Good morning. I'm Kris Doyle, Vice President, Investor Relations and Treasurer. Welcome to our Earnings Call for the Fourth Quarter and Full-Year of 2020. 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 Jerome Rouquet, Senior 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 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, Kris. Good morning, everyone. Page 1 summarizes our fourth quarter results and the full-year highlights. Visteon finished the year strong with sales of $787 million, up 5% year-over-year when excluding currency. Our strong performance was largely driven by the ramp up of new products launched during 2020. Adjusted EBITDA was $75 million or 9.5% of sales and in line with our expectations. We also generated adjusted free cash flow of $59 million in the quarter. Adjusted free cash flow for the full-year was $96 million despite the unprecedented industry shutdown in the second quarter followed by its V-shaped recovery in the second half. On the operational front, we continue to strengthen Visteon’s future growth in the fourth quarter, securing 22 new business awards from customers worth $1.4 billion in lifetime value. This brings our full-year new business total to $4.6 billion with $3 billion won in the second half. This is an outstanding achievement considering the industry environment and confirms that our strong technology portfolio aligns well with key trends in the industry. We also launched 11 new products in the fourth quarter, bringing the total for the full-year to 55. This makes 2020 one of our best years ever for new product launches despite the pandemic. Our products were launched on some high-profile vehicles that appropriately received significant attention and scrutiny. The team deserves great credit for delivering on our customer commitments despite the COVID challenges. The stringent cost control measures and restructuring actions we took early in the year resulted in significant structural cost savings. All functions including engineering, manufacturing and SG&A reduced their cost base. Capital expenditures also decreased in line with our expectations for the year. In addition to improving our adjusted EBITDA margin and adjusted free cash flow, these actions allowed the company…

Thank you, Sachin, and good morning, everyone. At this time last year, we could have never envisioned the challenges the automotive industry was about to face with industry production coming to a stop at most locations at some point throughout the first half of 2020. We are very proud of how the Visteon team tackle the challenges and continue to deliver on our commitments, while resetting our cost base and improving cash generation. These actions will ensure we are well positioned for the future. Visteon has continued to outperform industry production at our top customers driven by a high number of new product launched in 2020, 55 for the full-year. In 2020, Visteon sales were $2,548 million, representing a decrease of 13% when excluding the impact of currency. In comparison, overall industry production volumes decreased 16%, while production volumes at Visteon’s top customers declined approximately 20%. Cluster sales, which represent approximately half of our total sales increased compared to prior year despite the industry production decline. This performance was driven by the growth in all-digital clusters, which increased approximately 60% compared to 2019. Cost performance was another highlight for the year with a major reset of our cost base. Decremental margins for the full-year were approximately 15% on a normalized basis, reflecting the significant cost initiatives undertaken very early in 2020. Compared to 2019, net engineering was down approximately 30% and adjusted SG&A was down 15%. Costs were reduced as a result of lower activity levels, strong cost controls as well as short-term austerity measures, which primarily impacted Q2 and Q3. However, we do not rely on short-term actions alone and also undertook a major structural reset of our cost base, including various restructuring programs. For the full-year, adjusted free cash flow was $96 million and reflects the disciplined and…

[Operator Instructions] Your first question is from the line of Steven Fox with Fox Advisors.

Thanks. Good morning, everyone. First question, just since you guys were so bold to provide full-year guidance and look out further, can you maybe sort of talk about the risks of the supply chain to meeting that second half idea that things start to normalize? Are you seeing bottlenecks at the suppliers? Or are there other OEM concerns that we should think of? And then I had a follow-up.

Sure. Yes. Good morning, Steven. So first of all, I would like to just maybe expand a little bit more on this semiconductor shortage that we have currently. It's an industry-wide issue. That's affecting all suppliers and also all OEMs. And we are working at the same time very closely as you would imagine with the suppliers and OEMs to mitigate the impact as best as we can. Now it's really important to understand how this shortage came about as I’ve tried to explain in my prepared remarks. But the two most important reasons seem to be faster than expected, the V-shaped recovery that automotive had in Q3 and Q4, at the same time the increase in demand from consumer electronics. Now work is underway to increase capacity at the wafer fabs and other sub-suppliers of this semiconductor suppliers. But that activity takes anywhere between 20 to 26 weeks of lead time before we can get extra semiconductor supply. So at this stage, we are expecting that in the first half of this year, we will see an impact as an industry anywhere around up to, I would say about three weeks of production. And the supply should start – the increase should start to appear in the third quarter and continue to improve from there going into the fourth quarter. We do expect that that increased supply will be able to make up for some of the losses that we would have experienced in the first half, but not all of it because the demand at the same time in the second half also appears to be quite robust. So given where we stand which we see as a result of that, about 4 million to 5 million units of production to be impacted this year.

