Title

Presentation

Visteon Corporation beats earnings expectations. Reported EPS is $2.4, expectations were $1.7.

Chris Doyle: Good morning. I’m Chris Doyle, Vice President of Investor Relations and FP and A. Welcome to our earnings call for the first quarter of 2025. Before we begin this morning’s call, I’d like to remind you that today’s presentation contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed. Please refer to the page titled Forward Looking Information in our earnings material for more detail. Presentation materials for today’s call were posted this morning on the Investors section of Visteon’s website.

You can download them at investors.visteon.com if you haven’t already done so. Joining us today are Sachin Alwande, President and Chief Executive Officer and Jerome Mrouquet, Senior Vice President and Chief Financial Officer. We scheduled the call for one hour and we’ll open the lines for questions after Sachin’s and Jerome’s prepared remarks. Please limit your participation to one question and one follow-up. Thank you again for joining us. Now I’ll turn the call over to Sachin.

Sachin Lawande: Thank you, Chris, and welcome back to Investor Relations. Good morning, everyone, and thank you for joining our Q1 2025 earnings call. Visteon delivered another quarter of strong operating and financial results, illustrating the strength of our business and long term strategy. Net sales of $934,000,000 were essentially flat to prior year, but outperformed underlying customer production volumes equating to a growth over market of 10%. Adjusted EBITDA was $129,000,000 representing a margin of 13.8, another record for us and adjusted free cash flow was $38,000,000 Our performance in these key financial metrics represents an outstanding start to the year. The performance of our display product line was a standout in the quarter, both in terms of sales and new business wins.

Our multi year investments in building best in class display capabilities for automotive are paying off and Visteon has emerged as a top supplier of large displays to the industry. Our introduction of new cockpit technologies at the Consumer Electronics Show in Las Vegas in January was well received. In particular, our industry-first solution for AI for the cockpit generated significant customer interest. And while we are laying the base for a solid long-term future, we also had significant traction in the near term. New business wins came in at $1.9 billion for the quarter, which is a great start to the year, led by displays and digital cluster product wins with carmakers in Asia and the US. Operationally, Q1 was also a strong quarter. On a year-over-year basis, we grew margins by 290 basis points despite a muted production environment.

And lastly, we ended the quarter maintaining one of the strongest balance sheets in the industry, positioning us well to navigate potential tariff-related industry headwinds. Turning to page three. The company did very well in executing our strategy for long-term growth in the first quarter. Just as a reminder, our strategy is based on product and customer expansion, with a focus on faster-growing technology domains in automotive, supported by an industry-leading cost structure. This page highlights some proof points of the progress we made in Q1 in executing our strategy. The trend of software-defined vehicles continues to evolve, with AI driving the next round of innovation in voice and vision technologies for the cockpit. In addition to high-performance electronics, this trend is also driving the need for larger displays to render content.

With the increasing number of sensors such as cameras, radar, and LiDAR in and around the vehicle, displays are the primary interface to show safety, convenience, and entertainment content to the driver. In Q1, we capitalized on this trend and made meaningful progress in growing our displays business, both in sales and in new business wins. Moreover, our growing capabilities in the design of large and complex displays are now recognized as industry-leading. We also made progress on our customer and market expansion. We have built a strong book of business with Toyota over the past couple of years, and in Q1, we extended our collaboration with this customer. We won a new digital cluster business that will launch on five different vehicle models, plus a displays business for the luxury brand.

And reinforcing our strategy of expanding our business with targeted growth customers in the rest of Asia outside of China, we won new business with six different OEMs in that region in the first quarter. For China, we secured our first business win with Cherry, one of the fastest-growing domestic OEMs, for a large cockpit display. With a slowing domestic market, Chinese OEMs are increasingly looking for opportunities outside of China. Visteon is well-positioned to support them. They are also carefully expanding our business with Chinese OEMs to offset the decline in market share of global OEMs while ensuring profitable growth. We also made progress on our expansion in the two-wheeler market. In Q1, we secured digital cluster wins with Hero Moto Corp and Royal Enfield, two large two-wheeler OEMs in India.

