Good morning. My name is Dahana, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Mr. Joel Elsesser, Vice President, Investor Relations. You may begin sir.

Thanks, Dahana. Good morning, and thank you for joining us for our first quarter 2018 earnings call. Our press release was filed this morning with the Securities and Exchange Commission and the presentation for our call is posted on our website, lear.com, through the Investor Relations link. Today's presenters are Ray Scott, President and CEO; and Jeff Vanneste, Chief Financial Officer. Also participating on the call are several other members of Lear's leadership team. Before we begin, I'd like to remind you that during the call we will be making forward-looking statements that are subject to risks and uncertainties. Some of the factors that could impact our future results are described in the Safe Harbor statement at the beginning of the presentation and also in our SEC filings. We will also be referring to certain non-GAAP financial measures. Additional information regarding these measures can be found in the slides labeled non-GAAP Financial Information at the end of the presentation. Slide 3 shows the agenda for today's review. Following the formal presentation, we'll be pleased to take your questions. Now please turn to slide 5, and I'll turn it over to Ray.

Thanks, Joel. We're off to a great start this year. We again delivered record quarterly results for sales and earnings and we are increasing our full year guidance. We increased our share repurchase authorization and cash dividend, demonstrating our confidence in Lear's long-term outlook and our ability to profitably grow our sales and continue to generate strong free cash flow. Jeff will cover our first quarter results and our revised full year outlook in a few minutes. But first I'd like to comment on our unique product capabilities and our accelerating sales growth. Both our product segments are well aligned for current industry and market trends, allowing us to grow faster than industry production. We are experiencing a significant increase in quoting activity on E-Systems product in electrification and connectivity. We continue to invest in future growth and our guidance includes increased investments to support that growth and ensure the successful execution of the significant launches that we have in both product segments over the next few years. This year we will be launching the industry's most sophisticated connected gateway module. In 2020, we will launch the industry's first reconfigurable electrified seat tracks that leverage our combined Seating and E-Systems capabilities. Slide 6 shows our record sales backlog for the three year period from 2018 to 2020. This backlog will continue to drive sales growth above market for our Seating business and represents an acceleration in the rate of growth for our E-Systems business. In Seating 90% of our backlog is on higher content crossover and SUVs. In E-Systems, our backlog includes $400 million of new business in electrification and connectivity. Our backlog in China is approximately $1.6 billion including non-consolidated sales and approximately 40% of the China backlog is with the domestic OEMs. Slide 7 highlights the acceleration of…

Thanks, Ray. Slide 14 shows the financial highlights for the first quarter. We had a great quarter with record sales, core operating earnings, and adjusted earnings per share. Sales grew 15% in the quarter driven by our strong sales backlog, the benefit of foreign exchange, and the acquisition of Grupo Antolin's seating business, partially offset by lower production volumes on key Lear platforms. Core operating earnings increased 14% to a record $491 million, primarily driven by the increase in sales. Adjusted earnings per share was up 19% driven by the record earnings on lower tax rate and a reduced share count. Slide 15 shows the first quarter results for our two product segments. Both our E-Systems and Seating segments delivered double-digit sales growth with E-Systems sales growing 24%. Excluding the impact of foreign exchange, Seating sales grew 6% and E-Systems sales grew 15%, both well in excess of global industry production, which was down 1%. Both segments also had strong earnings growth in the quarter with earnings up 9% in Seating and 17% in E-Systems. As we indicated in January, margins were down slightly in both Seating and E-Systems compared to last year. The decline in both segments is consistent with our guidance, and driven by the significant program changeovers, increased investments to support our backlog, accelerated new business coating activity and higher commodity costs primarily related to steel and copper. Despite lower margins in both segments, our total company margin was flat compared to last year, driven primarily by the accelerated growth in our higher margin E-Systems segment, and leverage of our corporate overhead costs. Slide 16 shows the key assumptions behind our 2018 guidance. Our vehicle production outlook is based on the April 2018 IHS forecasts. Since our prior outlook, most foreign currencies have strengthened against the U.S. dollar led by the euro, and the Chinese RMB. Slide 17 provides a summary of our revised financial outlook. As a result of our strong first quarter performance and outlook for the remainder of the year, we are increasing our full year 2018 financial outlook for sales and earnings. We now expect sales to be in the range of $21.8 billion to $22 billion, an increase of $400 million from our prior outlook. The increase is driven primarily by the benefit of foreign exchange as well as higher production forecasted on key Lear platforms, including the GM large trucks and SUVs. Core operating earnings are expected to be in a range of $1.79 billion to $1.81 billion, up approximately $40 million from our prior outlook. We have increased our capital spending guidance by $30 million to $660 million to reflect additional sales growth to support significant launch activity and to reflect the impact of foreign exchange. Free cash flow is still forecasted at more than $1.2 billion for the year. Now, I'll turn it back over to Ray for some final comments.

