviously, what the restructuring charge that we took last year was. We’ve indicated cash restructuring this year is going to be north of $100 million. Most of that is in Europe. It could be slightly higher now that we’re looking at accelerating certain of that. So does it go up to, like, $125 million this year? Possibly, but we’ll continue to look at that as we go through the back half of this year. And, again, I just remind you of the comments I made earlier is, even though we take a charge, right, roughly about a third of that would be accretive to our EBITDA going forward. The other half, two-thirds is really just holding CERB [ph] with the lost volume over there, right? So that’s really the way that we’re looking at Europe right now in terms of restructuring dollars.

Yeah. I think, Mark, that’s a very good summary. I mean, there’s just -- I think you just have to constantly look at Europe from the lens of, you used to build 20 million vehicles, actually was a -- an exporter. Now, if you look, 14.8 million, 15 million next year is importing vehicles. There’s going to be just some amount of restructuring we have to put into that business that’s just there to hold CERB. It’s just the reality of that business from that standpoint.

Great. Thank you.

Thank you. The next question comes from Edison Yu with Deutsche Bank. Your line is open.

Hey. Good morning. Thanks for squeezing me here. I just wanted to check two things real quick. One, on the China local OE mix, I know you’re targeting 60% exiting fiscal 2027. Did you disclose what it is for the current quarter?

Yeah. We didn’t break it out, Edison, for the current quarter. We can get back to you. But literally, we were like, call it, around 40%, 60% at the end of last year. Overall, it doesn’t move by several basis points from quarter-to-quarter. So I’d say that we’re still in that, call it, 40%-45% split local versus foreign.

Okay. And just a second quick clarification. On the, I guess, on the walk, there was -- I think you said there was $9 million tariffs in the quarter. Is that basically just one month or is that a full -- representative of a full quarter impact? I know it’s getting recovered later, but I just wanted to check if that’s the full impact or is it actually going to increase for the full quarter…

Well, that was the full impact for Q2. As we indicated on the slides, our gross exposure now on a monthly basis is 12 million.

Okay. Got you. Thank you.

Thank you.

Thank you.

Okay. Denise, I think we’re going to close the call at this point.

All right. Thank you.

Well, I want to thank everyone for joining us and appreciate your interest in Adient.

Great. Thank you.

Thank you.

Thanks, everyone.

Thank you, everyone, for dialing in for the conference today. We appreciate your participation. Have a great rest of your day and you may disconnect.