These wins illustrate the growing trend of digitalization transforming the two-wheeler market, offering incremental growth opportunities for Visteon. As we advance our growth strategy, we are doing it in a disciplined way. We continue to leverage our platform-based product development and best-cost global footprint to drive margin expansion and cash flow generation. As noted previously, our strong balance sheet differentiates us from many other suppliers and allows us flexibility in our capital allocation approach. Turning to page four. Industry production volumes increased 1% in Q1 while production at our top customers decreased 4% on a revenue-weighted basis. The largest decreases were in North America and Europe, where customer production was down approximately 6% in both regions.

Sales for Visteon were up $1 million compared to the prior year, with all regions increasing except for China. We saw strong performance in The Americas and Europe driven by the ramp-up of recently launched display and infotainment products. That drove significant market outperformance. In Europe, we also benefited from the continued growth of our commercial vehicle business. In Asia, our footprint in India continues to expand driven by the success of our partnership with Mahindra, and the growth of our two-wheeler business. Finally, the launch of our digital cluster program with Toyota also contributed to the growth of our market in both The Americas and the rest of Asia. In China, as expected, we saw a year-over-year decline mainly due to the market share loss of global OEMs, and the lower sales with the domestic OEM due to lower export volumes.

On a sequential basis, our sales in China declined due to seasonality, in line with industry production. It was encouraging, however, to see that in Q1, the market share for global OEMs did not decline further on a sequential basis and, in fact, modestly improved. Overall, our Q1 sales performance underscores strong demand for our technology, our ability to execute successful launches, and meaningful progress against our strategic priorities with target growth customers, commercial vehicles, and two-wheelers. Turning to page five. We booked $1.9 billion in new business in Q1 led by displays and digital cluster product wins. The right-hand side of the page highlights some of the key wins in the quarter. We won a 12-inch digital cluster for a key large SUV platform for Toyota that I mentioned earlier.

The digital cluster will be equipped on several mass-market and luxury brand vehicles with the OEM. We also won a separate 12-inch driver display business for a luxury brand vehicle with Toyota, illustrating the growing relationship with this important customer for a 12-inch driver-side display and a 16-inch center display for the electric SUV and trucks platform with the Scout brand of VW Group. This platform will initially launch with two vehicle models in the US in 2027, and adds a new customer logo to our portfolio. As mentioned earlier in the presentation, part of our strategy in China is to support domestic OEMs in their expansion outside of China. We won a 25-inch curved display module business with Cherry, for two SUV models that would be sold in different regions of the world.

Cherry is a large domestic OEM in China with vehicle production estimated to cross 3 million units this year as they continue to expand globally. We expect to leverage this first win into a bigger business with this OEM over time. The two-wheeler wins were with two major Indian OEMs, including one program for the premium segment and another mass-market program. The mass-market program is for a multicolor LCD cluster with integrated connectivity and will be used on three high-selling models. The last thing highlighted on the page is for a BMS system with a luxury OEM in Germany, our fourth customer for this product line and second in Europe. This BMS system is for a new EV platform that is expected to launch in 2028 and will support 408-volt systems for maximum flexibility.

The first quarter provided a great start for new business bookings for the year, highlighting the market fit of our products and technologies. The pipeline of new opportunities for the rest of the year also looks robust. Turning to page six. The first quarter was also strong in terms of new product launches, with our digital cockpit and BMS products launching on 16 vehicle models worldwide. This page highlights some of the key launches. It is notable that 10 of the 16 launches were on mass-market vehicles and included a mix of powertrains, with hybrid electric gaining momentum. In addition, our launch of BMS on the Buick JL8 was for a hybrid electric vehicle and the customer also launched two all-electric models in the quarter with the same product, illustrating the flexible nature of our BMS technology.

With $1.9 billion in new business wins, and 16 new product launches in the quarter, we are well-positioned to drive continued growth of the business in the future. Turning to page seven. I would like to provide a perspective on tariffs and the impact on the automotive industry and Visteon. Our manufacturing plants that supply parts to auto customers in North America are in Mexico. As of today, USMCA-compliant parts are not subject to tariffs when crossing the Mexico-US border, and nearly all our products brought into the US from Mexico, approximately 97%, are USMCA compliant. Thus far, the 25% tariffs on cars imported from Mexico and Canada and other non-auto tariffs have had a minimal impact on the industry and on Visteon. However, while our customers have not updated their production schedules as yet, they are starting to see industry production forecasts for the remainder of the year being revised downwards.