Thanks, Jeff. In summary, Lear had another great quarter, again, reporting record financial results. We continued to experience significant sales growth in both segments driven by a record backlog, including awards with innovation and innovative products like our adaptive seating system and aligned with the trends of connectivity and electrification. With any kind of quoting activity related to these trends accelerating quickly, we are extremely confident that this growth will continue. Importantly, our focus is and will remain on profitable sales growth. With our industry-leading product capabilities, our cost structure, consistent focus on operational excellence and our financial discipline, we are committed to driving continued strong earnings and also superior shareholder returns. Now, we'd be happy to take your questions.

Your first question comes from the line of David Leiker of Baird.

Hi, David.

Mr. Leiker, your line is open. David Leiker - Robert W. Baird & Co., Inc.: Hello?

Hello? David Leiker - Robert W. Baird & Co., Inc.: Sorry about that, I was caught myself by mute. Ray, we and the lot of people in the industry are talking about multi-domain controllers and connected gateway. Can you help a little bit in understanding exactly what it is Lear's doing relative to other people? And what's your competitive position is within that product category versus others?

Yes. Sure. Actually Jeneanne Hanley is here, who's running our E-Systems business. I'm going to have her elaborate a little bit more on where we're at in respect to our competitive position and what we're doing differently.

Yeah, I'd love to, and you know what we tried to show and maybe, I'll take a second here to elaborate is, we're in a very strong position. So in today's connected architecture or architecture, right now we're number two in gateway module. So this is a product we have a lot of experience with. We're number two in the marketplace today, 18 years of experience with a broad range of customers. So when you take that foundation and then you look at the acquisitions that we've made over the last several years to improve connectivity, so the Arada, Autonet, EXO that I know that you're aware of as well as our organic investments in cybersecurity, that's where we're perfectly positioned to take advantage of that trend. So today, we highlighted just one of the products. You can see how advanced it is, so instead of just doing a moderate amount of over-the-air updates, we're now able to facilitate our customers updating all of the issues on the vehicle. You can see how there are short-term needs for that today and then long-term, it ultimately will enable the autonomous roads of tomorrow. David Leiker - Robert W. Baird & Co., Inc.: So, what you're doing at Audi this would sit on the zFAS controller, is that the way we should think about it or is that separate from that?

So we do have a longstanding partnership with Audi. And so what we have is a connected gateway module, so it's an enhanced capability of what we already do. But there's also a secondary communication module that goes with that. David Leiker - Robert W. Baird & Co., Inc.: And then just the last one. Of your E-Systems business, how much of it is in the connected architecture business space today?

So, Joel, (00:18:04)...

Yeah. It's pretty small. So combined between electrification and connectivity we're around $200 million today.

About $200 million. David Leiker - Robert W. Baird & Co., Inc.: Okay. Great. Thanks much.

Thank you.

Your next question comes from the line of Itay Michaeli of Citi.

Great.

Itay?

Good morning and congrats.

Yeah. Good morning.

Good morning. Just to start off with maybe two financial questions. First, Jeff, do you have just the organic growth for the company in Q1 and then what the latest thinking for 2018 is? And then just how to think about margins the rest of the year? I imagine with the FX move that might be having a bit of a dilutive margin on the business, just want to get your updated thoughts on that?

So if you exclude FX, I think we said it in the presentation the growth in Seating was 6% year-over-year, and in E-Systems it was 15% so total company was up 8% year-over-year excluding the impact of FX with an industry that was down 1%. With respect to, I think your second question was on full year margins, Itay?

Yes. And the cadence as well throughout the year?

