Good morning. I'm Ryan Wentling, Vice President of Investor Relations and Treasurer. Welcome to our earnings call for the Second Quarter of 2024. 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. Thank you for joining us. Now I will turn the call over to Sachin.

Thank you Ryan, and good morning everyone. Thank you for joining our second quarter 2024 earnings call. I would like to start with a summary of our second quarter performance as outlined on Page 2. Visteon delivered another quarter of strong execution with top line growth, margin expansion and free cash flow generation. We reported records for both quarterly base sales and adjusted EBITDA and delivered high single-digit growth over market. This level of growth over market is impressive considering the market headwinds this quarter. Sales were slightly over $1 billion driven by strong demand for both digital cockpit and electrification products. We saw double-digit year-over-year increases for digital clusters and displays, while electrification grew due to ramp-up of GM's EV production. Adjusted EBITDA increased to $136 million on higher volumes, strong operational execution and focus on cost. Adjusted EBITDA margin was 13.4%, which is a 270 basis point improvement year-over-year when removing the impact of last year's recall charge. Adjusted free cash flow was $28 million in the quarter. We also strengthened our foundation for future growth. We launched 15 new products in the quarter and won $1.7 billion of new business. We continued to diversify our customer base with new product launches and business wins with OEMs in Japan and India. Carmakers in Japan and Korea are currently underrepresented in our current customer base, and we believe there are significant opportunities to expand our business with them. Overall, I'm pleased with our second quarter performance, which was in line with our expectations, and puts us in a solid position entering the second half of the year. Turning to Page 3. Demand for our digital cockpit and electrification products was strong in the quarter. The powertrain agnostic nature of our digital cockpit products helped drive sales growth as strength…

Thank you, Sachin, and good morning, everyone. Visteon delivered solid results in the second quarter. We continue to execute well with 15 successful product launches including on the Toyota Camry our first global program launch with Toyota. We won $3.1 billion of new business wins in the first half. These wins further diversify our customer base, especially in rest of Asia with $1.8 billion of wins with Japanese and Indian OEMs. We also delivered another quarter of excellent operational execution and commercial discipline. Which led to record adjusted EBITDA and a margin in excess of 13% for the quarter. I am very proud of our track record of consistently expanding our margins. Lastly, we continue to focus on cash flow generation and delivering on our capital allocation priorities. Our strong balance sheet with a net cash position will allow us to balance organic investments, selective M&A and capital returns to shareholders. Turning now to the second quarter's financial results in more detail. Q2 sales were slightly over $1 billion in line with our expectations as communicated last quarter. Sales benefited from our market outperformance, generated from new product launches, partially offset by lower customer volumes and lower recoveries. Our market outperformance was the strongest in the Americas with growth of market in excess of 20%, solid outperformance in Europe and rest of Asia excluding China, while China significantly underperformed the market. We saw year-over-year growth in sales across digital clusters, SmartCore, displays and electrification products. It is worth noting that after several quarters of declining display sales, as a result of the BMW display roll off, our displays business delivered 17% growth year-over-year in the second quarter. We expect the display's product line to continue to deliver growth in the coming quarters. Customer recoveries declined year-over-year, as a result of…

[Operator Instructions] Our first call comes from Luke Junk with Baird.

Hi. Good morning. Thanks for taking my question. For my first question just hoping you could segregate cluster growth in the second quarter and your expectations through the back half of the year, just a lot going on here of digital cluster growth versus analog and hybrid. I think there's some product sunsets that we're seeing in the numbers and launch, delays or slower ramps. Can you just kind of square…

Sure. Sure.

… what we saw in the second quarter and then how that steps up in the back half? Thank you.

