Good morning I'm Kris Doyle, Director of Investor Relations for Visteon. Welcome to our Earnings Call for the Third Quarter of 2019. Please note this call is being recorded and all lines have been placed on listen-only mode to prevent background noise. Before we begin this morning's call, I'd like to remind you, this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the page entitled Forward-Looking Information for additional details. Presentation materials for today's call were posted on the Investors section of Visteon's website this morning. Please visit investors.visteon.com to download the material if you have not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer; and Christian Garcia, Executive Vice President and Chief Financial Officer. We have scheduled the call for one hour and we'll open the lines for your questions after Sachin's and Christian's remarks. Please limit your questions to one question and one follow-up. Again, thank you for joining us. Now I'll turn the call over to Sachin.

Thank you, Kris, and good morning, everyone. On Page 2, I will start with an overview of our third quarter results. On the subsequent pages, I will discuss our performance in the quarter in more detail. Christian will then discuss the financial results before we open the line for questions. Our third quarter sales came in at $731 million, up 7% year-over-year and 10 percentage points over market. Despite the generally weak market environment, this is the highest growth the company has delivered in at least the past four years. This growth was largely due to the strong performance of our digital cluster products, driven by the trend of digitalization of the cockpit. Adjusted EBITDA was $62 million or 8.5% of sales, an improvement over the second quarter. Adjusted free cash flow was $23 million for the quarter. Our sales performance was also strong from a regional perspective with the Americas growing 12% and Asia up 10% year-over-year. Europe was down 1% but better than the decline in vehicle production at our top customers in the region. Operationally, the third quarter was strong with 12 new products launched, as well as the ramp up of production of the display module represented us with challenges in the first quarter. We also opened a new technical center in Mexico to support the company's growing business in the Americas region. Our new business wins for the first three quarters reached $4.6 billion with two-thirds of this business based on our new next generation digital platforms. We added a new automaker to our customer base during the quarter, expanding our customer portfolio by two year-to-date. We have made slight adjustments to our full year 2019 guidance, which Christian will cover in more detail. We narrowed our sales range while keeping adjusted EBITDA unchanged. We…

Thank you, Sachin, and good morning, everyone. I would like to take a moment to thank Sachin, the Board and the entire Visteon team for the opportunity to contribute to the company's significant transformation for the last three years. As you can see from our release today, Visteon’s results inflected in the third quarter, and while the growth rates may be uneven going forward. I'm confident that the company's next stage of growth is firmly underway. Now turning to Page 10, we present our key financial results for the third quarter of 2019 versus the previous year. Sales of $731 million in the third quarter increased $50 million or 7% compared to last year due to net new business and the consolidation of a joint venture partially offset by lower vehicle production volumes, currency and annual price reductions. This revenue increase is at the highest level of absolute sales growth and the highest level of growth over market, since Sachin joined the company in 2015. This quarter represents the direct result of winning record levels of new business over the last few years. Adjusted EBITDA was $62 million, representing a $9 million decrease from 2018. Adjusted EBITDA was primarily impacted by the non-recurrence of an incentive compensation accrual release in the third quarter of 2018, partially offset by lower engineering expense. Adjusted free cash flow was positive $23 million representing a $65 million increase from 2010 primarily driven by a higher contribution from trade working capital. I'll provide more detail on the following pages. On Page 11, we provide sales and adjusted EBITDA for the third quarter 2019 versus 2018. In the quarter, industry production volumes declined by 3% compared to last year, and in addition, the company continues to see product roll-offs including an infotainment system with Mazda that…

[Operator Instructions] Your first question comes from David Leiker of Baird.

This is Erin Welcenbach on for David. First of all congratulations on the nice quarter. My first question is just if we could dissect the recent wins you have versus what's in the backlog. Is there any way you can kind of dimensionalize how the size the wins, comparing the content of those wins versus what you have in your backlog right now.

Sure, so what I would say first Erin, is that our digital products namely digital clusters, displays and display audio continue to do really well in the market. And we are now seeing digital clusters come down from the premium segment into more mass market models. As that happens, we are starting to see that our value of the awards go up. So this is something that we have been discussing for a while that we were anticipating this to happen as the cost and the prices of these systems are coming down that we expect to see them come more into the mass market and that's happening. With respect to display audio, infotainment in general tends to be a strategic decision for OEMs that is often looked at as a cross platform decision. So the awards tend to be larger and this is also reflected both in the wins as well as the pursuits that we have for the business. What is new, relatively new I should say, is the fact that the ASPs of this larger complex displays have gone up significantly as compared to say where we were at a year ago and that's a very welcome development in the industry from our viewpoint. And as we discussed, we have significantly increased - this time, this year our display wins as compared to where we were at in the prior years. So overall, I think this is moving along in the direction that we were expecting in terms of the trends and our capabilities continue to be very well positioned to win the business and that's reflected in our performance for new business wins.