I think the cadence is going to be pretty consistent. Obviously, we'll see in the third quarter as we typically do some cyclicality given the downtime that the OEMs typically experience during that timeframe. But I think overall you'll see a pretty even cadence throughout the year of margins in both of our segments. As you look at overall, what we highlighted in January when we gave the initial guidance and I think not a lot has changed as it relates to what we see margins for the full year. We highlighted a couple of things. One in E-Systems we said that there was going to be investment in growth associated with the significant backlog. That would incorporate some margin impact related to the launch costs and the R&D-type investment to support the electrification and connectivity. Secondly, we mentioned that we had a couple of previously non-consolidated joint ventures in China that we took control over. And albeit it's great business, its wire business. Its north of 10% business and as a result it has a return well in excess of our cost of capital. It has a dilutive effect on the overall E-Systems margins that in total are low 14%. And then we highlighted some copper headwinds in E-Systems as well. So all-in-all, we had suggested and would continue to suggest that we'll see margins full year for E-Systems in the low-14s. And in Seating, again, back in January, we suggested that we had a heavy launch curve. We had about a third of our North American and European JIT business that was going to changeover. And we had some headwinds associated with that, coupled with some headwinds that were associated with commodities, primarily steel. And as a result, we would see margins in rather Seating of low 8s. I think it's important to note that notwithstanding the margins going down year-over-year for the reasons I explained, the pure increase in earnings is pretty significant both in Seating in the quarter that was up 9% and in E-Systems our earnings were up 17%. And as you look at the overall margins in the quarter, our overall margins as a company were flat year-over-year which is – we're getting the benefit of the outgrowth in E-Systems versus Seating at a higher margin profile. And leveraging our HQ costs that were flat in the quarter, we wouldn't necessarily see those flat for a full year, but the costs would definitely not and HQ would not outpace the growth in our overall top line. So, we should see from a full year perspective some benefit in the overall company margins associated with those two facts.

That's very helpful. Thanks for the detail. And a quick follow-up perhaps for Ray on slide 7 with the increase in quoting activity, how much do you think that increase is just kind of secular growth as opposed to perhaps indication that Lear might be gaining market share just given that typically not every supplier is invited for the quoting? So, what's really the split between those two might be?

Between the secular and the market share gain. Yeah. I don't really know, Itay. I'd just tell you that this is an unprecedented amount of quotes that we've seen in the timeframe that we've been seeing it. I mean just thinking back to January when we were talking $700 million in respect to where we're at today. And we have talked before to get on the bid list is significant. I mean you have to have incredible capabilities in respect to just getting on the bid list, and they audit your plants, they audit your processes, you do technical presentations. And this process in some respects can take anywhere from three to six months as we go through a quoting process. But I think the key here to is the unprecedented amount of quoting activity we're seeing in connectivity and electrification.

That's very helpful. Thanks so much.

Your next question comes from the line of Chris McNally of Evercore ISI.

Thank you so much, gentlemen. Really just a follow on question on E-Systems and the quoting, maybe a little bit on the end markets that we're seeing you've had success around 48-volt. Could you could you talk a little bit about maybe the breakdown of sort of 48-volt versus maybe higher forms of electrification driving that the quoting activity?

Yeah, it's kind of shifted. We're seeing more of a 50/50 split now between electrification and connectivity. I think when we were talking earlier, it was more of a two-third/one-third electrification/connectivity, and we're definitely seeing the pickup in the connectivity side of the quoting activity. As far as the breakdown, Jeneanne, do you have any numbers with respect to this?

Yeah, I mean just looking out a little bit further in the future and then we'll pull it back in. When you think of 10 years out and the entire marketplace having an opportunity of $44 billion, we believe that $9 billion of that will be in (00:25:13). So even though the CPV is on the lower end of the range that we've provided, when you think that will be where predominantly even in Asia and in Europe a bigger portion of their electrification strategy, up to 30%, we're definitely seeing a lot of activity in that. But also in the full, there's a full range of vehicles. The customers are really are really spreading their options out and I would say it's the full range of electrification at this point.

That's great. And I know you've given these numbers before, but could you just remind us the historical rough range of conversion factors from quoting to backlog? I think people just are trying to get a sense, obviously electrical demand is going up, but if we were to see – I don't know a couple of years $1 billion each of quoting what would that typically convert to in terms of a backlog on an annual basis?

Like what our win rate is in respect to this (00:26:13).

Yeah, exactly.

So historically it's been between 20% to 25%.

Okay, perfect. And that would be essentially the 2025 is an add-on to your sort of the longer range backlog, right. This is sort of – I would say top-up?

Yeah. I think what you've seen historically in the third year, there's still quotes that we're going through. Usually in a lot of cases we've doubled that third year, so we have had quotes that we're working on today that will be reflected in our third year backlog.

