Welcome to the Adient's Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] I'd like to inform all participants that today's call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Linda Conrad. Thank you. You may begin.

Thank you, Denise. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the Investors section of our website at adient.com. This morning, I am 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 Q4 and full-year financial results as well as our guidance for fiscal year '26. 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 is my pleasure to turn the call over to Jerome.

Thanks, Linda. Good morning, everyone, and thank you for joining us to review our fourth quarter and full year fiscal '25 results. We will also discuss our fiscal '26 outlook and share additional information on how we are positioning ourselves for long-term success. Turning now to Slide 4, which summarizes our fourth quarter and full year results. With business execution remaining strong, we delivered an adjusted EBITDA margin of 6.1% and free cash flow of $134 million in the quarter. It's worth noting that full-year free cash flow ended at $204 million versus the previous high end of our guidance range of $170 million, leaving us with ample liquidity when it comes to '26 capital allocation, which Mark will cover in his section. This performance comes amidst challenging business conditions, not just in the fourth quarter, but throughout the year, including customer volume reductions and dynamic tariff policies. The Adient management team would like to recognize all of our employees for stepping up and meeting these challenges. By working together with both our customers through commercial negotiations and remapping value chains and our suppliers through supply chain management, we have successfully mitigated the lion's share of our tariff exposure this year. On a full-year basis, we generated $881 million of adjusted EBITDA and $14.5 billion in sales with an adjusted EBITDA margin of 6.1%. Customer volume reductions continue to be offset with strong business performance. From a cash perspective, we were able to generate an additional $204 million of free cash flow this year, net of funding our European restructuring program. Given our solid cash generation, we're able to return capital to our shareholders through $125 million of share buybacks, which represented a 7% reduction of our beginning year share count and 18% since the start of the program. Mark…

Thanks, Jerome. Let's jump into the financials. Adhering to our typical format, Slides 13 and 14 detail 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, which we view as either one-time in nature or otherwise skew important trends in underlying performance. Details of all adjustments are in the appendix of the presentation. High level for the quarter, sales of $3.7 billion were 4% better than fiscal year '24 with adjusted EBITDA of $226 million and adjusted EBITDA margin of 6.1%. Adjusted EBITDA and adjusted EBITDA margin were both down year-on-year, primarily due to the timing of commercial settlements and equity income, reflecting the impact of modifications to our KEIPER joint venture agreement, which were partially offset by favorable cost impacts and business performance for both the Americas and EMEA. In addition, equity income was also impacted by a few one-time nonrecurring items within the JVs, such as an income tax adjustment and timing of engineering expense and recovery. Adient reported adjusted net income of $42 million or $0.52 per share. For the full year, as shown on Slide 14, sales came in at approximately $14.5 billion, down 1% year-over-year due to lower customer volumes and unfavorable mix, which was partially offset by FX tailwinds. Adjusted EBITDA landed at $881 million, essentially flat with 2024 despite the increase -- decrease in volume, positive business performance offset the unfavorable volume mix headwinds as well as lower equity income year-on-year. For the year, we reported adjusted net income of $161 million or $1.93 per share, which represents a 5% improvement on adjusted EPS versus the prior year. I'll go through the next few slides briefly, as details of the results are included on…

[Operator Instructions] That is going to come from Colin Langan with Wells Fargo.

Maybe if we could start with the 1% forecast underperformance versus S&P. Any color on the major puts and takes there? I think you mentioned the F-150. Did you say that you factored in the downtime that's expected, but not the recovery that Ford has actually kind of indicated this recovery? And then any color maybe in particular on the wind-down of unprofitable business in Europe? Is that another big driver there that we should be considering in sort of the 1% drag? Yes.

So thanks, Colin, for the question. I'll take it. So on the F-150 in particular, we -- out of respect for our partner for the customer, we don't want to get ahead of them. And so what they've indicated on their call was F-Series. And F-Series is a mixture of F-150, F-250, and the entire Super Duty lineup. And they haven't officially made any announcements of where that recovery is going to come from and how all of the downtime will mix into that. So what we have forecast in our guidance is the downtime that we know today, what we actually have in our EDI releases, which takes us through the week of November 10, with a restart on November 17 with no recovery. So no makeup of any volume. In addition to that, what we don't know is what that recovery in makeup volume will look like. Will it come with significant overtime? Will it come with additional crews, additional makeup? Will it be kind of low-calorie makeup type revenue? And what will that mix look like? So that's part of that 1%. When S&P comes out with an updated at a November number, I think we'll tie out closer to that because they will capture some of the F-150 downtime. So that's part of it. The other piece of it is the European picture. So the -- we now have the full Star Louis, our plant in Star Louis, the exit of that business as that winds off, as well as a plant in Novamesto in Slovakia, the exit of that business as well, winding down, which would be below kind of S&P performance. So hopefully, that answers your questions on that.