And then just my second question, can you provide an update on what is going on in the infotainment market. What do trends look like there and where are you focusing your efforts in that market?

Yes, sure so if you go back infotainment was really segmented into three very distinct products. But the entry you had the basic audio or radio system, Bluetooth, maybe AM-FM. And then you had entry - sorry made and a high infotainment system. What we are now starting to see is a collapse of these three tiered segmentation into really a display audio which is the entry infotainment system which is also more connected either going through the smartphone or with an embedded DCU or a telematics unit. And then a high or mid-to-high infotainment system, so this collapse is really creating opportunities for us with the segmentation that we can now take advantage of by focusing on the entry display audio system and that's where the company’s focus and strategy is.

Your next question comes from Itay Michaeli of Citi.

Great good morning everyone, congrats and Christian best wishes to you.

Thank you, Itay

Absolutely, maybe it just to continue the discussion on the progress of digital clusters I was hoping you could share at a high level. What's the broad take rate assumptions are for digital clusters in your backlogs when customers are coming to you, what are they assuming and what are you assuming for take rates - broadly in the next few years?

Right, so if you look at where we were at with digital clusters the last couple of years. These products were really targeted at the premium segment of the market and the take rates were also fairly high, but by that I mean upwards of 80%. What is really different this time around is that we are starting to see digital clusters being targeted for the mass market segment as I said. And the take rates here have started at initially a little lower around 50%, but in some cases we are starting to see the OEMs increase the take rates again up to the 80% levels. Now in our backlog, we do not change the take rate assumption unless we are explicitly informed by the OEM of their intent to change. So, there are two types of take rate changes that, we see some of these are short-term like what is happening in China and that's a response to the specific situation of the market. And then there are the longer term take rate changes which we work with the OEM and only if it’s confirmed by them we then reflect that in our backlog. So I want to be clear that what's in the backlog really just reflects what the customer has committed to us in terms of the volumes.

And then second question just on the EBITDA guidance, still a pretty wide range. Can you just give us some scenarios of what could cause the company to hit sort of lower versus the higher end of the EBITDA range for the year?

Right, so let me take that, Itay. So as we guided we expect to see a large increase in EBITDA sequentially driven by really two things, the impact of higher sales growth in the single-digit sequentially with a significant increase in engineering recoveries. If you look at the previous years, last year in particular, engineering recoveries in Q4 2018 grew by somewhere around $20 million to $25 million from Q3, 2018 levels. And we expect to be in the same range this year. So, one of the things that we've put in our model - in our guidance is some variability around engineering recoveries because of timing. So, that is the reason why we did not necessarily change our EBITDA guidance.

And then I sneak in one last one, maybe for Sachin, if you can update us on drive core. I remember I think last quarter there were two awards that were potentially going to enter the RFQ phase just if you could update us on those that would be great?

Yes, that's a good question. We have the RFQs now as we had discussed, so it’s progressing as we had expected. The RFQs are with us, we are preparing for the response. So on track is how I would describe Itay.

Your next question comes from Emmanuel Rosner of Deutsche Bank.

Just an additional clarification on the net engineering costs. So I guess in the third quarter, for the first time they won’t just reflect down sequentially as they - often are there were so where down on the year-over-year basis, your net engineering costs. Is this something that we should expect into the fourth quarter as well?

Right so - as you know our net engineering is made up of two components, one is our gross engineering spent and the second is the recoveries. Our recoveries are on track. We've provided guidance. We've hit our guidance on the recoveries front. Now in the growth side, both came down sequentially as well as from prior year. So we realized savings from our restructuring cost faster than what we anticipated. Now for gross, for gross expense, engineering expense for the fourth quarter, we are forecasting a little bit higher expense for - our tech centers in Taiwan and Mexico. But overall, we're still on track for a mid-single digit increase for net engineering cost for the year.

And so we think a small increase in the gross in the fourth quarter that was a year-over-year comment?

