Good morning, I'm Kris Doyle. Director of Investor Relations for Visteon. Welcome to our Earnings Call for the Fourth Quarter and Full Year 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 that visteon.com to download the material if you have not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer; Bill Robertson, Interim Chief Financial Officer and Jerome Rouquet, Senior Vice President, Finance. We have scheduled the call for one hour and we'll open the line for your questions after Sachin's, Bill's and Jerome'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, Chris and good morning everyone. I will start by providing an overview of our fourth quarter and 2019 full-year results. On subsequent pages, I will discuss our operational performance and key achievements for the quarter and full year and provide more color on the performance of our digital cockpit products as well as new business wins for the year. I will also discuss our outlook for vehicle production for 2020 and beyond and discuss our updated business plan. I will then hand it over to Bill Robertson and Jerome Rouquet, who will discuss the financial results before we open the line for questions. I would like to welcome Jerome to Visteon as Senior Vice President, Finance. And will discuss more about his role at the company going forward as I conclude my remarks. Moving to the presentation on Page 2, our fourth quarter sales increased 2% to $744 million despite the 4% reduction in global vehicle production representing 7 percentage points growth over market when excluding the impact of currency. This is the second consecutive quarter of year-over-year growth and growth over market reflecting the strength of our digital cockpit solutions. Full year sales totaled $2.945 billion up 5 percentage points over market. Adjusted EBITDA was $85 million or 11.4% of sales for the fourth quarter and $234 million or 7.9% of sales for the full year in line with our expectations. Adjusted free cash flow was $35 million for the quarter and $56 million for the full year. Full year, new business wins exceeded $6 billion despite declining industry volumes mainly on the strength of our digital cluster and display products. We added two new customers in Europe to our portfolio and expanded our share of business in digital clusters with global OEMs. Turning to Page 3.…

Thank you, Sachin, and good morning everyone. On Page 14, we present our key financial results for the fourth quarter of 2019 versus the previous year. Despite a volatile market environment all three financial metrics were within our previously communicated guidance range. Sales of $744 million in the fourth quarter increased $13 million or 2% compared to last year due to new program launches and product changes partially offset by lower vehicle production volumes, program roll-offs and the impact from currency and annual price downs. This revenue increase represents the second quarter in a row of absolute sales growth despite a challenging automotive vehicle production environment and illustrates Visteons' ability to continue to outgrow the underlying vehicle production market. The sales out growth in the second half of 2019 represents the direct result of winning record levels of new business over the last few years. Adjusted EBITDA for the quarter was $85 million representing an $11 million increase from 2018. Adjusted EBITDA benefited from lower product development costs and other cost savings partially offset by lower vehicle production volumes in annual price downs. Adjusted free cash flow was positive 35 million contributing to a full year adjusted free cash flow of positive 56 million. I will provide more detail on the following pages. On Page 15 we provide sales and adjusted EBITDA for the fourth quarter 2019 versus 2018. In the quarter, industry production volumes declined by 4% compared to last year. In addition, the company's sales were impacted by launch delays at Ford, the impact of the strike at GM roll off of an Infotainment business with Mazda, and the impact of customer pricing and currency. Despite these headwinds, Visteon sales increased $13 million primarily as a result of net new business. Pricing, reduced sales by $19 million representing…

Thank you, Bill and good morning everyone. On Page 17, we present our full-year 2020 guidance, which excludes any potential impact from the coronavirus. As mentioned by Sachin, we are anticipating that global industry production volumes will decline again this year. Despite this challenging market environment, we are projecting sales, adjusted EBITDA and adjusted EBITDA margin to increase on a year-over-year basis. Our guidance for sales is between $3 billion and $3.1 billion. This assumes a decrease in global industrial production volumes of approximately 3% more than offset by 7% growth over market at the midpoint of the range. Adjusted EBITDA is forecasted to be between $250 million and $270 million representing an adjusted EBITDA margin of 8.5% at the midpoint of the range or an expansion of 60 basis points versus 2019. Adjusted free cash flow is forecasted to be between $40 million and $60 million. This range accounts for the non-recurrence of the favorable inflow in working capital that benefited 2019 as referenced by Bill and assumes capital spending in line with 2019 levels. Turning to Page 18, we provide an adjusted EBITDA bridge from our 2019 actual results to our forecast for 2020. We're expecting adjusted EBITDA to increase in 2020 to a level of $250 to $270 million, representing an adjusted EBITDA margin of approximately 8.5% at the midpoint of guidance. Let me provide some color on the main drivers for 2020. Adjusted EBITDA will benefit from the non-recurrence of the operational challenges experienced in '19 which include inefficiencies from the planned transfer in Mexico and the launch challenges with the industry's first curved display. More than offsetting these benefit is a reduction of EBITDA on our base business as a result of lower industry production volumes similar to what we experienced in previous years. Driving…

[Operator Instructions] Our first question comes from the line of Joseph Spak of RBC Capital Markets.