I mean are those major contributors to the 1% overall? Or are those combined still?

Yes. I mean would be -- those would really capture the 1% overall, yes.

And then if I just look at the walk on Slide 22, the volume mix drag is, I think, something like a 26% decremental, which seems pretty high. Any color on why such a high decremental for the lost volume?

Yes, I'll start, and then Mark can add any color if he needs to. There's a couple of factors that go into that. First of all, we have things like F-150 factored into that. And you have to remember, that's not coming out at a normal decremental because of the nature of how that F-150 downtime is coming in. It's coming in first at a very short notice. It's coming in. Initially, it was basically half shifts. So we were having to staff 2 full plants fully, but only getting half volume on it. It ran like that for several weeks, and now we're having to run it at full down weeks, but still having to pay subpay. And given that is 6% of our total sales, that's a pretty severe decremental for us for a very large portion of our Q1. In addition to that, in our Q1, we also have Nexperia downtime. And that Nexperia downtime is coming -- it's been public announcements at one of our very large Japanese customers, significantly impacting our North America operations. So when you think about Q1, it's going to have a very significant decremental in it because of those 2 factors, Nexperia and F-150, very short notice, partial shifts that are running either half or sub-pay impacted with very high decrementals associated with them that we're not really able to manage just given the short notice of them. Those are 2 factors. The third factor in there is one that I would say we will monitor closely throughout the year, which goes a bit to why we've given our official guide, and then if it were flat volumes, the mix of what S&P is calling off. They have called off in their October release some of our platforms, which are maybe higher contribution margin, being down year-over-year, and we'll see how that plays out throughout the year. And then the fourth factor, which is what Mark talked to, we're rolling on in our China business, significant new business this year. As that business rolls on, it isn't rolling on in its first year of production at full kind of incremental margins, right? We have significant launch costs going into it. We're rolling on with some of the China local OEs. As those roll on, they're not rolling on at kind of the regional contribution margin level. It takes us some time to bring those up to the standard margin level. And I'd say that's the fourth factor associated with some of that volume mix. But the first 2 are very significant, just how some of those downtime -- that downtime is coming at us in Q1.

The next question comes from Emmanuel Rosner with Wolfe Research.

First question is on the growth investments, $85 million investment for the future. Can you just comment a little bit more around how much of that is discretionary, how far out in terms of the future we're looking at for this payback versus things that are nearer term and just needed because you have new launches coming up?

Yes. I'll start, and I can turn it over to Mark for additional comments. Yes, I'd say it's an investment that's needed to really drive the growth. In my prepared comments, we kind of commented on what we see '27 shaping up to be where we see North America being able to grow in the mid-single digits over kind of vehicle volume, especially when we take kind of the metals out of that, which we've said we want to wind down metals. And we see China and Asia growing at kind of double digits over market. And we have that line of sight. And so we see that investment as needed. That's what I would call kind of the program growth and some of the engineering associated with it. The other thing that I would point you to, Emmanuel, where we're really driving business performance aggressively is on the automation and AI side. If I look at '25 versus '26, in '25, we spent 20 -- just round numbers, $25 million on automation and AI in our plants, and that yielded about $20 million in savings. As we begin to ramp up these efforts, we have a facility in Moore, Hungary that's dedicated to capital improvement, AI, and automation. We have a MIRO facility in Plymouth, Michigan that's dedicated to the same activities. We will spend upwards of about $60 million in AI and automation. And on a run rate basis, that will yield almost $40 million in savings. So the capital is roughly doubled, but the savings is more than doubled on a run rate basis. And that's factored into that total expense improvement or increase year-over-year. So I wouldn't necessarily label it as discretionary as much as it is driving business performance. an improvement into the business year-over-year.

Yes. And Emmanuel, the payback on that CapEx that Jerome was talking about, innovation is typically about 2 years. It could be anywhere from 1.5 to 2 years. That's what we try and focus on there. And as Jerome indicated, the other, call it, $35 million is really engineering and launch support for programs that are being launching with our customers. So think of it in 2 buckets.

Yes. And we'll see those launches, Emmanuel, really start coming on in the end of '26 fiscal year and then accelerating through '27. Okay.

