Welcome to Adient plc First Quarter 2026 Earnings Call. 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 section of our website at adient.com. This morning, I'm joined by Jerome Dorlack, Adient plc'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 Q1 financial results and our outlook for the remainder of our 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 two 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, Linda.

Good morning, everyone, and thank you for joining us to review our first quarter results. Today, we will focus on the quarter's solid performance and provide an update to our fiscal year 2026 outlook. We will also discuss new business awards and launches as well as share some insights on our expectations for the future beyond fiscal year 2026. Before we get into the results, I would like to take a moment to acknowledge the hard work and dedication of our more than 65,000 employees who work diligently every day to deliver on our commitments, especially in light of the significant challenges during the past quarter. The management team and I appreciate the team's collective efforts, which resulted in a solid start to fiscal year 2026. I would also like to thank our customers around the world who continue to recognize Adient plc as the world's preeminent CDN supplier. Thank you. Turning to slide four, which summarizes our first quarter results. The beginning of the year was filled with uncertainty. The Novella's fire, the Nexperia shortage, and JLR productions were all unknowns. But as the Adient plc team does time and time again, we managed through each of these events by leveraging a resilient operating model. Thankfully, the uncertainty of these events is nearly behind us, and we are focused on execution to meet the needs of our customers. For the most part, volumes are expected to recover within our fiscal year, and we expect to mitigate much of the overall impact of these events. Our revenue for the quarter was up 4% year over year, primarily driven by FX tailwinds from Europe. Excluding FX, revenue in China was up significantly as expected, delivering on our growth commitments and more than offsetting production headwinds from North America. We remain laser-focused…

Let's move to the financials on Slide 13. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side. I will focus my 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. While the details of all adjustments for the quarter are listed in the appendix of the presentation for reference, I would like to specifically highlight one adjustment related to our tax expense. You may recall on our fourth quarter call when we gave our outlook for fiscal year 2026, we mentioned a one-time non-recurring tax settlement in a non-U.S. jurisdiction. That settlement was recorded this quarter and is the key driver of the GAAP net loss of $22 million. Moving to the right side, high level for the quarter. Sales of $3.6 billion were 4% better than the first quarter of fiscal year 2025, with adjusted EBITDA of $207 million. As Jerome mentioned earlier, there were some temporary customer production disruptions during the quarter, and despite these challenges, the team improved adjusted EBITDA by 10 basis points year over year to 5.7%. This improvement continues to demonstrate the resilience of the Adient plc operating model and the team's ability to efficiently and effectively manage external disruptions. Moving on, equity income was favorable year on year, primarily due to increased sales at our joint ventures. Adient plc reported adjusted net income of $28 million or $0.35 per share during the quarter. Let's move to the revenue and regional performance versus the market on Slide 14. I'll go through the next few slides relatively quickly as detail for the results are included on the slides, allowing adequate time for Q&A. Adient plc…

The first question today comes from Colin Langan with Wells Fargo. Your line is open.

Great. Thanks for taking my questions. There's been some media headlines that there's possible disruption around the maybe it's a little worse for the F1, F Series recovery. Have you seen any impact in your schedule so far? Is there any way to kind of help frame maybe the risk to guidance if there is some hiccups in the recovery?

So first of all, Colin, thanks very much for the question. I think as we handled in what would have been our Q4 call. We're not going to kind of front-run Ford. I think what we have guided to currently represents what we have on releases in our best information that we have today. You know when Ford says kind of F Series, we always have to remember there's going to be a split between F-150, which is the platform we have, and then Super Duty production that they have in Kentucky. And so we don't know if there is going to be a disruption, how that disruption will unfold. And then in terms of framing what the disruption will be, I think that's why we put into the appendix material kind of what the split is, what our key platforms are, and how those key platforms break out. I think if they're you know, once Ford comes on, I think they've said on the tenth, they'll give kind of their guidance and kind of updated figures. You know, if there is something meaningful, we can always circle back with you guys. But as of now, it's kind of best-known information. I think as we said, in my commentary in the prepared remarks, we kind of anticipate making up any of that production that we lost in Q1 kind of now throughout the back half of the year. What we've tried to reflect in the guide as best we can.

