Good morning. I'm Kris Doyle, Vice President of Investor Relations and Treasurer. Welcome to our Earnings Call for the Fourth Quarter and Full-Year of 2021. 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 Web site 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 will open the lines for your questions after Sachin's and Jerome's remarks. Please limit your questions to one question and one follow-up. Thank you for joining us. Now, I'll turn the call over to Sachin.

Thank you, Kris, good morning everyone, and thank you for joining our fourth quarter and full-year 2021 earnings call. I would like to start with a summary of our full-year performance, as outlined on page two. As we have communicated on prior calls, semiconductor shortages affected the industry throughout the year, presenting many operational and commercial challenges. However, the company responded effectively and consistently to deliver against the high demand from customers for our cockpit products. The result was a strong financial performance in both the fourth quarter and the full-year despite the difficult environment. Full-year sales were $2,773 million, an increase of 7% year-over-year when excluding currency, and nine percentage points growth over market as vehicle production net our customers declined approximately 2%. Adjusted EBITDA was $228 million or 8.2% of sales, an increase of $36 million compared to prior year. Strong operational and commercial disciple by the Visteon team helped mitigate the impact of frequent interruptions to supply and the higher incremental costs of semiconductors. Adjusted free cash flow for the year was $22 million. The company's track record of launching a high number of new products remained intact, and in 2021, we launched 43 new products. In addition to digital cockpit products, we had launched the industry's first wireless battery management system on GM's new electric Hummer. These launches and the $5.1 billion in new business wins continue to position us well for market outperformance in 2022, and beyond. I'm also pleased to inform you that we added a third customer to our growing DMS business. I would like to thank the entire Visteon team for their hard work and dedication throughout the year. I'm proud of the way the team has rallied around the challenges to ensure we continue to deliver for our customers, and in…

Thank you, Sachin, and good morning, everyone. The last two years have been challenging for the auto industry. In this environment, the Visteon team has navigated both the pandemic and the global semiconductor shortages, with resiliency, highlighting the agility of our supply chain while demonstrating strict commercial discipline. For the full-year, sales were $2.773 billion, an increase of 7% versus prior-year, when excluding the positive impact of currency. Production at Visteon's top customers was down 2% underperforming the overall industry by approximately five percentage points. Compared to production at our customers, Visteon's growth of a market was 9% for the full-year, driven by the ongoing transformation of Visteon's product portfolio which our performance was supported by our proactive supply chain initiatives as well as positive pricing for the year. Adjusted EBITDA was $228 million or 8.2% of sales, essentially at the low-end of our original guidance, despite volumes being much lower than anticipated. Compared to prior-year, adjusted EBITDA increased by $36 million or 70 basis points of margin due to higher sales, lower engineering, continued cost discipline and a one-time customer recovery in Q4. Incremental costs related to the global semiconductor shortages were a partial offset. For the full-year, adjusted EBITDA was negatively impacted by $40 million of net costs. As a result of open market semiconductor purchases, supplier price increase, higher freight and logistics costs, as well as product redesigns. These costs have continued to increase throughout the year. But our recovery success rate also improved quarter after quarter, including full-year settlements in Q4. Combined with a strong pricing discipline with recoveries more than offset our annual price reductions. Adjusted free cash flow was positive $22 million in 2021. Adjusted free cash flow benefited from higher adjusted EBITDA and continued capital discipline, partially offset by built in inventory levels…

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

Thanks. Good morning, everyone.

Good morning, Joe.

Good morning, Joe.

Good morning. Jerome, I appreciate that you're not disclosing the rate of recovery better than guidance, and because you're still in active negotiations there, but your pricing was positive I think for two quarters in a row now, maybe you could at least tell us within that 9% growth over market you're assuming for '22 is what type of pricing is embedded there? Is it sort of still the typical negative price downs, or is it maybe a more neutral year?

Yes. Thanks, Joe, good morning. We are -- yes, we're not disclosing pricing for 2022. We're looking at this holistically, meaning that we have price increases on one side recovering for surcharges and cost increases. And then, on the other side, we still want to make sure that our customers benefit from some of the cost improvements that we are able to achieve in our business. So, it's really going to be a combination of both. And as we are going into the 2022, we are looking at that business equation, making sure that, essentially, our margins stay pretty neutral year-over-year. So, that's how we're looking at it.