And then I was also hoping for a potential update on onshoring. There wasn't as much discussion on this in this quarter than in the past. I think that you had obviously mentioned already previous wins, but it sounded like you were getting close to some potential additional wins there. So just curious where that's tracking. I guess, what will be the timeline of it starting to help the revenue?

Yes. So in terms of helping the revenue, the one product that we announced is a Japanese customer. It's now -- initially, it's with Nissan on the road, that's now in production. So that is in our kind of '26 figures, that incremental volume as they have onshored back into the U.S. It's unfortunately being offset by some other production challenges that we see just in terms of volume. The other Japanese customer, we expect that to launch at the end of our fiscal year '26. It will be running up to full volume. And then as far as other onshoring wins, we are, I'd say, in the final kind of last rounds of negotiation with a significantly large program, around between 200,000 to 250,000 units that will move from Mexico into the U.S. It would be incremental volume for us, utilizing existing footprint for us. And I would anticipate we'll have more news on that in the next call it, 3 to 4 months or so.

The next question is from Dan Levy with Barclays.

You gave some impressive growth over market targets for '27. And I know that there's some mix issues here in '26. Basically, can you just walk us through what the line of sight? And I know that there's obviously the macro environment can move. But what is the line of sight of sort of secure business? It's a function just of launches coming out? And how do you factor in -- there is still some uncertainty on how automakers might be moving their plans, powertrain stuff moving around. What is the line of sight on that growth of market?

Yes, I'll start, and then Mark can add comments. I'd say the line of sight, Dan, if I just kind of go region by region. In China, as we spoke kind of on the last earnings call, it really comes down to customers' ability to launch and execute. We were, I'd say, impacted last year. And if you look at kind of half-over-half, we saw almost a -- I think it's, call it, what, 50 basis point -- sorry, 500 basis point improvement, half 1 to half 2 in terms of mix improvement or growth over market improvement in China because our launch has finally started to accelerate there. And that's what really gives us confidence in our '26 and then moving into '27 is, one, our mix shift to the China OEMs, but then their ability to now launch and their launch cadence is finally picking up. So I think in China, we have a reasonable kind of line of sight. Within the Americas, which is our other region now that we're starting to gain some significant traction, it's really dependent on the Japanese OEMs and their ability to, I think, rotate some of their powertrain and rotate some of their plants. What gives us confidence is they generally do what they say they're going to do. Their level of execution, their level of commitment, their ability to plan, do, and execute is at a high level. So I think we have generally a high level of confidence when we look at what happens in the last quarter of '26, that's when a lot of these launches kind of time in and cadence in, thus the high level of engineering and elevated CapEx spend this year, and as that rolls into '27. So I think generally, we feel pretty good about what we see moving into '27 for the business. And then the other key piece of that, especially in the Americas, is when we think about growth over market, and we'll have more of this as we roll through '26 and really into '27 is it's also the portfolio. We've talked about this is rolling off some of that third-party metals business, and then really looking at growing the JIT, trim, and foam. And so it's that portfolio rotation that will also help to accelerate growth over market in those markets we really want to play in. And that's why the F-150 business not just winning what we had on the JIT and the foam, but also conquesting that trim business, getting more down the vertical integration stream, and providing that value proposition with Ford, codeveloping with them a better end product for the end customer was really crucial.

As a follow-up, same vein, I know that '26 on the margin side has some unique volume mix issues. But you've talked about this midterm 8% EBITDA margin target. There's a few different work streams in terms of balance in, balance out Europe. Should we understand '26 just as a transition year, but the broader positive margin trajectory is still on track with each of these work streams, and that 8% is still something that you're shooting for and is a realistic target over time?

Yes, Dan. I would say that nothing has fundamentally changed. Obviously, '26 significantly impacted by volume. That said, we continue to drive the positive business performance. We're investing in the growth. As Jerome just mentioned, we have a good line of sight in terms of where that growth is coming from in '27 and '28. That balance in, balance out story still holds, right, albeit certain of those programs have been extended in terms of their end of production life, right? So it's sort of muted the impact in '26. But I think when you get into '27, right, you've got your growth, you've got your balance in balance out, right? You've got your portfolio mix starting to change. Those are all the elements that will continue to walk us up from the current level of margin up to, call it, that 7%, 7.5% approaching that target.

And the next question comes from Nathan Jones with Stifel.

I guess I'll just start with a question bluntly on the first quarter, given the disruption of the F-150 and your expectations there. So just if you could provide any more color on what you're expecting specifically for revenue margins in the first quarter of '26.