Just to start, and thanks for the color on the guidance bridge on Slide 18. But in I just want to understand, in that volume bucket. Is that just sort of industry volumes, does that also sort of consider some of your legacy business rolling off like. And can you talk about maybe the detrimental margins on sort of the down business versus sort of the incremental margins on the business rolling on?

So to answer your first question about the volumes in our guidance. It's clearly and only the industry volumes, which have decreased in our plan period from when we talked about this in the beginning of 2019 by about 10%. So that's what's reflected in our guidance. It's not the impact of some of the legacy products that are rolling off, we do have those and offset by some of the new products that are launching, but the impact in this new forecast that is indicated as volume is the impact of the production environment that has deteriorated since the beginning of last year. With respect to the question regarding the incremental margins, this has also not changed when we talked about our plan in January of 2019. We had indicated that our incremental margins would be between 20% to 25% with the margins being low on the lower end of the range in the initial years including 2020 on account of the lower launch margins with the products that are launched. Now for 2020 in our new guidance, we are still assuming a 20% incremental margin and now with respect to the decrementals are normal decrementals are between 25% to 30%. Now in events like the coronavirus, it's going to be a little bit higher because we are not able to take actions especially with respect to some of the variable cost so that might be more around 35% but otherwise decrementals would be between 25% to 30%.

I guess and just to build on top of that the impact of the reduced take rates in China that you mentioned like is that - does that show up in the volumes or is that netted against the roll-ons and can you quantify the impact...

Yes, sure. So in 2019, as we have discussed I think several times, we benefited from the increase take rates in China, specifically with one OEM with Infotainment product and that's about a $60 million positive impact in 2019. Now this customer has since indicated to us that they are not going to run the sales promotion in 2020 and we have taken that into consideration in our guidance. Now that is largely a volume impact for us and some portion of that is also offsetting the roll-offs.

Your next question comes from the line of Dan Galves of Wolfe Research. And his line has disconnected. Your next question comes from the line of David Leiker of Baird.

This is Erin Welcenbach on from David. So I just wanted to follow up with a question more in the out years trying to understand, are you seeing any of your legacy contracts fall off more quickly in terms of take rates or the timing of them being discontinued.

No, in fact, our legacy business, or it was a stuff that we talked about that is rolling off, that continues to roll off as we had expected, but this, the contracts that we have won in the last 2 to 3 years, they are continuing ahead as planned. We are not seeing any impact in terms of short cycling, other than the volume impact. This is clearly the impact of the production environment going down that is there and we have quantified that and we have acknowledged that in our new forecast of the only significant sort of product roll off that we still have of which is the Mazda infotainment system. We have had an impact of about $100 million of the roll-off of that business in 2019. There is some ongoing impact of that in 2020 and 2021. For 2020, we assume an impact of the less than that about $75 million and as we go forward with Mazda our other business clusters and displays, which is growing will offset the decline of the remaining Infotainment business, so the decline will be moderated a bit. But in general, our new products that we have been launching in the last 2 to 3 years are actually seeing increased sort of take rates and it's not seeing it decline in the business.

And then my second question is just related to the R&D piece of things. I was wondering if you can outline you obviously started implementing some restructuring on the R&D front in the second half, just kind of the expectation for continued savings there. If there is opportunities still in the back half of the year to continue to optimize that R&D footprint ?

Yes. So we have been continuing to align our footprint to the needs of the industry as we see it going forward. It's a combination of making sure that we have the right resources, but also the right resources in the right cost locations. And so we have been rightsizing our footprint, mainly in Europe, which is where we have the bulk of the higher cost resources and so we have been taking actions prudently so that we do not impact ongoing business with customers or our ability to launch new products. So this has been going on. We have executed, some of the restructuring in 2019. And we are continuing to implement some more in 2020 as well. At the end of 2020, you expect to be done with the bulk of the restructuring up beyond that it's going to be some minor ongoing adjustments we have assumed a cost of somewhere between, I think $18 million to $24 million for the engineering restructuring that we will be executing in 2020. Given that most of our activities have been focused in Europe. It does take longer, both to execute, but also to see the payback on that investment. But even with that, our return on that investment is typically of within - the payback is within a year and a half.

Your next question comes from the line of Dan Galves of Wolfe Research.