Absolutely, Luke. So yes, first of all as you know, digital clusters have been a very strong product for the company now for the last several quarters. And even in Q2, we saw our sales of digital clusters grow good double-digit, year-over-year in a lower vehicle production environment. And it was one of the main drivers of our market outperformance. Today clusters overall make up about 40% of our sales. And of that, digital clusters, is about 80%. So the majority of what we do today in clusters are digital. And we are a clear market share leaders in that product category. And we expect this performance to continue. But I would like to also mention that what we are seeing in the industry is that in the mid-to-upper end of the market we are seeing more a transition towards Cockpit Domain Controllers and displays. And we are seeing also as a result of that, this digital clusters to migrate more and more into mass market vehicles. And we expect that transition to continue as we go forward from here. So this is why as you have seen, our displays performance has been very strong this year, the first half. And if you go back, last year, our SmartCore cockpit domain controller wins were also very strong. In fact, I believe that was the largest portion of our $7-plus billion in new business wins. And so with displays, being a product that requires shorter time to launch following the cockpit domain controllers which take longer to implement and launch, you see the sequence of CDCs followed by displays in the mid to upper end of the market and the migration of digital clusters into more and more mass market vehicles. We still feel that there's a lot of runway ahead for this product for the foreseeable future and we expect that to continue to be a leading product for us.

Thanks for the Sachin. The mix of digital customers is helpful. For my follow-up, maybe you or Jerome, just hoping for some high-level thoughts on following the updated 2024 expectations through to your 2026 midterm targets? Thank you.

Yeah. Let me talk about that, Luke, and I'll be happy for Jerome to also add any more color. But first of all, I would say that it is a little early for us to talk about 2026, but I want to share some of the things that we are looking at here as we look at the midterm. First of all, I would say that if you look at the last few years, we have demonstrated that we can grow our sales even in a flat LVP environment, right? If you go back to, say, 2019 to 2023, LVP was essentially flat at roughly 89 million units globally. And our revenues over that period of time grew 30% to almost $4 billion, and our EBITDA improved 300 basis points to about 11%. Now this year, we were expecting that performance to continue. But as we have discussed in our prepared remarks, the reduction in the outlook for customer vehicle production as well as the dynamics in China, has meant that despite those things, we will be in a position to deliver a flat, flattish performance 2023 to 2024, still representing a growth over market on account of the lower production expectations. Now, what I would also mention is that we are adapting to these market changes. We are first expanding our customer base in passenger car market to OEMs that historically have not been a big part of our revenue, for example, OEMs in Japan and India. Today, those set of OEMs make up about 5% of our revenue. And if you look at the production side of things, they make up almost 25% of the global passenger car production. So we see a lot of opportunity there. We're also focusing on two-wheelers and commercial vehicle segments. And in…

Understood. Thank you for that and we’ll stay tuned down. Thanks, Sachin.

Thank you, Luke.

Our next call comes from Goldman Sachs.

I guess -- it's Mark Delaney, and thanks so much for taking my question. I guess to start hoping to better understand the second half EBITDA outlook. Jerome, if I heard correctly, you talked about a normalized EBITDA margin. If you adjusted for some of the one-time factors would have been more like 12%. I think second half revenue is pretty similar to first half and yet the EBITDA margin looks like it's implied to be in the mid-11% range. So, maybe talk about some of the factors impacting EBITDA in the second half of this year versus the first half? And how should we think about the second half EBITDA as a potential starting point to think about modeling 2025? Thanks.

Absolutely yes. Good morning, Mark. So let me maybe start by saying that we are very pleased with the way Q2 performance shaped out. We performed better than anticipated. And if you step back and look at essentially H1, we've been performing better than what we had anticipated even after normalizing for some of the commercial one-timers that I highlighted in my prepared remarks, which represented about 50 basis points of benefit to EBITDA margin in the quarter. So, to put things in perspective, we were planning to be slightly below our EBITDA margin midpoint of 11.8% for H1. And we've ended the first half with 12.2% at face value. And if you normalize that with the one-timers closer to 11.9%, so closer to the 12% that you were referring to. As we go into H2, we're expecting this level of performance to continue on flat sales as you said per our revised sales guidance. So what will be happening, we'll be slightly increasing our engineering and SG&A spending in H2 versus H1, but a little bit less than what we had originally anticipated. And this good performance will combine with as well the good cost control of our SG&A and engineering will allow us to raise our EBITDA percentage to 11.9% for the full year from that 11.8% that we had previously guided towards, so $465 million for the full year. When you look at it versus prior guidance, it's essentially a set of decrementals that are close to 10%, which we believe is a pretty good performance given the challenging environment we're in.