Naty, we don't provide quarterly guidance, but I think as you're adjusting your model and you're fine-tuning based on your production assumptions, we did, call it, $195 million of EBITDA last year in the first quarter. There was no production declines at that point last year. As Jerome indicated, this year, we're facing not only F-150, but the on-off shifts related to the Nexperia chip shortages there. So is it possible that you're going to see a $15 million, $20 million decline in overall EBITDA quarter year-on-year for the first quarter? Absolutely, right? And then you throw in there JLR, right? They just started to produce their units, right, at the capacity. So again, it's those macro factors that I think probably puts Q1 at the trough for the year, and then we start building on that as we get into Q2, 3, and 4 as F-150 comes back as you have the supply chain shortages worked out with Nexperia, right? You have JLR. So that's sort of the way I see the calendarization as I go through the year.

And I guess my other one is on capital allocation. Lower free cash flow in '26. But as you noted, you have more cash than you need to run the business. Any expectations for what share repurchases in 2026 is likely to be relative to 2025?

Yes. So again, we'll opportunistically look to balance that between the share repurchases, debt paydown. As I indicated, we have $135 million left of repurchases on the current authorization. So we'll time the repurchases and the magnitude of the repurchases in line with how we see clarity with production playing out this year, as we see the cadence of our cash flow coming in this year, right? And so, without giving you a specific number, I'd just say that we'll balance taking the cash off the balance sheet between debt paydown as well as the repurchases.

The next question comes from Joe Spak with UBS.

Super helpful detail on the decrementals in your '26 guidance. I just want to maybe talk through one other element because I know you said you're not counting on some of that F-150 volume coming back. But if it does, is it fair to assume that the incrementals on that volume actually don't come close to the decremental margins because of all the trap labor and costs and some of the inefficiencies you mentioned? So it will help dollars, but the overall decrementals will still look a little bit worse than we would normally expect. Is that fair?

Yes. I think that's right, Joe. I mean if you just think about how that volume comes back on, as Jerome indicated, are they going to be running over running weekends, right? So that goes into that equation.

Any help, any guidance on sort of what we could expect the incrementals on that volume to be if it does come back?

I think it's too early to say still. A lot of it's going to depend on how does it come back? What are some of the discussions we have with Ford around the total recovery mechanism of it. I think it's too premature to engage in those types of forecasts. And that's one of the reasons why, again, out of respect for our partner, Ford, we didn't want to put anything in here because we just -- we don't know the timing cadence. If it's going to be run over, let's say, the Easter break, I mean, that's going to be a lot of premium costs. It's just going to be run over Saturday and Sunday, that's a different model. So it just -- it's too early to say at this time what that even looks like.

The second question, I guess, is just on free cash flow, and apologies if I missed this. I know you spoke about elevated restructuring in '26. I think it was about $130 million in '25. Did you give an actual number for '26? And then you talked about more normal levels beyond that, but I just want to get your sense of sort of what gives you confidence that continued restructuring, particularly in Europe won't be needed that you're going to be more rightsized after '26.

Yes, Joe, so good question. So we did about $130 million of cash restructuring last year. I think that drops down to about $120 million this year, right? Normalized run rate for us, right, is probably going to be somewhere in that $50 million, right, plus or minus, once we get through, I'd say, the elevated restructuring in Europe. Part of it, and we've been very transparent, and you and I have talked about this before, right? We do see that trending down. But in terms of the overall timing, some of that's going to be dependent on customer just program runoffs, right, and what they decide to do with their facilities and where they're going to source certain of their programs. So again, for modeling purposes, I'd assume a $50 million run rate. So again, when you think about this year for '26, right, a couple of the elements, the calls for cash that are elevated, right? I'd say my cash taxes at $120 million are elevated; those typically would be in that $100 million, $105 million mark on a run rate basis. My restructuring dollars, rather than $120 million, should be falling back to that $50 million run rate. And then it's just a function of EBITDA, right? So if you were going to ask what's the normalized level of free cash flow, start with your EBITDA. Let's just say we do $900 million CapEx. We've always said that, that will be running somewhere in that $280 million to $300 million, especially with the growth investments and the automation that Jerome talked about, cash interest, call that $185 million, $190 million, cash taxes, $100 million and restructuring $50 million. So you get to a normalized level, call it, somewhere around that $250 million, $260 million mark at a $900 million EBITDA, right? So that's the way I think about free cash flow, what's normalized levels for us. That's the bottom of the hour. So if you can move to wrap the call up, that would be great.

So in closing, I want to thank everyone once again for your interest in Adient. If you have any follow-up questions, please feel free to reach out to me. Also, I'd like to acknowledge we will be in New York City later this month, participating in the--