Okay. And just the -- maybe the tone of the conversations you've been having with your customers thus far?

We've had, I would say, good successes in Q3 and Q4. And these are difficult negotiations, obviously, it's not something that the automotive industry is very used to, it's normally the other way around. But I do think that customer understand that there is a need to pass on this inflation. And we are very active as [technical difficulty] we speak, settling on the 2022 price increases, and just pricing negotiation overall.

Okay. And, Sachin, I noticed in new business wins for the year, infotainment was down to like 9%, I think it was up closer to 20% the year prior. And, obviously, that's been -- that it's been supplanted by some good wins in some of the other products. But I am curious if there has been a change in reception to [indiscernible] infotainment product is indicative of a shift to maybe more Android-based wins or maybe there's some more content or can you describe a little bit what's going on?

Yes, sure. So, what we see happen is that we are seeing more cockpit domain controller interest in the industry, our SmartCore solution. And when we talk about the cockpit domain controller, it includes the infotainment functionality. So, when we have identified infotainment separately in our slides, it's the standalone infotainment, which we believe is going to be, as we go forward here, replaced with more and more cockpit domain controller wins.

Okay. But just to be clear, was that a change versus how you disclosed the year prior or it is apples to apples comparison?

I think it is a slight update to how we have disclosed as compared in the past. What we used to do previously was that cockpit domain controller was not a separate category; it has been a relatively new introduction.

Yes, and Joe, you'll see in the appendix, we also split out with revenue cockpit domain controllers for the first time. And so, we recast the last eight quarters for your convenience.

Okay, thanks very much, everyone.

Thank you.

Your next question is from the line of Brian Johnson with Barclays.

Hi, team. This is Jason Stuhldreher on for Brian.

Hi, Jason.

I was hoping we could follow-up, Jerome, maybe on the 2022 margin outlook. Number one, you mentioned, I think, on the last call about $40 million of chip-related or supply chain-related costs in 2021. Could you just update us on how that finished? And then into '22, you mentioned a $20 million year-over-year tailwind. I just want to confirm, is that a target that includes your embedded assumptions for customer recovery? And I guess what I'm trying to get at is, in 2022, could you kind of quantify what sort of the nonstructural costs are in the P&L, and how that sort of fades out?

Yes, no, thanks. So, the -- just starting with 2021, we did achieve the $40 million number on net cost that we had guided towards, starting from Q2. So, we incurred, in 2021, $40 million of net cost after recoveries as it relates to semiconductor shortages and inflation. As it relates to our guidance for 2022, so we do -- the absolute number that we're guiding to is $20 million negative for the year, and that's again net of recovery. So, that means that we are going from a negative $40 million in '21, to a negative $20 million in '22, and therefore we'll have an improvement in 2022.

So, about a $20 million kind of net [multiple speakers]…

Absolutely, yes.

Yes, understood, which, by the way, seems better than a lot of your peers, so congrats on that, and well done. But -- okay, and then I guess just another question for Sachin. And maybe you could just kind of level-set us on where the -- where your market share is in analogue clusters versus your win rates in digital clusters. And the reason I ask is as we move -- I mean, you've talked about moving out to 2025 around a 25% penetration rate of digital clusters. As I understand it or as I would assume it would be, within EVs, that digital cluster take rate should be close to 100%, and that it's, for an ICE vehicle, a digital cluster is kind of a nice-to-have, for an EV it's pretty much a need-to-have. So, if you could just level-set us on those two numbers. And then as EVs grow and as digital clusters grow in that penetration, how you see the defensibility of that product as others look to [multiple speakers]…

Yes, so the first thing I would like to highlight is that the industry, in terms of new product designs, are going completely all towards digital clusters. So, if there's any analogue clustered business it's kind of more the ongoing business, as more and more of the features, whether it's ADAS or EVs, and other reasons that are driving that adoption of digital clusters, that's just accelerating, and we a significant interest in terms of replacing analogue with digital. Having said that, I would still expect that the tail to be fairly long, especially in the lower segments of the market. Now, in our case, our market share of digital clusters is, I think, the highest in the industry. We continue to win. Most of our wins that we report are for digital clusters. As I've said, if there's any win of analogue, it's sort of a continuation of the business. And that's where we are focused on. Now, today, 2021, we had about just over half of our clusters business come from digital clusters, and that market share is, for us, within our share of the clusters business, it's going to continue to grow. And in terms of defensibility, I think we have a very good platform approach that's very competitive. We today have business with virtually all of the top 15 or even 20 OEMs globally. There are maybe a couple that we don't do digital clusters business with. And I expect even those, as we go forward, we will be able to penetrate. So, I feel very good about our digital clusters franchise, and I see that, over time, as we go forward, however, that that's going to be replaced by more of the cockpit domain controller, SmartCore type of business, but that has some number of years to go.