That is a sequential - that’s a sequential comment.

Okay.

Year-over-year it will be much lower than last year.

And then sort of, wanted to ask you around your - a question around your revenue outlook. Obviously, you've been able to maintain your revenue outlook since the beginning of the year despite - considerably weaker macro and industry environment and the volumes in particular. And so, I'm wondering if you could talk about the implications for your longer term walk as it stands - as of January, you’re expecting a fairly large step up in the revenues to be like a $3.3 billion, $3.4 billion in 2020 in particular. And obviously, I'm sure the volumes you had assume are not reflect probably shaping up weaker than what we saw at the time. But at the same time, it also seems like you're sort of has been offsetting these which maybe some faster new business launches. So any thoughts you're willing to share there?

Yes, the first thing I would say is that with respect to the longer term outlook. We will provide that guidance early next year when we discuss our fourth quarter and full year earnings for 2019. But having said that, the way we think about next year in particular, we do not expect that vehicle production that customers are going to rebound from this year's levels or even going into the fourth quarter here. We are starting to see some softness in vehicle production and we expect that given the macro environments on all regions that this weakness will continue into our next year. And now even with that weaker expectation of the market environment, we believe that our revenues will still grow and they will grow because of the high number of new product launches that we have had. And we had 56 new products that we launched last year and in the first three quarters of this year, we have launched 35. So we are on track for that one launch for a weak cadence that we talk about. And as these products start to ramp up in production, and we will see them being able to offset the headwinds of the production volumes being down and the normal rollouts of the products that we experience. So we will provide more details clearly on our earnings call fourth quarter earnings call. But the takeaway that we should have from this discussion is we think given our discussions with customers the environment is going to continue to be weak at the same time our performance as indicated in Q3 and as we are implying for Q4 will continue into next year with respect to new product launch performance.

Your next question comes from Joseph Spak of RBC Capital Markets.

Maybe just first one on the quarter so look the revenue obviously came in better than you expected or sort of guided at the end of the second quarter or maybe by $12 million to $14 million. But you also sort of talked about EBITDA sort of be flat and it looks like all of that revenue if not more of that better revenue sort of - for the EBITDA. So maybe if you could just help us, it sounds like maybe some of this is sort of the timing of the engineering between the third and fourth quarter, how much of it was related to that. And then what's the delta that caused EBITDA to come in better than you thought.

Right. So let me take that chaos, if you think about the guidance that we had which is a small increase on a year over year for revenues and it came out to be 7%. That's and the flow through of that would actually be positive for EBITDA. And the second is our guide on the engineering we guided that engineering would go up on a year over year basis by mid-single digits. It went down by mid-single digits. So those are the two things that drove the EBITDA and we - as I mentioned the reason for the change in engineering is because we've realized the savings from our restructuring actions faster than we anticipated. Now for the full year, we are adding a little bit higher expense in Q4 to support the new tech centers. We're building one as you know in Mexico, as Sachin mentioned as well as Taiwan. And so for the full year our engineering expense continues to be in the mid-single digit increase over last year.

So it is fair to say that part of the better EBITDA in the quarter was timing of engineering, and that's not to say you didn't do better on engineering as well but because you're doing better you're also reinvesting more in engineering a little bit earlier than you otherwise would have?

That is correct.

And the second one Sachin just since you're always a good resource here and you provide a little bit of color on sort of you know the market, but like if we look big picture broadly there I thought - I think there were some interesting developments you had, it's like auto grade Linux gaining traction in China, SAIC sort of joined in there, then you had Android Auto with GM. So, it seems like there's these different factions developing. It's unclear really who's winning and I know in the past you sort of said you're really agnostic, but what is that really the case because like how portable is what you do on top of those operating systems I guess between the systems? Like do you need to place engineering bets on a on an OS winner?

That's a great question. And the way we think about how that's developing is we need to think about the market from a China perspective and the rest of the world. And I do not believe going forward that we will be able to offer a single solution for the global requirements. China will take a different path. So, what we see happen in China is that the ecosystems that we all know of Alibaba, Baidu, Tencent are becoming more important for connected infotainment in China. They're moving up the value chain especially in terms of AI-based features whether for voice or for better user experience in general. But when you look at it outside of China, we do see that there is a strong momentum towards Android and Android automotive. So the bets that we are placing is far outside of China, for the rest of the world, it's on Android and Android-based infotainment. Now, in terms of China we are really focused on our cockpits domain controller solution for that market. We are seeing some of the leading car OEMs want to differentiate themselves through technology especially technology in the cockpit with larger displays and cockpit domain controllers. That's where we can truly differentiate more than say in the upper levels of the software in China where on account of the restrictions that you have there are better strategy there is to partner with these larger ecosystem players. So that's been our approach which seems to be working well so far. Again these are things that we have to monitor on a regular basis and course correct as required. But for now I think this is - this is how we see it and so far this seems to be the right approach.