Got it. No, that's helpful. And maybe if you could just talk a bit on the onshoring opportunity that you flagged. I think it was a couple of quarters ago, you said it was $175 million, so we're to $500 million. And then also in your commentary today, I'm not sure if I heard it right, that there's a significant near-term win that you're hoping to update us on. So any color on maybe how quickly some of these wins could come? Because I feel like some might start trailing out into '29 and beyond, or are these gonna still be things that hit in '27 and '28?

Yeah. So what I would say is, you know, so the 175 has grown to 500. That includes the conquest win that's in there as well. We picked up a conquest win, call that know, it's about a 100 to a 150 million. So between onshore and conquest now it's up to $500 million. And the big thing that's still left to get that I think we feel confident in is a domestic OE who is moving production from Mexico into the U.S. You know, we're in the quote process, kind of the final stages of that right now. I think we're hopeful that we'll hear something in the next couple of weeks on kind of the final decision. And that now makes up kind of the gap between know, we're at what I'd call 250 million of booked 250 to 300. That'll make up the gap between the 300 to the 500. So kind of if you wanna think of the bridge, last time we gave you an update we were at a 175. We're now kind of on the books for 300 and we've got another 200 of wood to chop. And we hope to know about that in the next I'd say, two weeks or so. Yep. And then, Colin, with regard to your question in terms of what rolls on, right, assuming that all comes in, we've indicated that about 300 million of that $500 million comes in 2027. And the other rest of it, the run rate full run rate comes in, in 2028. Yeah. Think that's a good point. I mean, we really don't see that some of it's already launching any of that really pushing out into '29. I mean, in this year with a lot of it now coming on in '28. So it is known booked revenue. We're spending capital now and launching up now to be able to roll it on in '27.

Just to quickly clarify the win that you're hoping to get from the domestic going from Mexico to the U.S. Is that in the 500 already? Or is that that would be incremental?

Yes. So that would be in the 500. That would be the bridge from kind of 300 on the books going to 500.

Okay. Got it. Alright. Thanks for taking my questions. Thank you.

Thank you. The next question is from Nathan Jones with Stifel. Your line is open.

Good morning, everyone. This is Andres on for Nathan Jones. Thanks for taking my question. Regarding Europe restructuring spend, can you please provide an update as to the progress you're making in restructuring the European business?

Yes. So what we've indicated in the past and what we've guided to looking forward, right, if you look at the elevated spend last year call it, you know, around that 130 million-ish, most of that was in Europe. This year, '26, another, call it, $120-130 million in restructuring primarily Europe. We didn't indicate that that goes down in fiscal year 2027. Beyond that, we said it's very hard for us to give you a good line of sight because a lot of any type of restriction that goes out beyond '27 is really dependent on what our customers do with their programs. Right? So we're in active discussions with them just looking to see you know, end of production for certain programs, what new programs might be rolling into plants. So really, we'd love to be able to tell you what's happening in 2028 and 2029. There's gonna be restructuring. It's just a question of the magnitude of that. And, it's really relative to what our customer production plans are.

Awesome. Thank you. And then just one more, that's helpful. Asia adjusted EBITDA declined 7 million driven by increased engineering spending for new programs. Should this be expected to continue, sustain? Just trying to get a better idea as to the timing there.

Yeah. I'd say that overall, APAC, right, if I look at business performance, that's gonna be positive. For full year '26. Clearly, there's gonna be quarters where you have increased launch and engineering costs. Again, those are gonna be offset as I go through the quarter with, you know, other ops other efficiencies that roll on. But we did indicate that net engineering and launch were going to be higher this year as we continue to grow out and spend for the growth.

Got you. Thank you. Appreciate it. Thanks for taking the questions. Thank you.