Great. I appreciate that perspective. That's very helpful.

You got a second question?

Yes, I did. Just on the digital cluster growth, which is really tremendous now. Can you talk about maybe a little bit under the covers in terms of how you envision sort of the mix improving based on your order book towards not just the larger screen size, but embedded more into the dashboard as opposed to sort of some of the pop-up displays we're seeing right now?

Yes. I think it's a really interesting development that we are starting to see and automotive is really following the lead of consumer electronics in terms of look and feel of the displays. While at the same time, there are some very specific automotive challenges that we need to overcome. So we are seeing the trend to go towards what we would call here as pillar-to-pillar displays, but using multiple large displays behind a single glass covalence and using very thin borders, et cetera, to make them look a lot more like what you see with tablets and other consumer products. In addition to that, we are starting to see specific requirements of automotive, such as the need especially on the passenger side to limit that distraction that could be caused for the drivers. So privacy solutions are required in automotive. There's also interest in replacing more of the buttons with touch with haptic something that we’re starting to see really emerge now. And so in response, Visteon has developed our own display technology called microZone, it's an alternative to OLED, offers very specific automotive relevant features that even OLED does not offer. And on top of that, we are developing our own active privacy solution for passenger displays that I just mentioned, and also dynamic image enhancement capabilities, which will make the graphics really look very nice even in ambient light conditions that we have in automotive use cases that you don't have typically with consumer electronics. So we're really very excited about this whole shift towards larger displays and we’re starting to see that happen now. Now we've mentioned digital clusters. We are seeing really good growth and we expect that to continue. Now in 2021, we are seeing some impact on that growth on account of the semiconductor shortage, but I expect that to come right back as we get more semiconductors towards the second half this year and continuing into 2022 and 2023.

Great. That's all very helpful. Thank you very much.

Thank you.

Your next question is from the line of Luke Junk with Baird.

Yes. Thank you for taking the question this morning. Sachin, wondering if – first, we can talk about industry acceptance of – or interest in wireless BMS technology following your announcement with GM last quarter. Our understanding is that there was some hesitancy around being first on OEM now that GM has taken a pledge, how does that changed the tone of your conversations with other OEMs over the past few months? I think you also mentioned you were looking at showing your second wireless BMS win to customers going forward as well.

Yes, no. I think it's a very important point, Luke. Also, anytime you introduce a new technology, especially wireless in a mission-critical situation like the powertrain, you clearly have to overcome a lot of concerns that people would rightfully have. And so we have done a lot of work in that area in terms of ensuring the reliability of the system as well as to make it very robust and address security considerations as well. And the win and the discussion that we had in the last quarter with GM certainly has made a huge impact in our ability to talk to other OEMs and for them to take this technology seriously. Now what's really important to understand is how a BMS solution, the significance of that in the design and development of new EV platforms. One of the first decisions that an OEM has to make, then they decide to build an EV platform is the design and architecture of the battery cells and modules and packs because that ultimately becomes a critical factor in how they can then deploy that into vehicle models. So that usually is one of the very first decisions they make. And the BMS solution is very much tied to that architecture. Now if you have a wired solution, as you can imagine, your options [indiscernible] are limited in terms of how you can then configure the modules to form the packs and wireless solution gives them ultimate flexibility. So this technology that we have introduced has all of the right benefit especially for OEMs that have a EV platform strategy. All they really want is just to build one-off vehicles on, say electric technology, it may not be as important. Clearly for us, that kind of a business is also not as interesting as a platform business that we can design and develop that solution once and it can go into a high number of vehicle models thereafter. So this second win that we talked about here on this call is a similar win. It is a platform that has been developed by this OEM. By the way, this is a new customer as well for Visteon. We do not have other business with them and so we are really excited about the potential of future growth. This is similar in terms of the engagement that we had with GM a couple of years ago where we started work on the platform. And then now as the OEM started to add more vehicle models, the business grew in terms of scope and we expect to see something similar in this case as well.