Thank you.

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

Hey, good morning, guys. Thanks for taking my questions.

Good morning.

Maybe starting with the -- good morning, the net engineering impact. I was hoping you could provide a bit more color on how we should think about the cadence into the first-half of the year. And then what do you see as the engineering expense levels necessary to support that sales ramp to the $4 billion target next year?

Yes, the -- if I step back and look at our engineering expenses, you have to look at the gross expense as well as the recoveries. And if you look at our gross expenses, they've been fairly flat, in fact, in 2021, were have a little bit more lumpiness is on the recovery side. And it's just the nature of our business. We've tried to be as even as possible, but we tend to have a little bit of lumpiness in Q4, and that's what happened this year and as well last year. So, we had quite exceptional recoveries in Q4, and that amounted to $46 million, when our run rate has been closer to $30 million. But if you step back and look at what we've recovered this year, $134 million, it was similar to what we had recovered in prior year. So, that's again, as well a fairly stable number. As we think about engineering, going forward, we will -- we ended up the year with a little bit less than 7% in terms of engineering as a percentage of sales. That's kind of the number we are thinking about going into 2022. And that means with sales growing, that we'll be able to invest a little bit more in areas that are pretty important to us connectivity or electrification, just to give a few example. As we go into 2023, we'll continue to reduce slightly our engineering percentage, and again, that will allow us to continue to invest. So, we'll probably be still below 7% as we get closer to 2023.

And one thing I can add to that is that if you look at the $4 billion in revenue, most of that engineering is actually already behind us. That's really just driven by now, the supply availability and that should get us to that target and all the engineering that we're talking about here will essentially contribute to revenue two or three years from now.

Okay, got it. Thank you. And then, Sachin, the improving semiconductor allocation that you noted, you are, Visteon is a bit closer to that dynamic than some suppliers and just our take, you seem a bit more optimistic than others on how the evolving supply chain dynamic here. So, my question is, are you still seeing disruptions as it relates to component availability? And if so, are they just increasingly isolated to certain categories? And should we expect the spot market buys that impacted you last year, it was that a potential input cost we should be thinking about in the 2022 as well?

That's a great question. And the way we look at it is the overall situation has improved over last year, all the natural disasters that impacted supply, the industry towards the end of last year largely recovered from that, and you saw the result of that towards the end of last year, especially in November, December, that we were able to secure more supply. And as you also know, there are different types of semiconductors. And not all of them have the same dynamic in terms of supply. So, what we are seeing now is that a particular class of semiconductors typically referred to as analog chips are the ones that are more constrained than some of the others, we do expect that constraints will be more severe in the first half than in the second half, we will have to go out to the broker market to secure components to reduce the gap wherever we can. And at the same time, much of the improvements that we expect this year, especially for those analog chips are going to be modest, and will likely come from these modest increases in wafer supply to that part of the chips, and maybe some efficiency improvements in both the fabs and the back end processing. One point that may have not been as well understood is on account of how the industry came out of 2020, 2021 was not a year that had a lot of efficiency in the supply chain itself. So, we expect to see some improvements that come out of just that, and the more attention that semiconductor industry is paying to automotive this year. But the new capacity investments which are happening, by the way, also for analog chips are likely going to really deliver increase supply in 2023, beginning 2023 and it's going to continue to increase every quarter. And even though we may not necessarily achieve equilibrium between demand and supply in 2023, it should be good enough for us to achieve our midterm projects that we have set. Post 2023, I mean, we will wait for the industry, the semiconductor industry to tell us more but my expectation is that, we will be by the end of 2023 more or less in a equilibrium between demand and supply.

Got it, thanks. Thanks a lot, guys.

Thank you.

Your next question is from the line of Aileen Smith with Bank of America.

Good morning, everyone.

Good morning.