And if I could just follow-up, is there any scalability between sort of developing further two platforms? And then it also sounds like what you're saying is just based on the sort of software opportunity that that's a bigger, higher margin opportunity for you outside of China and in China sort of more, more dependent on the domain controller opportunity?

Yes. And then there is scalability as well because even if you look at China where we are able to leverage what to do rest of the world is at the Android operating system level, not above the operating system and we can offer more value and more content outside of China is on top of Android. So if you can imagine it's a sort of a scalable solution that in China we are able to go up to the Android level, but we add more value through the cockpit domain controller strategy and outside of China where this the cockpit domain controller seems to be taking a bit longer in terms of being adopted in the industry. We are able to go up the value chain mode through Android and apps on top of Android.

So just one more quick one then and maybe I missed this but of the 20% of new business wins this year in China, how much of that is the cockpit domain controllers?

It is a large component of that is the cockpit domain controller and we have some interesting both new business opportunities as well as launches coming up in 2020 along those lines.

Your next question comes from Steven Fox of Cross Research.

First question I was just curious if we could get a little more end market color. Obviously the growth of our market is significant, but have you - has the company had to adjust any of its expectations for the ramps given end-markets, in other words are you seeing a slower ramps, any push outs in Q3 and into Q4, and in a similar vein either a plant shutdowns that your OEM customers as expected through the end of the year or it could be you had to adjust for something there. And then I have a follow-up.

Yes. The short answer is no on both counts. On the launches, the 35 that we have had year-to-date have largely occurred on schedule. So nothing to report in terms of any delays of any sort. And the same goes with respect to the plant shutdowns, they have largely been as anticipated.

And do you view that as sort of a risk into next year, or do you think you have that conservatively considered as you ramp or is this too early to tell.

It's I think too early to say about what might happen next year. As you can imagine we are in a lot of discussions with customers to understand their plans for next year. Mostly, I would say given how long these programs take to be designed developed and launched, we do not expect significant changes for next year's launches. If anything at all that might be something further out. So for next year, we are largely locked and loaded and executing towards the launch and that goes for all of the customers. So I think this is not something that in the near-term will shift significantly.

And then you mentioned that you overcame the issues with the center information display console behind you. I think you talked about it being like a $3 million benefit this quarter. Is that true? And then now it sounds like it's slipping into a competitive advantage with some of the optical bonding capabilities you mention. So can you just sort of maybe delve into why it's such an advantage and how we should think about how we can leverage it longer-term? Thank you.

Before I send it over to Sachin to talk about our competitive advantage, just wanted to clarify Steven that it was a $3 million cost in the in Q3.

Yes.

So, this particular product represents the highest volume curved display on product that has been launched this year in the industry, right. Nobody has launched this level of complexity and volume which has as I mentioned enabled us to develop certain capabilities which have been very helpful in making our case that other customers that wanted to go down that path. So following this product launch we have won multiple business wins but other OEMs for similar large curved display products and it's also a very good development from an ASP, average selling price view point. So it's definitely a trend that we need to watch going forward in response to where we see this industry head as Christian mentioned we are investing in a display technology center that we are setting up in Taiwan that would bring industry experts that have decades of experience in building display products into Visteon to help us get even stronger and scale up in anticipation of the products that we have already won and the pursuits that we are seeing ahead of us.

Your next question comes from Dan Galves of Wolfe Research.