In addition, the executive order of April 3 directs the Secretary of Commerce and the CBP to establish a process to apply a 25% tariff to non-US content of auto parts, that are currently exempt under USMCA. These tariffs are expected to go into effect on or after May 3. This proposed tariff would impact approximately $10 million of Visteon products imported from Mexico into the US on a weekly basis, depending on the final definition and scope of this tariff, it could equate to a weekly cost of approximately $2.5 million. However, more recently, the administration has indicated that they are evaluating options to reduce the disruption to the auto industry. In the event the administration allows USMCA-compliant automotive components to be exempt from tariffs as they are today, we would not incur the additional weekly costs.

We anticipate that tariffs on currently exempt automotive parts will add to the uncertainty in the industry and will further impact industry production volumes and vehicle and product mix. As we work through various scenarios, we have seen a variety of forecasts attempting to estimate the negative impact on industry vehicle production volumes this year. The range is quite wide, from 1% down compared to the prior year to a high single-digit decline. As OEMs react to this highly dynamic and fluid environment, we expect significant changes to our customers’ production volume and schedules as the full scope and cost of the tariff become clear. Because of the increased uncertainty due to tariffs, we are not reaffirming guidance at this time. We will provide regular updates as the tariff and production environment becomes clearer.

Jerome will provide more information on our tariff playbook later in the presentation. Turning to page eight. In summary, the company continues to lay the foundation for future growth with a technology-driven product portfolio that is well aligned with industry trends. And while tariffs present new uncertainties, I want to remind everyone that this is not the first such cycle that we have been through. We faced similar levels of uncertainty at the beginning of the COVID-19 pandemic, and the subsequent global supply chain disruptions. Each cycle reshapes global production volumes and mix for the short term, before the industry begins to stabilize. We again find ourselves at the beginning of another cycle and we are working closely with our customers to mitigate tariff impact in the near term while remaining focused on our long-term strategy.

I am confident that our global manufacturing footprint, proven supply chain management capabilities, and industry-leading cost structure and balance sheet will enable us to emerge stronger from this cycle just as we have done previously. Now I will turn the presentation over to Jerome. Thank you, Sachin, and good morning, everyone.

Jerome Rouquet: We had a solid start to the year, both operationally and financially, with all our key financial metrics coming in strong. Sales were $934 million with robust market outperformance, offsetting headwinds from lower customer production, normal annual pricing, lower customer recoveries, and unfavorable FX. Adjusted EBITDA for the quarter was $129 million reflecting continued operational execution and cost discipline. Adjusted EBITDA margin for the quarter was robust at 13.8%, and benefited from some favorable one-time commercial items. On a more normalized basis, our margins are slightly above 12% and in line with our original expectations for the full year. Adjusted free cash flow was $38 million, driven by solid EBITDA performance and a modest inflow from working capital.

Lastly, we returned $7 million to shareholders at the beginning of the quarter, in the form of share repurchases before pausing all activity due to the uncertainty related to tariffs and their impact on the overall economy. We remain committed to our balanced and flexible capital allocation framework and have shifted our focus to preserving cash, and further fortifying our balance sheet in the near term. Overall, we delivered a very strong first quarter. Turning to page 11. Sales were $934 million for the quarter, a $1 million increase compared to the prior year. Our market outperformance of 10% was partially offset by lower customer production of 4%, lower recoveries as well as normal price downs for customers, which were in line with prior year’s levels.

Finally, FX negatively impacted sales in the quarter by 2% mostly driven by a strong dollar. Our growth of the market was driven by recent product launches, combined with strong demand for our display products. Excluding customer recoveries, base sales grew approximately 2%. On a regional basis, sales growth was driven by The Americas and Europe, where we have ongoing benefit from recently launched programs, including several Ford programs which were originally delayed at the beginning of 2024 but are now ramping up. China was the one region which was down, consistent with our original expectations for the quarter and for the full year. On a product line basis, the highlights for the quarter were around our display products, which grew 50% despite customer production volumes being overall down mid-single digits.