Really a great color. Thank you for that. As my follow-up to Jerome, I was hoping we could talk about the incremental margin walk this year. So thank you for the EBITDA margin percentage walk on Slide 16. I'm wondering if we could outline that on a similar basis just in terms of what guidance seems for incrementals in 2021 both on an underlying basis and adjusting for some of the moving pieces that we have last year and this year?

Yes, sure. Luke, good morning. So overall our incremental margins will be similar to what we've guided previously. We've always talked about 20% to 25%. We'll be at the midpoint for next year at 22% exactly. I think what's important to mention is the fact that in 2020 we did reset our cost base, so even though the incremental margins for 2021 are not fundamentally different from what we've been guiding, we do have a lower cost base and therefore it's reflected in our EBITDA margins going forward. So 22% I would say excluding the semiconductor impact is what you're looking at for 2021. Maybe expanding into the future as well that's kind of the – roughly the incremental margins that we're expecting as well that will be adding going into 2023 and which will allow us to achieve our 12% EBITDA target.

Great. Thank you.

Your next question is from the line of Rod Lache with Wolfe Research.

Good morning, everybody. First question is just to clarify is the second BMS win somewhat related to the first one, simply because the Ultium is going to be used by more than one OEM. And you could just clarify if the input that you've received or feedback from other OEMs, have you gotten any indication about how you stand relative to some of the others that have also been working on developing a wireless BMS solution?

Sure. So Rod, just to be clear, the second win has no connection with the first business win GM or with the Ultium batteries. It's a completely different – separate customer, different development, which is what frankly makes it even more exciting for us. As you know, there are other OEMs. We've talked about Honda using the Ultium batteries in our BMS with that engagement, but that's not in any shape related to what we disclosed here on this call. So to your other question, we certainly are getting the feedback that in terms of a wireless BMS approach that we have a lead as compared to our competitors. And that's simply on account of the work that we have done over the last about two to three years now on this technology. Having said that, I would expect that other competitors would be working and trying to bridge that gap and we should not expect that we would be the ones and the only ones with the solution of which is the case today, which we will happily take and hopefully convert into more wins like this second win that we have announced. So we are trying to capitalize on this momentum and the lead that we have, but at the same time expecting to see more competition to come up.

Great. Thank you. I was hoping maybe if you can share any volume expectations from the second OEM and – but my second question would be, recently Ford talked about increased collaboration with Google and utilizing Android operating system in their infotainment systems. And obviously you have a lot of experience here. And I was just hoping you might be able to just speak to what you see happening here at OEMs potential customers and whether this is a software that is disintermediating you? Or is this something that is actually enhancing your position?

Yes. Just to go back to the question that you asked about the volumes. What I can share with you is that this win similar to our initial engagement with GM has volumes associated with the initial launch of a EV on this platform. And I believe it's about 150,000 units per year and expected to grow as the OEM add more vehicle models similar to what we faced with GM. So that should give you some color on the magnitude of that win. On this Ford, Google announcement, it's actually a very positive announcement from our perspective because as you may know, today we do not participate in any infotainment business at Ford. And at the same time, I believe Visteon has more experience in building Android-based digital cockpits with our SmartCore technology. We talked about our SmartCore evolution that integration with Qualcomm’s new processor and multiple engagements that we have on that type of solutions. I don't believe that there are too many competitors who have as much experience and capability in Android-based digital cockpits like we do. So I see that as a positive development and we hope to participate in some fashion with Ford as we go forward into the future.

Great. Thank you very much.

Thank you.

Your next question is from the line of David Kelley with Jefferies.

Hey. Good morning, everyone. Maybe just a question on gross margins and then I have a follow-up on the wireless BMS discussion. So starting with the fourth quarter gross margin, and I'm looking at Slide 26 here. If we remove the engineering impact that looks like cost of sales ticked up 500 basis points to 600 basis points as a percentage of growing revenues. Can you just talk about or provide some color on some of the drivers of that increase?