Perfect. Okay. Thank you so much.

Your next question comes from the line of Colin Langan of UBS.

Great. Thanks for taking my question.

Yeah.

Last night Ford announced that they're getting rid of some of their cars. Can you remind us what exposure you have and if that's reflected in your backlog right now?

Yeah. Obviously, there were some discussions with Ford. There's one program in the passenger side that would be reflected in our backlog. However to kind of the way we look at, we have a really good relationship with the Ford Motor Company. If they're going to transition any type of product, our relationship with them if it's in Hermosillo, the infrastructure we've put in place, we'd work closely with them on the transition to any type of vehicle they're talking about and make sure that we're the most cost-competitive, the best quality, and deliver the best product to win and secure a new business that might be a replacement for that plant. So, it's minimal. It's the Fusion in Hermosillo.

Got it. And can you remind us your steel, I mean you said it was a headwind. Is there any quantification of how large it is and what are you two-thirds hedged on steel – the hedging?

Yeah. With respect to steel we buy about 3 billion pounds of steel a year. And of that buy, we're exposed at roughly 10% of that buy. The other 90% is either we participate in a steel buy program with the OEMs which they handle the risk or the steel comes in a fabricated way. So, we've highlighted some exposure in our 2018 guidance, 10 to 20 basis points on steel. We have bought ahead for our entire steel buy for 2018. So, any changes in the current steel prices with respect to the impact in 2018 will be fairly negligible.

Got it. And can you just remind us, I'm not sure if I missed this earlier, I think that there is $600 million of electrified and connected business between the backlog of what you have today. What is the split of that number of EVs, 48-volt and connected?

Yeah. It's two-third/one-third. Right now, its electrification in the two-thirds.

So two-thirds electrification. And is that 48-volt for EV? I know there's like, and you're talking about like invertor-type business as well?

It's a combination, but primarily 40-volt.

Okay. All right. Thank you very much.

Yeah.

Your next question comes from the line of Emmanuel Rosner of Guggenheim.

Good morning everybody.

Hey, good morning. How are you doing?

Good, good. Thanks. So one follow-up question on this large backlog in electrification and connectivity. What kind of margin does it sort of come into your revenue? Is there some initial below average because of the investments or sort of like the lack of initial scale or is it very profitable pretty quickly?

You know I'll put it this way. We have our financial disciplines and when we go after business and we win business, it hits the metrics that we have internally financially. So we don't take business that is below the threshold that we have set up as far as acceptable. So, it's good business, it's profitable business. I mean you've seen where our margins are at in E-Systems and it's in line with that.

Understood. Okay. And then I guess sort of like just switching gears to the Seating side. So your main competitor there has been having troubles on the structures and mechanism business. Can you just remind us...?

Thank you for bringing that up.

Can you please remind us from your point of view, I guess, how important is this of a capability to have as a seating supplier? What is the sort of like revenue you derive from these? And is it sort of like a structurally challenging business or are there any specific issues here?

Yeah. Thanks for that question. One, we've always focused on structures and we do believe we need some capability. We don't think you need to have an enormous amount of capability with structures. It does give you some advantages in certain circumstances but we can still do extremely well as you can see from our results without having a big chunk of our business in structures. And our business is profitable. And we still have more work to do, but nonetheless it's profitable. So we don't have a desire to go out and grow that business just for the sake of growing it. In respect to your second question how difficult it is that is a very, very difficult business. And it starts with the right people in respect to their experience. And we're talking about tools and dies and (00:32:22), et cetera that you have to invest in this business three, four, five years prior to any type of particular launch. And so I'd say – you know these guys hear me say it all the time in trim or JIT or wiring, we can put people in place to fix a particular issue. In structures you can't. You have to, in some cases start from the ground up revalidating new tools and dies, capital equipment, (00:32:50), fail-safes everything. And so it is a very challenging business and when you do have issues it is very difficult to get out of. And then I'll answer any questions in respect to, if we're going to take any of that business on if – it hasn't been asked, but we're not going to take any of that business on.

Okay. That's super helpful. And then just very quickly a clarification. You were talking about some of the E-Systems and the margin dynamic and one of them was consolidation of some of the JVs in China. The sort of like below average margins there, is that a function of the geography or is it just the mix of products that you manufacture there that are lower margin?