Adjusted EBITDA for the quarter was $129 million compared to the prior year. Adjusted EBITDA improved as a result of higher volumes, favorable timing of commercial items, manufacturing efficiencies, lower engineering and SG&A, partially offset by foreign exchange. Net engineering as a percentage of sales was 5.6% and includes the recent German acquisition we made in Q3 2024. On a year-over-year basis, net engineering costs were down due to lower personnel costs and favorable timing of program expenses and engineering recoveries. We continue to leverage our platform approach, our best-cost footprint, and have embarked as well on many initiatives that improve engineering productivity, while continuing to invest in critical engineering capabilities including vision, speech, and AI.

Adjusted SG&A also lower on a year-over-year basis, benefited from our cost optimization and rebalancing initiatives started in February 2024, ongoing cost controls, all while investing in key technologies that will further improve productivity. As mentioned, we also benefited from several one-time commercial items in the quarter, which are related to costs incurred in prior quarters. Excluding these one-timers, our normalized margin is coming in slightly above 12%. Turning to page 12. Visteon generated $38 million of adjusted free cash flow in the quarter. We continue to benefit from a robust adjusted EBITDA and were able to convert EBITDA into cash flow at a rate of approximately 30% in the first quarter, in spite of the traditional Q1 seasonality that we normally experience.

Trade working capital was a slight inflow for the quarter, and included a modest inventory build early in the quarter in our US warehouses. This temporary inventory increase allowed us to minimize tariffs that went into effect for a few days in early March. Cash taxes were higher this quarter reflected our continued improvement in profitability in most jurisdictions as well as timing of cash payments. Net interest continues to be a modest positive as the interest income earned on our cash slightly exceeds the interest expense paid on our debt. We also had an outflow in Q1 related to our February 2024 annual incentive program, which was paid out at higher levels due to the strong financial and operational performance Visteon posted last year.

Capital expenditures were $35 million representing 3.7% of sales and slightly below our original full-year expected run rates. In Q1, we continue to invest in several insourcing initiatives in addition to our ongoing investments to support customer programs. We ended the quarter with $658 million of cash and a net cash balance of $343 million. Turning to page 13. We are not reaffirming full-year guidance at this stage due to the uncertainty created from tariffs. And the range of potential outcomes it creates for the automotive market, most likely in the second half of the year. I would like to provide some additional context. Absent the announced tariff and the latest economic developments, we would be tracking in line with our original guidance.

We had anticipated Q2 sales would look fairly similar to Q1 sales and adjusted EBITDA margins would be in line with our normalized margins of about 12%. Our recent outlook for the second half of the year was consistent with our expectations when we originally set guidance. Putting all this together, we were confident we would be within our original guidance and likely towards the midpoint. However, the level of uncertainty has increased significantly since our last earnings call. The first round of automotive tariffs went into effect on April 3, with a tariff of 25% on all vehicles imported into the US. Although we have seen minimal changes in customer production schedules so far, we anticipate OEMs will begin adjusting production schedules based on a range of variables, including their manufacturing footprint, global supply routes, dealer inventory levels, their pricing, and market share strategies.

We anticipate the impact on industry production volumes would be negative but the range of outcomes at this point is wide, especially when forecasting production at the customer and vehicle level. To further compound the uncertainty, there is the potential for another round of tariffs expected on or after May 3, in which the non-US of 25%. This would increase the cost to build a vehicle even further and create another layer of uncertainty on vehicle production schedules. If these additional tariffs are implemented as announced, the direct impact could be approximately $2.5 million per week based on volumes assumed in our original guidance. As one data point, S&P issued their monthly industry production forecast update last week. For Q2 2025, their forecast was reduced by 1.6 million units assuming tariffs remain on imported vehicles and the additional tariff on auto components goes into effect.

In this scenario, our customers’ production would decline in the high single digits compared to the prior year, a three percentage point decline from our original expectation. With most of these declines in the second half of the year. Using this scenario, our financial outlook for Q2 2025 would be near the bottom end of our original guidance. This assumes that decremental margins on lower volumes are in the mid-20% range. It also assumes we would begin incurring tariff costs, which we intend to pass along to our customers to better reflect the new cost of producing a vehicle. This is one scenario out of many. Other scenarios include different rates and implementation dates for tariffs, with different outcomes for industry production volumes and vehicle mix.