Got it. Thanks for all that color. Maybe a strategic question. There's been a lot of news out there OEMs looking to partner on electronic architecture or some of the big tech giants looking to maybe more with software. Maybe if you could talk a little bit more on some of those things. I guess the one I wanted to better understand was, specifically as you think about the digital electronics in the car, you had Apple with the next version of CarPlay, you're looking to have more influence over the broader set of digital controls in the vehicle. I'm hoping to understand how that maybe impacting OEMs want to work with Visteon, maybe there's some opportunities for you, maybe some incremental challenges. If you could maybe talk about what you're seeing in regard as the digital electronics and the software ecosystem continues to evolve. Thanks.

Sure. So first of all, I would say that all these new features and capabilities that CarPlay and other technologies bring, they're actually driving more content into the cockpit. And that's great for us, because that requires the OEMs to often redesign and reimplement some of these capabilities, because they were not conceived of at the time that they build their earlier generation systems. And more often than not, we see more of these technologies demand higher computing resources and power. You mentioned CarPlay, but one of the big topics that we see, that's going to impact the industry is AI and generative AI, in particular, coming into the cockpits of the future. Now that requires a significant level of uplift in terms of compute resources and therefore, the content and value that we can bring, but that's also going to be first entering into the space at a particular point in the market in terms of segmentation and probably not necessarily go across all of the vehicles on account of cost at least initially. So that -- all those things that are coming in for -- we look at them as a net positive for us. You also asked a question about this licensing of vehicle platforms. You probably are referring to the Rivian VW deal. We look at those as essentially OEMs trying to figure out for the major term, how they can catch up to the state of the art in terms of the vehicle electrical architecture. It does not have as much to do with what I would call the top hat which is where we play. Now if you look at VW as an example, they have 15-plus brands in their portfolio. They cannot take an electrical vehicle architecture from anybody and just spread it…

Thanks so much for all those thoughts. I’ll pass it on.

Thank you.

Our next call comes from Guggenheim.

Yes. Good morning It's Ron Jewsikow, Guggenheim. Sachin, Jerome, you highlight the $1.8 billion in year-to-date wins with Japanese and Indian OEMs. I guess we're particularly focused on the Japanese part but any color or even firm numbers on how that $1.8 billion compares to prior years? And I guess how big of an opportunity do you think this could be because traditionally it's a pretty high bar winning business versus the currency suppliers?

Yes. No that's a great question. So if you look at – I will particularly focus on Toyota because of that group of OEMs they represent the biggest opportunity. Now as you know, Toyota has some very high profile, high volume vehicle brands the RAV4, Camry, Corolla represent these marquee brands that have very high volume. And until I would say about three years ago we had roughly maybe very small I would say single-digit million dollars of revenue with Toyota on some ancillary products but nothing in the cockpit. And our first launch with them was for the Corolla in China. And that was a regional product, limited volume. They were essentially testing our capabilities. The success of that launch allowed us to participate in the bidding for the bigger Camry clusters. And then there are two clusters that these products typically offer. They have a upper end and the mass market. And we were very pleased that we won the mass market a higher volume cluster product that we launched in the quarter that we talked about. So following that there are multiple, the regional launches as well as further more global program opportunities with Toyota, right? And Toyota represents over 10% of the overall production of vehicles. So – and yet today that's hardly even factors into our revenue list. So huge opportunity. And we see the same thing with the other guys that we talked about right Honda, Hyundai, Maruti, Suzuki. So that's where we are really putting a lot of our energies on. We were anticipating that the market in China is going to be a lot tougher given what's happening there and our energies are better focused and served on these OEMs and our products and technology is also fit where they see their vehicles go. So we're pretty happy with how it has turned out. And I should also mention I mean the Japanese OEMs in passenger car markets obviously is our biggest chunk of our revenue. But two-wheelers represent a huge opportunity as well. It has not been the focus so far because of mainly the nature of that product did not really allow for electronics with a lot of power consumption that came along with it. Now with that segment also turning to electrification, that's no longer the barrier and we can do a lot more with electronics and software than ever before.