First question, if we rewind the clock about a year ago, you were among the more conservative suppliers in your production assumptions that was underlying your outlook. And now if we look at 2022 your production assumptions appear to be some of the more aggressive calling for up 9% year-over-year versus some suppliers that are around the mid single-digit range, can you help us bridge the gap in terms of what you may be seeing around the improvement in the supply chain and the production environment versus others or would you just characterize it as your outlook may be more realistic, and others may be more conservative?

No, I think we have been really, we try to be very thoughtful, first of all about how we look at production outlook and a year-ago, when we were looking at the semiconductor supply situation, of course, we could not have anticipated the natural disasters that happened during the year. But if you were to take the impact of those out, we would have been very close to our 80 million unit production forecast that we had at the beginning of last year. Obviously, we all know what happened, there were the natural disasters, Texas, in Japan, and then the impact of the COVID on the backend processing that impacted the supply. But short of that we would have been at a part where we believe we are forecasted. So, now as we look at 2022, we again are taking a very thoughtful approach and are very closely aligned with the semiconductor supply base, we work with virtually all of them very closely. And so, we believe that, number one, we are in a supply constrained environment to the demand is there, as you know, as well, there's a strong demand from consumers, the whole dealer inventories and pipelines are depleted. So, it's a environment that will be driven by how much material is available and mostly semiconductors. So, if you were to take out the impact of the natural disasters from last year, that should give you somewhere between 8% to 9% of improvement on the supply, and then, on top of that, to comment that I just made about the efficiency of the supply chain, which wasn't necessarily very high, if you look at utilization of the fabs, it wasn't where you would expect them to be. When you factor that in 2022, then you would be at a point where I think we will not see less than 20 million units per quarter in 2022. This is, of course, barring any unforeseeable events that could happen this year as well, which we are not factoring into our outlook. We don't think that we should be unnecessarily conservative. We believe that this 9% improvement is within reach and that's the basis on which we have made our outlook.

Okay, great. That's helpful. And then second question, I wanted to follow-up on slide six in terms of the $5 billion new business wins, and specifically is your DriveCore Autonomous product in that number at all, the way I read it, DriveCore, maybe in that 4% other category, which is pretty small in the grand scheme of things. So, if that is the case, can you talk about any traction or interest that you're seeing from your customers on DriveCore and if and when you could translate into new business wins because obviously, the competitive environment, there's really fierce?

Yes, the first thing I would say is that just to clarify, it is not in the $5.1 billion, just to be clear, but here is how we see the industry evolve, and why we are still excited about the fact that we have DriveCore and what it means potentially, to our business. So, one clear trend that is emerging is that there is an integration of some level of ADAS functionality with the corporate electronics. So, infotainment and cluster, which is already integrated, is now seeing the next level of integration with what I refer to as informational ADAS. So, this is not ADAS that is taking control of the vehicle. So, for that you still have a dedicated ADAS system. But there's a lot more camera based processing that's coming into the vehicle to deliver more awareness, a 360 degree awareness of the environment around the vehicle. And that kind of functionality uses the same underlying technologies that are used to camera based object detection and classification, which is part of our ADAS technology stack. So, we have that technology. We integrated that into our next generation SmartCore product. That was one of the things that we demonstrated at CES earlier this year. And we are already in discussions with certain OEMs that see the same sort of path, the same trend. On the other side, you see the silicon industry now offer silicon system on chips that have integrated neural processing units of NPUs which enable us to while running infotainment and cluster, also integrate the ADAS stack. So, we believe as we go forward, it's going to be very important to not only have cluster and infotainment, but also some level of camera-based processing ADAS processing whether it is occupant monitoring, driver monitoring, outside environment detection, and offered features like Sentry Mode, for example, which we have now the possibility on account of this ADAS tag that we have.

Okay, great. That's very helpful color. Thanks for taking questions.

Thank you.

Your next question is from the line of Ryan Brinkman with J.P. Morgan.

Hi, good morning. This is Ben [indiscernible] on for Ryan Brinkman. Thanks for taking my questions and congrats on a good quarter. My first question is we see a lot of interest lately for Visteon telematics business. And I thought to ask how much of your revenue comes from telematics right now? And how big do you think this business segment could be? And also as OEMs are increasingly driving electrification and next-generation electrical architecture, how will telematics benefit from this trend?