Well I think A, it's wire and as a result there is the lower investment costs associated with wire. So typically we would gain a return on our investment at a margin profile north of 6%. But I think the bigger issue here with these JVs is that we've taken over operational control of these JVs and as a result we'd be able to apply the Lear operational disciplines that we have not been able to do prior. So I think given the fact we can get in there and do what we need to do. We should anticipate seeing the margin profile get back up to where the other type of wire business, both in that region and in other regions, would be.

Great. Thanks for the color.

Thanks.

Your next question comes from the line of Brian Johnson of Barclays.

Hi.

Hi, Brian.

Hi, good morning. This is Dan Levy on for Brian. Thank you for taking the question.

Oh. Hey, Dan.

Thank you. I just wanted to ask about the E-Systems growth. Certainly this organic growth is really robust but I guess just more of a historical question, when I compare this to what you were putting up in the segment several years ago which had organic growth of sort of low-to-mid single digits, which is certainly fine but it's below what your comps are. I guess, I'm wondering what is really inflecting today that wasn't occurring several years ago, because one would argue that a lot of the trends that are in place that are benefiting E-Systems today those are things that should have occurred several years ago. So is there a catch up of some sort? Is there any one particular product? Is there any one particular customer? Why is it so much better today than it was several years ago when some of your competitors were getting that growth several years ago?

Well, I think this has taken some time too. If you go back I remember when I first was in E-Systems and it was $1.6 billion and it lost money and there was talk of what we should do with that business for a completely different reason. Well, what we did was we invested in our people and we brought in some of the best most talented people and that did take some time. But you know putting that talent in place, building those capabilities not just from a people standpoint, but from an infrastructure standpoint, we invested in the business with the right capital allocation how we looked at our plants, how we set up the inorganic investments that we made and organic investments we brought in. So we built one heck of a division that now is, you're seeing the results. I mean we are in a great position to grow and return great returns to our shareholders. And I think on top of it, not just what was more traditional, the secular growth story. I mean this is really compelling. It's unprecedented like I said with what we're seeing with these trends with connectivity and electrification. The investment what we made is playing out perfectly with these trends that are moving the industry forward.

Okay. Thank you. And just one more follow-up on the segment. You know the other thing that you could compare and contrast today versus several years ago was that, you had much more significant margin expansion albeit coming off of low comps. Your margins are fraying a little bit here some of that's investment I get that. But what's the ROIC that you're seeing on the business that you're winning today versus what you're bidding on several years ago? Is it comparable because I believe for a while you said it was sort of abnormally high and that it could come down? There's still room to be profitable but maybe you could take more growth, but at slightly lower margin. So how is that dynamic today versus what it was several years ago?

I think overall, the dynamics are that the ROIC that we're getting on the business is higher than what we've seen in recent years. But, I think it's important to understand that given the current configuration of the products that we have in the E-Systems, two-thirds of it being wiring which is relatively low investment, we get a return on our cost of capital in that segment with a margin profile at around 6%. So, the fact that the margin profile is in the 14% suggests that we're getting a significant return on that. So, there's a natural baffle associated with what the OEMs are going to allow you to make. But I think in general, if you look at the ROIC returns that we've had over the last several years, they continue to grow.

Okay. Great. Thank you very much.

Your next question comes from the line of David Tamberrino of Goldman Sachs. David Tamberrino - Goldman Sachs & Co. LLC: Great. Good morning.

Hey, David. David Tamberrino - Goldman Sachs & Co. LLC: How're you doing?

Good morning. Great. How're you doing? David Tamberrino - Goldman Sachs & Co. LLC: I'm doing okay. Hey, I wanted to ask you, could you elaborate a little bit on your willingness to increase your metal's segment. I think there was announcement earlier in the quarter that you're increasing some capacity in one of your European facilities, and again that's really one of the conversation alluded to earlier one of your competitors having a little bit of challenges there, and I was just wondering how much Lear would be willing to kind of pick up some of that slack if they were asked to by their OEM partners?

Yeah. To answer the first question, we did make an announcement that was more specific to a customer increase volume request. And so, that was very specific and obviously we were extended some fair returns in respect to our investment. The second question I'd be very clear, we have a lot of great things going on right now. We have our own launches. You can see we're launching some of the most exciting products that are going be launched this year and next year and the following year. So, we're focused on what we needed to deliver to our customers and what could deliver us growth for the future. We have zero interest in picking up any structures business that is in a situation of crisis. That can become a distraction and it could become a serious problem. We have way too many opportunities that are a lot brighter in our future than picking up structures business from a competitor that's having problems. David Tamberrino - Goldman Sachs & Co. LLC: Okay. Understood. And then...