Yes. Sure. Good morning, David. So overall, I would say – I’ll step back and maybe talk about EBITDA first. So overall our EBITDA margin was 9.5%, and it is very similar to what we had done in Q3 when you exclude the austerity measures. So versus Q3, our EBITDA margins have decreased because of the austerity measures not reoccurring again. We did have more sales in Q4, but I think one of the most significant items we had versus Q3 was the fact that we started to see additional supply chain costs and that's probably the most relevant item versus Q3 that is important to mention. We had approximately 80 basis points of additional supply chain costs related to logistics expenses, related to spot buys with brokers and that's going to continue as we know probably in Q1 and Q2 of this year. So that's really one of the key items. If you do as well the comparison versus prior year in terms of the gross margin, prior year was very elevated due to very high engineering recoveries. We had as well a pretty high level of claims last year at the time, you have as well various items this year impacting the gross margin versus prior year being warranty expenses being a little bit higher as well as incentive compensation that we've increased as we went into the year given that the performance increase. So there are a lot of moving parts, but I think the relevant item is really the fact that overall our performance was in line with Q3. And the way to look at our performance as well is really to combine and how we represented the financials, H1 versus H2. We do think that H2 is very relevant of our performance with sales level being obviously at $1.5 billion for second half.

Okay, great. Thanks. That's very helpful. And then maybe following up on the BMS discussion, recall you're working with ADI on the Ultium platform. I believe they've separately also announced a second platform win as well having yet disclosed the OEM. So I was just hoping you could confirm whether or not they are your semi-partner, and then maybe just taking a step back, could you talk about the go-to-market strategy as we think about potential further BMS build-out? Are you partnering or working with a semi-supplier, such as an ADI to pitch to OEMs, just wondering kind of how that semi relationship works for you? Thank you.

Yes. So I can confirm, David, that your understanding is correct. So ADI is our partner here in this engagement, the second win as well. As you can imagine, we have a lot of work that we have done together that we want to bring to other OEMs and we expect this joint collaboration and go-to-market to continue together. We are, as we speak also in discussions with other OEMs. And in most cases, the way it works is that Visteon being a Tier 1 supplier, we have the relationships and the engagement lead and the silicone supplier is assisting in specific areas of the solution where they clearly have a strong role to play. So this is the model that we are rolling out to multiple OEMs while we engage in the development of the systems that we have won and we continue to invest in our capabilities in this area. Because the key thing that I would like you to take away from this is that the BMS technology is not a static fixed function, fixed feature solution, it’s evolving as the OEMs are understanding more about how to work with batteries and what more features and capabilities to add to it. So we see that as a ongoing area of growth of our content first and, of course, that will drive growth in price and ASPs.

Okay. Thank you. That's very helpful. Thank you both.

Thank you, David.

Your next question is from the line of Itay Michaeli with Citi.

Great. Thanks everybody. Jerome, maybe just to talk on the last question on the year-over-year EBITDA walk in the fourth quarter ex the engineering, a little bit of engineering did come in below your expectations. Just can you talk about the incrementals year-over-year, it's on the other puts and takes that you gave a sequential walk, which was helpful, hoping could you do a quick year-over-year walk as well on the EBITDA?

Yes. So Itay, good morning. You're referring to Q4 of prior year 2019 to Q4 of 2020.

Yes.

Yes. So as I mentioned, we had – if you look at the gross margin that we had in Q4 of 2019, it was pretty elevated and really not in line with the overall performance for the full-year. So you had – you have a lot of moving parts, but we had very high engineering recoveries in Q4 of 2019 pre-high as well. Customer recoveries on the commercial side, which we call customer claims and this did not reoccur again in Q4 of 2020. You have as well on the other side, as I mentioned, warranty expenses, which are a little bit higher in Q4 of this year, they tend to be a little bit lumpy and we do have as well a higher incentive compensation comp for Q4 of 2020. So therefore, you've got high recoveries on one side in 2019, and then some further expenses in Q4 of 2020, which makes that variance pretty large, in fact when you look at it this way. As I said earlier on it's really H2, which we believe is the right reflection of our performance for the company at a level of $1.5 billion in sales.