Yes. The first thing I would say is that you look at the big -- megatrends in the industry, it's about cars being connected and electrified. And connected means a few different things. So, you have a specific telematics functionality which is essentially the modem that connects the car to the cloud. And obviously, every car already has that -- every new car. But then, what's also very exciting is what we have seen that more and more of the infotainment is also implemented now with android -- an android operating system. So, it's only natural that cars will also now require apps and other services such as OTA as we go forward. So, we have developed our and we launched it at CES our own cloud services starting with our app store. We are working on an OTA service. And there are additional services being planned. So, this telematics offering from Visteon is going to be integrated into our in-car SmartCore system. So, you have an end-to-end solution. And we expect to be one of the few in the industry to be able to offer this complete end-to-end solution. We already have today over 50 app developers signed up on our app store. And we expect to be able to sign up more. And this is to me a very exciting area of development for the cockpit. You mentioned electrification, obviously that's a very big trend right now that we are all aware of. And we have a very competitive battery management technology and a very strong [indiscernible] roadmap to keep it current. So, we believe we have a very good mature product portfolio now that addresses the key megatrends in the industry. Now specifically in terms of our revenue breakout, you don't necessarily breakout our telematics business only to reflect the modem portion of it that's interesting. Yes, we have a small [indiscernible] there, and what's more interesting to me is the integrated services -- online services together with our SmartCore solution.

Great, thank you. That's good to hear. My second question is how much of incremental commodity and labor inflation costs are you expecting this year? And of those costs which are the costs that are recoverable? And which are the costs that are non-recoverable? And if you could please remind us how many percentage of this cost can you recover through your mechanism? Thank you.

Thank you. As I mentioned, we are -- we are not disclosing in 2022 the amount of inflation that we are forecasting. It's as we said, we are still in the middle of negotiating with customers and suppliers. So, we've recovered a fair amount in 2021. Most of that was in Q3 and Q4. And based on the successful negotiations, we anticipate that we will be able to recover a fair amount as well. And we've given a net negative $20 million. For us, it's largely around semiconductor shortages. I am afraid these are kind of the costs that are essentially contemplated in this number.

Great, thank you.

Thank you.

Your next question is from the line of Colin Langan with Wells Fargo.

Great, thanks for taking my questions. Just thinking about the 9% growth-over-market, you've talked pretty clearly over 2021, how customer mix was a pretty big headwind. I think it was 5% for Q4 alone. How much is that helping, that 9% growth over market, in terms of customer geographic and platform mix, and how much is just purely brand new business wins?

Yes, so, first of all, Colin, we are not assuming any customer mix, it's neutral in our assumptions for 2022. And if you look at our geographic mix, I would say that we are similar to 2021, where we saw double-digit or close to that growth over margin almost all of the regions in Q4, we do expect a similar performance in 2022 as well. I think what has happened, which I believe I made comments to that effect in my prepared remarks, is that some of our legacy business that used to cause us issues in the past, most of that is flushed from our system now. So, the benefits of these new product launches, and we've had -- we've reported, over the last couple of years, quite a few of them, are really what's helping drive that growth over market. It's virtually -- almost all of it is new product launches. And so, as we expect an improvement in the supply of semiconductors, we expect that to help us across all of the regions.

Got it, that makes sense. And then, as I look into the 2023 targets that you've reiterated today, I think if my math is right, it's 23% year-over-year growth at the midpoint of our 2022, and on the market assumptions only up 6% as well, so that's 17% growth over market. What's driving that? Is that just a giant chunk of new business wins? Is that assumption that some of the customer mix headwinds you had last year finally start to recover in '23, how should we think about that?

Yes, so, Colin, the first point I would make is that if you look at the demand, we have the demand already, so it's not based on any assumption of incremental new business wins. If you look at the assumptions, it's almost a similar performance with an improvement in our growth over market, as well 2022. We do expect our growth over market performance to accelerate with more supply. As we have mentioned before, the secular trends are all very beneficial to Visteon. And on top of that, because we'll still be in a relatively constrained environment, we expect to see OEMs continue to prioritize higher content vehicles, like they have been, also in 2023. So, we believe that if the supply improves the way we believe it should, and we'll know more through the rest of the year, but if -- we think it's going to improve the way we think it will, it should be well within reach.

Okay, all right, thanks for taking my questions.

Thanks, Colin.

And this concludes our earnings call for the fourth quarter and full-year 2021 results. Thank you, everyone, 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 fourth quarter and full-year 2021 results earnings call. You may now disconnect.