Now the only thing I will add – the only thing I'll add there is that in the event I've said this, if a customer does come to us and they want us to pick up the business, if they're willing to give us their JIT plant with it, maybe we'll talk about it. David Tamberrino - Goldman Sachs & Co. LLC: Understood. And that's fair from an overall corporate return and what your ROIC is relative to your cost of capital for those businesses. Maybe shifting gears, one of the underlying I think trends that you're pointing to and kind of continuing to harp on is just the shift from passenger car to light truck and where you're seeing a significant amount of that new businesses coming on. Can you just refresh us on what the profitability difference is for Lear moving from a passenger car to a light truck platform?

I think it's really a function of the content difference. And for example in a SUV, you typically have three rows. They tend to be more outfitted with leather and other type of content features. And I think what we generally see in terms of those type of vehicles, it could be gross margins or contribution margins in the 15% to 15-ish percent. And when you get into the passenger cars with two rows which maybe doesn't have as much content in it, it could be 12-ish – 10% to 12%. David Tamberrino - Goldman Sachs & Co. LLC: Okay. And just lastly, I know, we talked about it a little bit earlier today. On the E-Systems quoting, a lot of business out there, who you're seeing as your main competitors? Is it the traditional, let's call it E-Systems suppliers that we would think of from a Tier 1 automotive perspective? Are you seeing anyone else, any Tier 2s or technology companies trying to come in there in those businesses?

Yeah. For the most part it is the traditionals but there are new entrants, there are new players. I mean, there's some other, as you're aware of, technology companies that are looking at to get into this space. But for the most part it's the traditionals that we compete against and have competed against for years. David Tamberrino - Goldman Sachs & Co. LLC: Okay. Thanks for the time.

Yeah.

Your next question comes from the line of Joe Spak of RBC Capital Markets.

Thanks. Good morning. Just if we look at – and I know it's a big CPV increase in Europe. Is that primarily driven by some of the higher E-Systems as some of the more content gets on? And then I guess related to some of the E-Systems commentary and disclosure you put in earlier on the bidding, how does that breakdown geographically, especially compared to the existing E-Systems geographic breakdown?

I'll take the first one with respect to the CPV in Europe. We did see a pretty significant increase in the CPV in the first quarter. There's really three main elements to that. The biggest of which is FX, the Euro appreciated significantly between first quarter last year and this year. We did have a significant backlog in that region as well. And we had an acquisition that we – the Grupo Antolin acquisition came on in, I believe in May of last year. So year-over-year the Antolin sales would be completely incremental year-over-year. So those were the three main factors that drove CPV in Europe.

Okay. I didn't realize you – I thought that like the CPV were at constant currency, okay. And then just on the E-Systems bidding opportunity versus sort of the current mix business geographically?

So right now we're seeing – I think it's a bit comparable, maybe more heavily weighted to North American and Europe, but we have obviously been in close contact with the customers, and we believe that there are more firm opportunities to come specifically in Asia. I think that that's something is going to be a little bit dynamic. But right now the bigger – it is somewhat correlated to the current business that we have today.

So, about a third, a third, a third.

Okay. And then just getting back to the structures business, so I mean if your competitor does sort of toe a harder line with their customers on the pricing required for that, wouldn't – I might not be thinking about it correctly – that that would be positive for you as well?

Yeah, that would be positive. All the relationships of all the components that shipped through us are direct components. So that's something that they would have to work out with our customer directly. And unfortunately, I kind of know a little bit about that and that doesn't go well. And when you go and ask for price increases or want changes or you want to relieve yourself of your contractual obligations that either puts you on an immediate new business hold, it locks down any future growth opportunities, and the next step is they start remove – to desource you on programs that usually you're the most profitable.

Okay. Thanks for the color.

Your next question comes from the line of John Murphy of Bank of America.

Good morning. This is Aileen Smith on for John. Can you talk about the...

Good morning.

Good morning. Can you talk about the realization of the backlog in the quarter relative to your initial estimates, especially with production schedules that moderated through the quarter in some of the major regions?

I think they came in right where they thought we would be. So, I think we had a pretty good balance, and if you look at the backlog for the full year, it's going to be a fairly ratable cadence of the backlog in each quarter.