Great. That's very helpful, Jerome. And then maybe a bigger picture question on the sustainability of growth over market maybe a mid-to-high single-digit rate of growth over market beyond 2023. I think you alluded to, of course, higher take rates and just higher EV penetration as a source of incremental growth beyond 2023. But can you share any sort of bookings targets for 2021 that you would need to reach in order to feel confident about that sustainability of the growth of the market beyond 2023?

Yes. Sure, Itay. And certainly, I think we have been on a path to achieve a $6 billion of more in terms of new business wins for the past few years. 2020 was an exception and we know the reasons why. But as we look forward, the trend of upgrading the cockpit to digital continues to be strong rather for new vehicle models or for extending the life of older models through mid-cycle updates. In fact, in Q4 of our $1.4 billion in wins about 25% of that was for mid-cycle updates. And so as we look at just the pipeline of new opportunities for this year, it's looking actually quite strong, particularly for SmartCore, especially Android-based SmartCore solutions or displays in the [indiscernible] digital clusters. One thing I should mention is that this diversion of clusters into digital that when that we have been discussing for the past few years, it's actually in full bore right now, and yet about only 25% of what we ship today for clusters are all digital. So we still have a really good path forward here, even beyond 2023, as we start to see that conversion to continue, which brings along with it higher sales prices of clusters versus the other kind. So now coming back to the target for 2021, the pipeline that we have, the trends that I talked about in terms of the digital cockpit together with the trend towards EVs, which is also positive for us because EVs tend to have higher digital content plus BMS opportunities. We believe we should be achieving $6 billion in new business wins in 2021.

That's very helpful. Appreciate all the detail. Thank you.

Thank you, Itay.

Your final question is from the line of Joseph Spak with RBC Capital Markets.

Thanks very much everyone. Maybe just one more on sort of the second wireless battery management system, is that – I know you sort of talked about size, and I'm assuming the content is in the same range as you talked about prior. But what about – when is that expected to begin production? I mean, does it – is it – I guess, is it in your updated 2023 revenue target?

Yes. Joe, so it actually starts to ship in 2023, but at very low volume, so it's not material towards 2023 guidance. And it will ramp up from that point onwards.

Okay. So then if we look at 2023 now versus prior, I know, sort of relatively similar when you sort of adjust for volume that's how you guys look at it?

Correct.

Okay. And then just on the $30 million supply chain headwind next year, I just want to understand, is that the volume impact you're talking about or are you also paying higher prices for some of the semiconductor content because we saw some announcements that they were raising prices, given the lower shortage. And how does that work with your customers? Are you able to pass that through? Or is that sort of – its own sort of separate negotiation when you have to pay higher prices for the chips?

So I’ll take that one, Joe. Good morning. So we've seen already some cost increasing in 2020 in Q4. And as I said earlier, that's one of the reasons as well why our margin was a little bit lower in Q4 because we started to see a few costs coming in. The first one relates really to, I would say, the general supply chain condition and the fact that we got a higher cost of logistics, that's one pillar. The second – and that will continue we think into Q1 and Q2, at least of 2021. That the second big bucket that we are forecasting in our $30 million relates essentially to spot buys that we've got to make at elevated prices from distributors for semiconductor purchases. So this is another reason, and the second part of the bucket. The third bucket, which is probably a bit lower, but it's included in there. It's the fact that as well, we'll be redesigning a few parts here and there to – able to accommodate for some of the changes. So that's at a high level to $30 million. There has been, indeed, as you said, comments in the press about suppliers raising prices. In our case, a lot of our prices are locked and we're negotiating in fact before the crisis started. So we are covered on that side. We don't have – at this point in the $30 million, the assumption that we would recover that from customers, but that's definitely something that we would address at some point.

Okay. So it's possible, there's an offset in sort of some of the engineering recoveries that it sort of tend to get over the course of the year?

Possible is the word I would use…

Okay. Thank you very much.

Thank you.

Thank you.

Thank you. And this concludes our earnings call for the fourth quarter and full-year of 2020. Thank you everyone for participating in today's call and your ongoing interest on Visteon. If you have any follow-up questions, please contact me directly. Thank you.

This concludes Visteon’s fourth quarter and full-year 2020 earnings call. You may now disconnect.