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

Great. Thank you very much. I was hoping to ask you about the commercial settlement. I think it's you mentioned it in a few slides as a factor in terms of at least timing and sometime magnitudes. Can you just help us understand if you know, the magnitude of it is beyond what's usual sort of like this year, if that's know, like, helping the Outlook or if you're just flagging it as essentially a cadence or calendarization impact.

Yeah. Emmanuel, it's a good question, and thanks for the call and I'd say it's more of timing and cadence know, as you know, our business you know, is a transactional business. There's always certain commercial negotiations that are planned for the year. So we did have what I'd say a bucket of what I'd say planned commercial actions that the team had to go out there and get. Obviously, first quarter was benefited from, I'd say, the timing pull forward or certain of those commercial actions. Nothing that I would say is extraordinary versus what we were planning within the original '26 plan.

Okay. And then if we were trying to think about you know, fiscal twenty-six as sort of like a bridge sort of like in future years. Are there any sort of extra recoveries expected this year that we shouldn't be capitalizing, or is that sort of no more course of business?

Say normal course of business.

Okay. Understood. Help me out with this because I don't wanna do anything more. I also wanted to ask you about the Asia business. Obviously, joint venture income, trending in the right direction. Can you just remind us when does Adient plc get, the cash from the, the joint venture?

Yes. So it depends on the joint venture, right? So we have them cadenced throughout the course of the year. So in the first quarter, we'll get certain dividends in. If you look at our largest joint venture over Kuiper, right, that's typically back half weighted. Terms of when the dividends come in.

Understood. Thank you.

Thank you for the questions, Emmanuel.

Thank you. The next question comes from Joe Spak with UBS. Your line is open.

Hey, good morning, everyone. Wanted to just go back to the growth opportunities know, and I know you gave a lot of good color here, but it does seem like maybe the pie is also growing, right, versus sort of what you indicated prior? And, like, I just wanna get your sense of sort of you know, whether you think most of these reshoring decisions, least, on production, maybe not sort of the sourcing for that production is done more. Or if there if you're continuing to see customers look to or to move more here so that could maybe grow over time even if it doesn't come in necessarily in a 27 time frame. And then on the EMEA portion, you mentioned, you know, accretive balance in balance out and, you know, that that's long been part of the plan, but it's been delayed. And are you implying that you now see better line of sight to that really start to kick in in '27 where margins can start to move higher?

So first, for the questions in both are really good questions. On the near shoring or maybe on shoring, I think, we see an acceleration in the discussion with our customers on onshoring opportunities. And what we've highlighted today are ones that we are actively in the quote process or awarded on. And that's what kind of totals to that 400 to $500 million including the conquest wins. That said to your point, we are seeing more activity with the particularly with the Japanese OEMs where we are very well positioned given our long-term partnerships with those customers for additional potential volume growth in the twenty-eight 'twenty-nine timeframe. Whether that be you know, some of their vehicles kind of two and three-row SUV type things. That they're looking to move back here. I do think there is that potential. A lot of it will come down to their capital allocation decisions and long-term where does USMCA set up next generation. So I think as they make their footprint decisions over the next possibly six to eight months that will then influence their loading of their vehicle assembly plants. What's key for us is given those relationships, given where our JIT facilities are, and given how well we service them, we are ideally suited to be able to capitalize on that growth. And so I do think we see a potential tailwind even beyond what we've talked to today. And there'll be more to come as they make their slotting decisions. So yes, I do think there is potential there. On your second question on EMEA, we are getting a greater line of sight on some of the roll-on roll-off. I think as we look into fiscal year twenty-seven and 'twenty-eight, we do see recovery. Mark and I have been talking…

Yeah. No. That it it it does. I I appreciate that. Maybe just as a second question, and sort of a quick follow-up to your recoveries comment. I just like, it it does seem like it helped the the results in the quarter from an earnings perspective. You just help me understand minus $37 million outflow you're showing in the cash from commercial negotiations. Like, is that just timing of when like, you're booking that versus the cash? Like, I I just any color on that be helpful.