Okay. Great. That's very helpful. And to ask a related question to Joe's on the pricing dynamics, as a result of some of the pressures one of your competitors is facing. Some of your other peers are forecasting some pretty substantial growth in their respective seating business over the next few years. With these dynamics and again in a more muted volume growth environment, would you think that pricing competition among the major players for quoting new business would increase or change in any material way?

No, I don't think anything's going to change. I don't think it has changed. We hear that there has always been irrational players in our space. And the only thing I'll add to that our customers are very sophisticated too. They know when you're taking it below just to try to win business in, those programs haven't worked out well for the customer or the supplier. In some cases, we've even had to go in and build seats for some of our competitors like last year where we built seats for one of our competitors because a lot of different reasons, but I think – in my opinion was it was because it was below market and they didn't put the right capital investment in place. And so it hasn't changed. We haven't seen a change and I don't see a significant change moving forward either.

Great. Understood. And one final question for Jeff. If I'm looking at your full-year outlook for operating earnings versus what you reported in Q1, it implies what could be some seasonally lighter earnings in the back half of the year. Is this more a function of conservatism on production schedules or from where you sit now is there anything notable on product launches or roll-offs that might be hitting a bit harder in the back half of the year?

No. It's pretty much what we thought. Quarter in, I think the industry volume environment has been a little bit better than what we had anticipated. The FX environment has helped us out as well, but other than that I think it's exactly what we thought it would be. And I think that if the industry conditions hold with respect to commodities, volume mix, those type of things, I think we would post at the high end of our guidance.

Great. That's very helpful. That's it from my end.

Thanks.

Your next question comes from the line of Armintas of Morgan Stanley. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Good morning. Thank you for taking the question.

Good morning. Armintas Sinkevicius - Morgan Stanley & Co. LLC: When we think about the (00:48:34) opportunity at the vehicle and I think (00:48:36) talks about 40 terabytes an hour of raw data that is generated by an autonomous vehicle. Given the investments you're making in connectivity, can you talk about the data opportunity you roll in in that developing ecosystem? And then, just curious about your capabilities, how much of it is a mix of software versus hardware, if you could talk about that, that'd be great?

Yeah. I'll take that, I mean maybe I'll start with a back one. Obviously we've said before well over 3,000 engineers and growing both on the hardware and software side. So we're fully staffed internally, so we do that in-house. You talked about the quantity of data that's being transferred and the speed, and again we highlighted one key product and that's why the 4.5G capability and we all know in later years, the 5G capability is going to be critical to enabling that. So one of the things that we do that's may be a little bit different than our competition is we're partners with their customers, we don't compete with them. So we're going to help them manage that data, bring the data in with more accuracy, quickly, lower latency. It isn't in our plan right now to try to own that data or monetize that data but we do have full capability in delivering it with speed and with accuracy. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Okay. And the gateway product just trying to understand sort of the very basics, so pardon my sort of ignorance here but, is that transferring data to the vehicle, from the vehicle, within the vehicle? How do I think about just the very basics of what your gateway product does?

Yeah. So starting at the foundation of, it was just what you would think it would be, it was more internal to the vehicle but a central hub, so it still required a high amount of processing ability to consolidate the communication. Kind of the first level of connectivity became some of the infotainment updates or some of the connectivity module updates that you would traditionally find with your cellular or Bluetooth service, et cetera in the car. Again what we're able to do now, so it's a super or a connected enhanced gateway, in addition to the communication module is, your over-the-air updates now can address all the ECUs in the vehicle. So now you think about the ability to update quickly for warranty or software bugs, et cetera, it really takes on a much expanded role in the vehicle. Armintas Sinkevicius - Morgan Stanley & Co. LLC: Okay. And if you're now trying to own or monetize the data just trying to think of the revenue scheme for your end, is it just you know effectively a one-time payment for a vehicle or is there any sort of recurring revenue model that you're working through?

You know that we've thought through this. Our value proposition for our customer is right in line with what we're doing with connectivity at the gateway module. As far as getting in – I know there's some mega tiers getting into that space and in some respects competing directly with our OEM customers, that's something we're interested in. We have a really good value proposition delivering the gateway and the seat boxes in the space that the customer really sees us as delivering value in. But as far as getting into those adjacencies, that's not something we're interested in. I think that gets in complete conflict with our customers. And like I said the opportunities in front of us are enormous and we just have to make sure we capitalize on them. Armintas Sinkevicius - Morgan Stanley & Co. LLC: All right. Thank you for taking the question.