Thanks for that. That's really helpful color. And then a follow-up question on the Chinese market broadly, certainly the local versus global mix issues in China are not a Visteon-exclusive issue to navigate. But I guess from our vantage point, it's pretty clear that global OEMs have a product issue in that market competing with I would say the more tech-forward Chinese local OEMs on things like displays and software. I guess my question is, these are things that I think Visteon can clearly help with. But what are your discussions like with the global OEMs about their plans in China to maybe drive more tech-forward offerings?

No that's a great question. And let me try to explain, what we see happening today in the market in China. So it's clearly an earlier adopter market in terms of Tech and they are very keen on bringing latest and greatest technologies into the vehicles, at cost points that were considered prohibitively high, by the global OEMs. The global OEMs by definition have their sights set on the broader markets and some of the tech doesn't necessarily carry the same appeal in those regions, as it does in China which even from a consumer perspective is a lot more accepting of new tech than many other parts of the world. So the problem that everyone faces is, how do we differentiate and bring the right amount of tech for the various markets that is appropriate for those different regions? And that has been the challenge that they faced. And therefore they were a little late. But the global OEMs recognize this, just like we do. And they also recognize that they need help because their approach of building a vehicle for the globe doesn't really work in this kind of a market environment. So that's the first thing. Now what we see is that, in the long run it's very likely that the German and Japanese OEMs will figure out a way to get to that point. It might take them a little bit longer than we would all like. But they will get there. And our objective is to work very closely with them to work side by side and bring those types of solutions in China and different solutions for rest of the world. Now within China, with the domestic OEMs, we have been gradually increasing our portfolio of domestic OEM customers. And we've been very selective and careful about it. There are a lot of OEMs. We do not expect that most of them will actually be able to sustain their businesses through this very challenging time. But there will be some that have that sort of achieved that escape velocity. Geely clearly is one of them. The issue we are facing with Geely, I think is more of a temporary thing that is particular to the time that we are in with the domestic demand being a little soft, but we're also trying to expand to other OEMs domestic OEMs in the top five lists in China leveraging our technology capability. What we have to offer with respect to high-performance compute the AR -- the AI, that I talked about is probably going to be deployed in the market first in China, before it gets deployed anywhere else. And that's where we are investing and that's where we think we will be able to make some breakthroughs in the coming quarters.

Thanks. I appreciate the color. I will hop back in the queue.

Thank you.

Our next caller is Bank of America.

Hey. This is John Babcock. I just wanted to ask I guess quickly yeah, I mean one of the things we're hearing obviously from EV OEMs is that they want to kind of keep costs under control. I mean Ford, has talked about this other OEMs have talked about it. Out of curiosity I mean are you getting sense that OEMs are starting to target electrification products as an opportunity to lower costs? Or what are you kind of experiencing on that front?

Yeah. Great questions. And what we see is that the first generation of EVs -- okay they've all realized that they're not competitive to some of the Chinese competitors in terms of the cost. And a lot of it is actually cost that is coming through design. And so what we see is a lot more willingness on part of these OEMs to engage in discussions about how to lower the cost. Now there are certain requirements I would say that would necessitate a higher level of cost in say in US and Europe versus some of the Chinese vehicles, but the fact does remain that there is a cost disparity and that they will require updated designs with more modern technology, more integration to be able to achieve some sort of a parity with China. That's precisely what we see as our differentiation. And we don't want to be just one of the 10 suppliers that can do an OBC an onboard charger or a DC/DC converter. We want to be one of the few that can do a three in one, or four in one, or five in one type of a system. We started with BMS because that was kind of the most natural stepping stone for us given the similarity with what we did here at clusters mainly with ASB. But clearly where it needs to go to is more integrated solutions, more silicon-driven solutions. Now the hype has kind of cooled a little bit in terms of the growth expectations, but we all expect is to grow more steadily and it will be one of the powertrains of choice besides others. And we hope to have our fair share of that business as we go forward. I'm actually not too displeased with the fact that the industry is taking a little bit of time, because it wouldn't be -- we would not have been ready. And this time it really gives us the chance to take a step back and come up to speed on some of the tech through the activities that we have including the joint venture that we have with Shinry.