And so, sorry about that before. Just wanted to ask about margins. In 2019, I'm sorry, in 2020 if we reverse kind of the non-recurrence of the curved display, you kind of get to the low end of your guidance. And so if you get to get to the midpoint, it's like 10 million of kind of incremental EBITDA on a 100 million of revenue growth. So the incremental margin is lower than you've talked about in the past and then if I look at kind of the out-year 2023, your new outlook is 12%, which is a couple of hundred basis points versus a year ago and again, it's not really explained by the fully by the revenue decline. So I guess my question is really has there anything changed about the margin profile that you're expecting on your new business going forward?

Daniel. Good morning. It's Jerome. So in a nutshell, the most of the changes that you're seeing here are volume-related. So, not only for 2020, but as well in the out years. Essentially the margins that we were anticipating when we talked about the long-term plan back in January 2019. We're in the 2025% range, and they were largely coming if not essentially coming from the net new business combined with pricing and efficiencies. At the time we had no volume decline, we were assuming that volume would be stable, it's likely, if not slightly growing. So what has changed really in 2020 is the fact that we don't have that volume growth. In fact we have volume going down on the industry side, and that's really what's impacting 2020. Similar story for 2023, where the volumes are much lower than what we had anticipated to the tune of about 10% as mentioned by Sachin earlier on. So that's really what's bringing down our margin to 12%. But I would like to highlight the fact that we're still going to grow our EBITDA margin by about 400 basis points between now and 2023, which is again, similar to what we had anticipated in terms of expansion back in '19.

And just maybe one follow up, could you help us with a little bit more detail on 2020 in terms of what you're expecting from a negative pricing impact and kind of what's your ability to how much can you offset that with efficiencies?

Yeah, that's a good question. So the pricing levels that we've assumed for 2020 are very similar to what we've seen in '19. So we are operating between 2% to 3%, mid-point being 2.5%. So it's a fairly large number in dollar terms and we are offsetting these with efficiencies in plants and efficiencies with sourcing and as well, to some extent with engineering, as mentioned by Sachin. So my key focus in 2020 is really going to be around cost efficiencies manufacturing, sourcing and engineering and make sure that we are more than offsetting that pricing.

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

I want to continue the discussion 2020 little bit kind of 2019. If we look at the business wins on page on the business - in the page with the 2019 business wins. As you know, fair amount of digital clusters, Display is a smaller part, BMS pops up. I'd love to hear a little bit more about that. How should we be thinking about the margin profile of that as you make your way to 12% and there is depending on the take rates in the various categories is there room for that margin to move?

So, Brian. First of all of what I would like to say is that given the environment we are in, a $6 billion plus new business win achievement is quite significant and a significant portion of that has come from our cluster of product line. Clusters continue to evolve and some transition towards all digital clusters is continuing to cut across the industry. And we are really benefiting from this because fewer of the traditional suppliers can deliver the kind of technologies in software and displays that are required for digital clusters. ASPs are going up and our margin profile with digital clusters is also better than the legacy products. Displays which is a real stand out for us in 2019 with over $800 million in sales. The reason why we have been able to perform significantly better than in prior years, is the shift towards this multi-display modules. The ASPs are also significantly higher, a lot of content in them and therefore the margin is also very healthy, are traditionally with the smaller displays I have been very conservative in my approach to the industry but with this shift towards this larger Displays multi display modules. One, we are in a great position with our capabilities that we have built over the last couple of years and the experience we have gained in launching high volume products in Displays category. And also the fact that the margin is much better is certainly an area for a lot of interest for us. Now, infotainment is as you can probably tell from the picture is not where we would have liked it to be considering our performance in the last couple of years. This is a transition year for us with respect to Infotainment, we made the switch to a Android-based…

And just a follow-up around 2023 guide, it looks like CapEx, as a percent of sales, ran about 4.8% last year. If you held that ratio then your free cash flow as a percent of sales will double by 2023. Is that the right way to think about it or is there going to be a change in the capital intensity of the new business as it comes on or it be one way or another.

Yes, Brian, it's Jerome, so we are already for 2020 maintaining our CapEx levels, so '19 to '20 is flat in CapEx terms, meaning that the CapEx percentage in relation to sales is starting to decline. We are definitely going to leverage that going forward and we'll have that percentage going down even further in the out years. I'm not in a position yet to give you the exact percentage, but yes, at this stage you can definitely model a lower CapEx percentage as we are leveraging our base.

And Brian. We have said earlier that we have planned capacity to go up to $5 billion in revenue. So that is still the case and so we should be able to leverage the investments we have made in the last couple of years, and hopefully have a much better CapEx performance as a result.

And just finally, I guess just point on that. Jerome, would it be fair to say that coming from a very capital intensive, part of the auto industry, which is going to be one of your focus points?