It really is, Joe. So, again, as I indicated, yes, it did benefit the quarter helped offset some of the operational inefficiencies. But again, it was pulled ahead either from a Q3 or a Q4 or Q2 timing right into Q1. So again, over the course of the year, it's no more than what we are expecting from a commercial. And again, whenever we have commercial recoveries, there's always a timing mismatch between what we're trying to recover versus when that expense or when that cost actually had. Tariffs is a perfect example, right? We'll have a tariff impact in our financial but yet we don't get the recovery for that for several quarters after that right. So it's normal course, but I'd say timing.

So that also helps the free cash flow cadence in the back half. What because that that's when you expect to get that. Okay. Thank you.

Thank you. And as a reminder, if you would like to ask The next question comes from Andrew Percoco with Morgan Stanley. Your line is open.

Great. Thanks so much for taking the question this morning. I do just want to come back one more time to the Europe dynamics. It sounds like you're expecting some improvement in that market in 2027. But your prepared remarks, you talked about how one of the headwinds is essentially the China import volumes into that market, that doesn't seem like something that is maybe going to slow anytime soon. So I guess my question would be, you know, what are you doing to essentially either buffer yourself or manage margins if that continues? And I guess maybe a second part to that question would be, is there an opportunity to those customers? Obviously, you've seen some success with the domestic, China OEMs in China. But as they export more volumes to other markets, I'm just wondering if there's an opportunity to be a supplier of choice there, and that might help, you know, in terms of the margin improvement in that market. Thank you.

Yeah. So I think there's two ways that we think about addressing that. So the first one is understanding where the Chinese exports are coming into Europe, what segments they're attacking there, and trying to insulate ourselves from the segment. So primarily as they're coming into Europe, they're heavy on the A and B segment. And so we've been very focused on going up segment. If you look at a lot of our conquest wins in the region, you know, they've been with say, 10, call it, you know, C segment luxury segment Porsche vehicles, the higher-end segment Volvo high segment type of platforms. And so business that's rolling on we talked with didn't give the platform name. We're in the middle of a complex launch. With the German OE at the moment that's on a very high-end segment type of vehicle. So it's going up segment on vehicles that are insulated at the moment from the Chinese where the Chinese are succeeding. Within Europe. So that's one way that we're going about it. Another way that we're going about it is as the Chinese are localizing within Europe we're able to win components business there. We're also able to bid on some of the JIP products and win some of the JIP content where possible. That's another avenue that we're able to actually attack and benefit from some of that. And then the last way that we see is where possible what vehicles are the Chinese exporting into China? From you know exporting into Europe from China and can we win share there. In some cases, because the large exporters would be with SAIC, And SAIC is historically one of our competitors' territory, Yingfeng. So that's not that's not territory that Adient plc plays in. But when it's a Neil, or when it is a you know I'll point to say Geely as you know as an example. And we've just recently signed a joint venture with one of Geely's largest seating suppliers that we're able to capitalize on. And that will give us access into that export market. And that's why we were very strategic in signing that joint venture to be able to gain access into the export market for vehicles that are exported into Europe. And so it really is kind of a three-layered approach into looking at it. You know? Insulate ourselves from the segments that are being attacked, Where we can't do that, can we gain components on vehicles that are being produced in there? And then looking at what vehicles are being exported can we gain content directly on the export vehicles?

Got it. Okay. That's super helpful context. And maybe just continuing on the onshoring debate and opportunity, I guess, I'm curious, and this may be a few years out, but I'm curious to what extent you're hearing or having conversations with the China domestic OEMs in terms of their aspirations to come to the U.S. or Canada market. Obviously, recently Canada making a deal with China on reducing tariffs on EVs. I'm just wondering if that's going to become a bigger opportunity for you guys going forward and if starting to have those preliminary conversations.