When we think about the continued mix shift towards digital clusters away from analog, are there any major differences between those products maybe vertical integration or billing materials that would create an inherently different margin profile? A – Sachin Lawande: The digital clusters are inherently more heavier in terms of softer content than they are analog counterparts. So, what it does offer then is the possibility for us to now build a software platform for digital clusters that can address the majority of the requirements across OEMs. So this is something that that will keep us in a very strong position going forward, because we are - I would say one of the very few suppliers that have a deep understanding of the requirements of digital clusters across a broad swath of the OEMs that enables us to take that insight and build a platform that would then enable us I should say to lower the cost of developing this products, offering reuse as well as higher quality. So that’s the next sort of step that we see us take this business. Q – Daniel Galves: Just one follow-up on kind of material costs inflation on electronic parts. I know that was offsetting some of your normal cost savings, but it looks like that may have kind of diminished in the quarter. Can you talk about that a little bit and is there anything we should think about going forward in terms of material costs maybe LCD pricing? A – Sachin Lawande: Yes. So, the specific materials capacitors, resistors that had an increase in cost over 18, we are starting to see more capacity enter the market and as a result the prices have started to come down. We’re still not at the levels that were when before it started to go up. So we’re still focused on driving further efficiency out of it, there is still more opportunity. And I expect that as we get into next year, and we should be in a much better position with respect to the prices there. So hopefully sometime in the first quarter or second quarter of 2020, those price increases should be behind us. With respect to displays and other products, I don't think there is anything noteworthy in terms of the price or the cost movements. And they are traditionally good components in terms of being able to drive efficiency and I would expect that to continue.

Your next question comes from Brian Johnson of Barclays. Q – Brian Johnson: You mentioned some restructuring and engineering also noted closely, it's a nice center. So as we kind of think about the net engineering spend, was the improvement this quarter really from restructuring. And are you still on track rather than acceleration of reimbursements from OEMs. And if so or if not, what is that – was the pace for reimbursements for Q2. I mean to... A – Sachin Lawande: Yes. So I'll take that Brain, but you're absolutely right. The difference in our net engineering from what we've got it, is really in the gross spend. Recoveries actually came in equal to what we've guided. And the reason for the reduction in gross spend than what we've guided is because of the realization of the savings from the restructuring cost. Now we're taking as we are opening up new tech centers we are reinvesting in Q4 for those tech centers and as such are both our gross and our engineering recoveries are pretty much in line with what we've originally guided which is a mid-single digit improvement from last year. Q – Brian Johnson: Okay. And second question if you let me A – Sachin Lawande: Brian, hey let me just clarify Q – Brian Johnson: Yes A – Sachin Lawande: It's a mid-single digit increase from last year not an improvement. Q – Brian Johnson: Yes. Second OEMs are under intense margin pressure worldwide especially in China and in Europe. You did a good job on pricing, but another electronics focus, tier 1 had a pretty big material drop in there electronics business due to the procurement pressures and one time rebates and pay to play in all those things, so kind of as you look…

So our next question comes from Ryan Brinkman of JPMorgan.

You know you're showing strong growth over market as a result of your new business launches. I think based upon your previously communicated new business wins, it's pretty clear that this will continue or accelerate in 2020. Can you help us think though about what will be the margin impact from this growth? I think on the one hand you know the more digital higher technology products you mentioned earlier they're likely intrinsically higher margin. On the other hand sometimes there is a headwind to margin while new programs are ramping. So I guess the question is when you kind of take into account these different factors, how should investors think about the progression of margin relative to the progression of sales going forward, now that we're in this new period where you're launching more and more new business? A – Sachin Lawande: Right. So, Ryan I think we’ve also said before that the margins of new launches is lower than their margins as they mature and are more I would say midflight in the lifespan. And as we are seeing a higher percentage of our revenue in this growth phase come from new product launches. We will see that our margin expansion will lag our revenue growth. So this is how we should be thinking about it. Nonetheless, what I want to be very clear of it is that we are going to see margin expansion from the current levels is just that the growth of the margins will lag our revenue growth on account of what I just said.

And then just lastly I think it's probably a pretty minor issue for you with more of your GM exposure being in China than in North America. But can you talk about the impact of the GM-UAW strike in 3Q and what impact you think it could potentially have in 4Q? A – Sachin Lawande: Yes, you're absolutely right. Our North American business with GM is currently still relatively small. It's going to change as we’ve business we have won, but today it’s relatively small. And also they were able to pick up our product through the strike. So we haven't really felt much of an impact from the strike itself. So I would say it is minimal and nonmaterial.

Thank you. And this concludes our earnings call for the third quarter 2019. Thank you everybody for participating in today's call and your ongoing interest in Visteon. If you have any follow up questions please contact me directly. Thank you.

This concludes Visteon’s third quarter 2019 earnings call. You may now disconnect.