Your next question comes from the line of Anthony Deem of Longbow Research.

Hi, good morning. Thanks for fitting me in.

Yeah, good morning.

So I have a few questions here. First, can you give us any early indications of Seating quoting activity year-to-date or awarded business? Do you see last year's momentum continuing into 2018 or potentially are competitors faring better?

No, I think we're still – from a success – let's just say from a win rate, we're still at the same level. There is more of a cyclical nature of the Seat business as we're going through quotes because we are going through the heavy quotes right now as far as our launches but where we see opportunities in Seating is in China. I look at China and right now where we're spending a lot of our time and effort on is we have one of our competitors has 50% of the market share. We believe that's their Achilles' heel. We think the domestics and we've had numerous meetings with the domestics now they're taking a much more traditional look at their business and they want a more balanced share of wallet, meaning they want multiple seat suppliers in their portfolio. They don't want exclusively one partner because they want technology. They want the efficiencies, they want the cost advantages and they want the quality. So you know what we're seeing is where the growth is going to be come in seating is with the domestics in China and we think that's a big opportunity for our growth.

Very helpful. In your quoting activity of $1 billion in the emerging categories, just two questions, is the split between the consolidated and non-consolidated even with your existing backlog call it maybe 75/25? And then secondly, you mentioned connectivity used to be a third now it's half, so obviously that trend's really taken off. Is it primarily in OTA, V2X or security or maybe even a blend of all these categories?

Yes. To answer the first question, we're actually growing at an accelerated rate to what we have today. So we have about a 70/30 position with the domestics and the foreign OEs. And I think you saw with our growth rate, it was 40% with domestics. So we're actually increasing our domestic content in China. With respect to the second question...

Yeah. Just on the connectivity, it is dynamic and you know I expect when the time is right or there is another update with the backlog maybe next year, we'll continue to communicate with you, but we have to be prepared for it to be dynamic. Connectivity in particular, you know, we're seeing the full range from just the base level of embedded communication, the high end which we talked about today which was more of the over-the-air. But, there is activity in the V2X area. Obviously these are different horizons, but we are seeing activity with the V2X as well.

Thank you. And then, just last question. Thanks for taking mine. Given the Ford North America announcement, and then the larger trend really and the consumer preferences towards larger vehicles, in your estimation when do you expect the industry sales mix benefit and the shift out of passenger cars to really plateau? Do you see that as an early next decade issue and does your backlog or conversations with customers give you any indication? And thank you.

Wow. That's an heck of a question there. Yeah. I think, I mean we have seen a significant shift. There is no question about it. And where it ends up I really don't know. The programs that we're working on fortunately for us are a lot of the popular brands that we're seeing that are going to launch over the next several years, but as far as giving you a final percentage, I don't have that number.

Okay. Fair enough. Thank you very much.

Yeah, thanks.

Your final question comes from the line of Jeff Osborne of Cowen and Company.

Good morning, guys. Thanks for squeezing me in. One quick one, I might have missed this, but is there a differential in margins in E-Systems as a mix of quoting three years out moves more to connectivity versus legacy wiring and other electrical aspects? I'm just trying to get a sense of 2020 and beyond, should we still be thinking in the 14s or as there's more cybersecurity and hardware, software platforms with compute?

I think the way we look at it is, everything's got to earn a rate of return on the investment and when you look at connectivity-type programs, it's a higher level of investment type business. So as a result, it should theoretically have a return or a margin profile that's slightly higher. But it's not going to significantly change kind of where we think in the near term E-Systems is going to be. I think we still see, given that, we're going to be in that low-to-mid 14% range.

Got it. And then maybe just one quick follow-up, you mentioned the win rate of 20% to 25%, is that pretty consistent within electrification and connectivity or you're higher or lower in one or the other?

It's actually a little bit higher than I think what we've seen traditionally than where we're at today. Yeah. So, it's a little bit higher.

Got it. Thank you.

Yes. Thank you.

Okay. I think that's it. I think no one probably left on the call, is the Lear team, I just want to say a couple things. One, we do have the best team in the industry. There's no question about it and it's by the results that we keep continuing to produce quarter-after-quarter and I just want to thank you for your outstanding work. It really pays off with everything we're doing. We have a really tough year this year with our launches, but I know we're up for it and like I said thank you for everything that you're doing.

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