Yeah. So maybe so the first thing I would say, and it's know, because you had said, you know, on the onshoring debate that mean, I just wanna be very very clear. I mean, there is no debate. Adient plc will be a net beneficiary from onshoring. I mean of all the seating suppliers we will be a net winner from onshoring. It's already being shown today we will be a net beneficiary, net winner from onshoring. I mean that's already shown and that trend will continue. Secondly to your question then, as it pertains to you know, the Chinese kind of coming to whether it be Canada or Mexico, I think Mexico is another potential depending on how USMCA plays out. And if the U.S. leverages Mexico into putting tariffs on. I mean we are working through our China because there's such strong ties in China. With some of those OEs that may explore a relationship with Canada or with So absolutely we're having those discussions you know with the BYDs of the world with the GLEs of the world on you know if they want to go to Canada or if they want to go to Mexico we could be there to service them. The question is what is their real appetite for doing so? But if they want to explore that we would absolutely be able to service them. The question is do they want to? And what are those long-term trade and industrialization ties look like? But absolutely, because of our strong strong relationships in China we are able and we do have those discussions.

Okay, great. Thank you so much.

Yes. Thank you for the questions.

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

Hi, great. Good morning. Thank you for taking the question. Wanted to first start with a question on your equity income and specifically the margin dynamics. This quarter was especially strong higher equity income despite lower revenue. And I think this is interesting in context of our understanding that some of the increased China business was supposed to roll on at lower margins. So maybe you could just talk through what occurred in the first quarter on the China equity income and how we might expect some of the margin dynamics to play out as you get some of this new China business? How margin dilutive is it? What's your confidence that the net profit will, in fact, be better?

Yes. So maybe a couple of points there. Dan, and thanks for the question. We talk about the new business rolling on in China which would result in what I'd call manageable compression in our margins over there. That's really the consolidated business, right? So think of that, whether it's business with the Chinese locals that we're funneling through our consolidated sales, consolidated EBITDA, etcetera. In China. The equity income piece, that's really derived from our joint ventures right, like with Piper, certain of the other joint ventures that we have over in EMEA. Those sales, as I mentioned in my prepared comments, were actually higher this quarter. And so again, it drove my performance and my better operating performance at those joint ventures. Right? Piper being one of those joint ventures. So I think it's important to differentiate between each of those buckets, the consolidated piece as well as the unconsolidated piece.

Great. Understood. Thank you. And then second, wondering if you could just comment on one of your competitors who reported this morning pointed to a large conquest win for, complete seats on a US automaker's truck program. I know you gave some positive updates here on shoring, but maybe you could just talk about maybe some of the dynamics within sourcing or large trucks, which we know are a key program for you and also for you know, this competitor as well on some of the other platforms out there? Just if you could comment, on that development from them.

Yeah. I mean, I think what you're getting at do we lose any large truck programs? And so there's we haven't lost any large truck programs. I think their win isn't reflective of any Adient plc losses. So I would anticipate that it is something that one of our competitors has lost. Which you guys know the market pretty well so you can where that loss would have come from. But I think stepping back more strategically and saying what does this mean for the market? First of all congratulations to Ray and Frank and Jason up there in Southfield. And I mean that. I think more strategically though what it means for the market is, and this is what I think both they've been saying and we've been saying is, this is a market that needs consolidation. You know, the competitor who had that business we have been actively conquesting their business. Know, we've conquested a large portion of their other business that sits in other portions of The U.S. So we've taken quite a few of their dots off the map. We've taken dots off of their map elsewhere. And I just think it's representative of a larger symptom of what needs to happen in seating which is consolidation. And so I think you know, for them I think it's I'll assume it's a good thing. And I think for seating, the more of this that can be forced through consolidation is generally what needs to occur in the space. But for Adient plc it's a it's no impact. It isn't anything that we had. It's none of our business. In terms of anything that we were an incumbent on.

Great. Thank you. That's helpful insight.

And there are no further questions. Perfect. Thanks, Denise.

And so, in closing, I want to thank everyone once again for your interest in Adient plc. If you do have any follow-up questions, please feel free to reach out to me. Also, would like to acknowledge that we will be in New York City next week. Participating at the Wolf Conference and hope to see many of you then. With that, operator, we can close out the call.

Thank you. This does conclude today's call. We thank you for your participation. At this time, you may disconnect your lines.