Okay. Thanks for that. And then also I mean one of the things I have noticed at least going to car shows and seeing what's out there in the market it seems like there are several OEMs that are perhaps lagging a little bit in terms of putting in larger displays and also even putting in more advanced technology. And I just want to get your view on what it's going to take some of these OEMs to adopt some of the larger more complex displays and technology?

I think it's just a matter of time. I don't think it's the lack of desire. It's just an execution pace that some of these OEMs is much different than what we would like for sure. But we see it is going in that direction gradually. It is a matter of cost for some of them. They play in segments that in some cases cannot absorb fully the increased cost. And for those reasons we have also been very focused on driving greater vertical integration of those products. Displays today are very high priced on account of the cost that they take. And our approach has been to try to bring more of that content under Visteon control. So we can take some of the other tiers two, three, four suppliers out of the picture, and thereby, lower the total cost to the OEM represents still a very good opportunity for us. So we often talk about vertical integration as the term for many of those things whether there are modules with semiconductors or displays. The idea is to take more of that cost into Visteon's control, and thereby drive more affordability of those types of technologies. Without that, it will just remain at the upper layers of this vehicle market but we believe that the bigger opportunities are in the mass market segments.

Okay. Thanks.

Thank you.

The next question comes from Dan Levy with Barclays.

Hi. Good morning. Thank you for taking questions. I apologize if this has been asked already, I joined late. But maybe you can just talk to the impact of China not just beyond 2Q where we know is a drag there. But how much the weaker China outlook is being factored into the outlook for the remainder of the year? And then maybe if you could just talk about -- you still expect -- or you gave an update earlier in the year on low double-digit growth over market through 2026. Just given how we've seen China evolve and the continued pressures maybe you can talk about what offsets do you have there on the China front and the customer mix?

Yeah why don't you start Jerome and then…

Yeah, let me maybe size first the adjustment to the guidance on the sales side. So we've upgraded -- downgraded, sorry, our sales guidance by about $200 million. About a third of that is coming from volume. We think that a little bit more than -- another third is coming from China and then a little bit less than the remaining would be -- a little bit less than a third comes from the EV mix that we see as well as the program delays that we've got with one customer. So that gives you an idea of the of the size of China about a little bit more than a third of our guidance revision on the sell side.

Yes. So -- and to the question about if you look beyond 2024, what is the impact of China and the offsets. China, if you look at last year, domestic China was about 15% of our revenue, which has come down this year to I would say 11% 12% of our revenue. So, we have a couple of points of impact that we have to make up for. And yes there are offsets, especially on electrification, BMS as well as our cockpit products on EVs that we will have to get into more detail in terms of the vehicle build plans for 2025 and 2026. As you know even though there has been a lowered expectation of growth of production of those vehicles for regulatory reasons, OEMs have to continue to build our EVs, okay, without that, they will be facing very significant penalties which are going up with each passing year. So, we do expect growth. We'll have to figure out exactly what that represents that will offset some of the negative impact that we see in China. And then I mentioned our 2-wheelers and commercial vehicles perhaps, Dan, before you joined. So, we have been really focused on it the last couple of years. We have made good progress in winning business and launching products and that will also be a net positive. And then more perhaps for 2026, we are also looking at building our engineering services business. We have a very strong capability in software in automotive technologies both for the cockpit as well as for BMS and electrification. And we are able to now contemplate offering engineering services to support some of the software development plans of OEMs. So, those are some of the things that we see as positive that we will have to factor into what we will ultimately then come up for our midterm guidance.

Great. Thank you. Just a follow-up and again I apologize if I missed this earlier. The -- one of your customers just gave some comments on a podcast about some of the challenges of transitioning to the software-defined vehicle because of sort of these widespread ECs and really the fact that there's just a proliferation of suppliers that each own their own ECUs and the challenge of getting through OTAs. And I think this gets to some of the other challenges we've seen for some of the other automakers in making the transition. What is the tone or tenor of the dialogue that you've had with customers on making this transition, knowing that there's this desire for the OEMs to own this but obviously them recognizing that they've had some of their own challenges in making the transition on owning -- apologizing if you've already talked to this.