Yes, I would say on the cash flow side CapEx will be working capital as well and will be beyond obviously expanding on the EBITDA side.

Your next question comes from the line of Emmanuel Rosner of Deutsche Bank.

I was hoping to ask you on the revenue trajectory on Slide 10. So when I look at sort of the out years 2021, 2022, the gross about markets remain solidly double digits. In 2020, I understand the volume impact versus last year's trajectory, but I'm looking at growth-above-market. It feels like even on the growth-above-market basis you may have dialed back a little bit to your expectations for 2020. So was hoping to get a little bit more color on this. Was there some new business launches being pushed forward into late 2019 or is some of it being pushed out in 2021. And any factors there in terms of your growth-above-market profile?

Yes, let me give you some more color on what's happening with 2020. So first of all, we are continuing our better than market performance that we really kind of started in the third quarter of this of 2019 and continued into the fourth quarter and that will continue into 2020. Now, what we have adjusted our 2020 guidance for, includes a few headwinds which are the lower take rates that I just discussed earlier that we will not see the recurrence of the take rates being higher in 2020 in China as compared to 2019. We are also seeing some lower production with key customers in particular Mazda, Ford and Nissan, so the customer mix is not very favorable in 2020 and that's the other impact and also some vehicle launch delays especially with Ford considering that we have a number of launches with them and the fact that we have had some experience in 2019. And so we have also accounted for some potential delays there. Now without these headwinds, we would have been a double-digit growth compared to market. So the story in terms of the new product launches that is pretty intact. It's really an impact of the volumes at our key customers especially the ones that I've just mentioned.

That's really great color. So just to be clear, so there were some delays with the issues with the Explorer launch last year. So it's not, you don't know for a fact, there will be some in Ford's launches this year, but you are basically incorporating some in your 2020 guidance.

That is correct.

Out of conservatism. Okay, understood. And then the follow-up here is on the working capital, could you please go back over, I guess the drivers of sort of like this year-over-year use of cash on the working capital. What part is not recurring from 2019? Can you just go back over the quantification of this? And what will working capital look like this year?

Yes. So the 2020 free cash flow drivers are increased adjusted EBITDA, CapEx, flat and then increase in working capital. We have essentially simply an increase in sales year-over-year and that's going to attract a negative working capital. Combined with that as well is the fact that we had a pretty good performance in '19 and a fairly sizable inflow in working capital in 2019, as Bill mentioned in his presentation. So the combination of the two makes a little bit of a more challenging working capital story for the 2020 cash flow.

And any number?

We can do - you can do the math. I mean we've got, one more sales. Obviously, the Q4. It's a few millions negative versus 2019, which is a big inflow of about $50 million.

Your next question comes from the line of David Kelley of Jefferies.

Just a quick follow-up on that working capital discussion. Are you seeing any change in OEM payment cadence, are they potentially pushing out payment terms, giving the choppy production environment we're in?

No. And I'll let Bill expand a little bit more on that, but we are not.

Yes. No. And in fact, we actually had improvement in our 2019 trade working capital in each of the three components. DSOs improved year-over-year DPOs improved and I inventory turns improved as well. So a lot of that was hard work on our side, but we really haven't seen any change in the OEM payment terms.

I appreciate the color there and maybe to quickly switch gears, a coronavirus follow-up, I think you referenced the potential global impact. I guess are you currently seeing any residual impact and markets outside of China relative to your customer production schedules.,

Yes, we are unfortunately. As you can imagine, this supply chain global supply chain is very deep and the products that we tend to make especially electronics have hundreds of components and hundreds of suppliers in China, not just supplying to Visteon but also other suppliers that supply to OEMs. We are hearing about potential impact at several of our customers in Europe and North America. We are working very closely with them, as you can imagine, having joined calls with suppliers out of China trying to manage allocation so that we can continue to keep our customer lines intact and not have an impact on them. At this stage, it is a day-by-day situation and we will need to get through the next two to three weeks before we can really say whether we are out of the woods or not. There are few suppliers in China that have only opened their plants recently meaning earlier this week, and so we will be discussing and meeting with them on a daily basis for a little while to understand when they can ramp production back to full capacity and that may take some number of weeks for them to get there. So we will have to walk - watch this interim period very carefully and manage our supply chain, not just us but also collaboratively with other suppliers with the OEMs.

Thank you. And this concludes our earnings call for the fourth quarter and full year 2019. Thank you everyone for participating in today's call and your ongoing interest in Visteon. Do you have any follow-up questions, please contact me directly. Thank you.

This concludes Visteons' fourth quarter and full year 2019 earnings call. You may now disconnect.