No, it's a great question. And I would say that if you were to go back two years, three years ago, there was a lot of talk about how OEMs would hire these mythical thousands of engineers to do their software themselves and build all of those technologies on their own. That tone has changed dramatically. Now, there is a sense of realism in that outlook. We understand that the problem is only getting bigger by every passing quarter. It's not getting smaller and their capabilities are far from being able to deal with it. So, what is clear from -- even some of the things that we have witnessed in terms of OEMs trying to license vehicle platforms from start-up OEMs, there's a clear indication that they cannot do it themselves. There's no reason to do it otherwise, right? And yet, those things are only a half step, because even if you license you're getting a snapshot at a point in time, while the industry keeps evolving. So we think that this problem cannot be easily dissolved especially for legacy traditional OEMs that have many brands different segments that they cover, it's not a simple thing as to say, let's build one software that will cover everybody because that's not realistic. So the problem isn't becoming smaller it's growing and that's what we see as our opportunity.

Great. Thank you.

The last question comes from Wolfe Research. Q – Shreyas Patil: Great. Thanks so much for taking my question. This is Shreyas Patil. Maybe just one. First of all, when I look at your bookings overall $3.1 billion so far for this year, on track to be over $6 billion for the full year. I look back over the last several years, even going back to 2017 2018 you've been booking at around $5 billion to $7 billion, a year. We tend to think about -- I tend to think that if you're consistently booking at that level, you should eventually get to that level of revenue. I understand volume has been less than expected in recent years. Obviously, we had COVID. But how do we interpret these bookings and what they mean for where revenue will go for Visteon in the coming years?

Yes, Shreyas. I would say, that in general, again, the lots of details. But in general, that is the right way to think of it, right? But as you know, there have been a lot of changes somewhat disruptive including the latest what we are seeing in China, that does affect that linear sort of thinking about how the revenue should rise up to the booking level. The biggest impact, if you go back, actually has been the volume expectations, okay? So if you think about even 2019 to 2023, our customers' vehicle production and I'm not talking about outlook here I'm talking about actual, went down by 10%. So the 10% drop we had to know the makeup for and our revenues increased 30% over that period. So if you were to have even a flat line and mind you, we were actually in the bookings because that's what the customers gave us, the expectation was that there would be a steady 2% to 3% production growth, right? So if you really look at where we should have been versus where we were at over that four-year period it's a swing of almost 17% 18% in terms of production alone. Now if you were to add that to our 2023 revenue, we would have been closer to where we would have been if you were just to assume that -- of revenue growth. So the biggest impact has been LVP. And then there have been some other smaller impacts that have created a little bit of a headwind. Now, what's really good here at Visteon, is that we have been adapting to this market dynamics and finding opportunities for growth, whether it is looking at OEMs that have not been part of our top 10 list or the two-wheeler market or the commercial vehicle market and engineering services. So, we see plenty of pools where we can grow profitability in this time period. That to me, that's part of what we do. The market is the market. We have to react to it. And I think we have done a pretty good job of positioning the company for growth, even with all of the things that I mentioned. Q – Shreyas Patil: Okay. That's helpful. And then maybe just Jerome, just a quick question on -- I believe you mentioned that the decrementals on the lower revenue is about 10%, which sounds quite low, but just maybe if you can help explain what some of the offsets are on that?

Yes, absolutely. Yes. So we've been performing better than anticipated in the first half. Q2 was a demonstration of that. So, we expect this performance to continue. That will obviously help the decrementals as we reduce our sales for the guidance. We also are helped by these commercial one-timers that represented about 50 basis points for Q2. So, the two combined as well as a little bit of a revision of our spending on SG&A and engineering as we go forward, will help us to get to 10% as opposed to have the 28% that we normally have. Q – Shreyas Patil: Okay. Great. Thanks.

Thank you.

Thanks, Shreyas

This concludes our earnings call for the second quarter 2024. Thank you everyone for participating in today's call, and your ongoing interest in Visteon. Thank you.

This concludes Visteon's Second Quarter 2024 Results Earnings Call. You may now disconnect.