Given the uncertainty, not reaffirming guidance is prudent. However, we intend to provide updates as visibility improves. In this environment, we have taken many actions to ensure we can navigate through various scenarios. Earlier in the year, we created a cross-functional task force to work closely with our customers to reduce the impact tariffs could have on our business and our customers, simplifying, for example, our supply chain where possible. Following these actions, about a third of our sales from our Mexico plants will be shipped within Mexico, reducing the direct tariff exposure. We are also in discussions with suppliers and looking at options to resource based on the components’ country of origin. In parallel, we continue to evaluate the optimal location for production, utilizing our existing global footprints.

We are keeping all options open, and we will be ready to operationalize some of these depending on the nature and size of the potential tariffs that will be in effect. However, there will be limits on how much we can reduce the direct cost of tariffs and we intend to pass along any remaining costs to our customers. In addition, we are working to minimize the potential flow-through on volume, leveraging our best-cost footprint and ongoing focus on cost controls, we will be ready to implement some of the past playbooks that allowed us to emerge stronger in similar situations. We have also pivoted our capital allocation priorities temporarily pausing share repurchase activity to shift our focus on building our cash position and further fortifying our balance sheets.

We ended the quarter with over $650 million of cash on our balance sheet, and have access to an additional $400 million of liquidity with our revolver. With a debt balance of $315 million that does not mature until 2027. Our net cash position is a robust $343 million. We will also continue to opportunistically look for technology accretive acquisition. And as the market gets more stable, we will reassess our position and may look to restart shareholder distributions. This illustrates our flexible capital allocation approach, that is supported by strong cash flow generation and one of the best balance sheets in the industry. Finally, I would like to echo the comments from Sachin. This is not the first industry headwind we are facing. Over the last few years, we have demonstrated our ability to emerge from previous challenges in a strong position, and I am confident we will be able to overcome this challenge as well.

Turning to page 14.

Sachin Lawande: Visteon remains a compelling long-term investment opportunity despite some of the current market uncertainty. We expect to benefit from higher demand for more digital content in the cockpit, regardless of powertrain. Visteon is well-positioned for long-term top-line growth, margin expansion, and free cash flow generation, while our strong balance sheet provides us with significant flexibility to pursue our capital allocation priorities. Thank you for your time today. I would like now to open the call for your questions.

Operator: Question and answer session.

Operator: At this time, if you would like to ask an audio question, please press star then the number one on your telephone keypad. Again, that is star and the number one. We will pause just a moment to compile the Q&A roster. Our first question comes from the line of Mark Delaney from Goldman Sachs. Sir, please go ahead.

Mark Delaney: Yes. Good morning. Thanks for taking my question.

Sachin Lawande: And thanks for all the details you provided in the presentation this morning. You mentioned you are looking hard at your supply chain and would expect to offset any remaining tariff costs. But can you help us better understand your confidence in being able to achieve that with the exception for tariffs on USMCA-compliant parts does go away on some of the conversations you are having with customers at this point?

Sachin Lawande: Alright. Thanks, Mark. So yes. So let me first start by saying that we have not been impacted by tariffs as yet, as we mentioned earlier. And we have, at the same time, started discussions with customers in terms of recoveries, but our focus our primary focus so far has been on working with our customers to reduce exposure to tariffs. And I would say on both fronts, those discussions have been very constructive. We expect that we would be able to reduce our exposure by working together. But as Jerome mentioned earlier in his remarks, there is going to be a limit to that, and depending upon what happens you know, post-May 3, we will have to approach the customers to recover the extra tariff costs. We fully intend to recover those costs. We believe the static state will reflect the true cost of building those products and ultimately building the vehicle. And as a result, it will have to be passed on to the customers. Anything you would like to add,

Jerome Rouquet: Yes. Thanks, Sachin. Mark, just maybe just to clarify the Q1 impact on tariff. It was very immaterial for us. As you know, the tariffs went into effect for three days, the full tariffs. And we had built inventory. We had essentially built inventory that had crossed the border and therefore, was not subject to tariffs. So we were able to use that inventory during these three days, and that has minimized the tariff impact in Q1. So very material for us in Q1 as I should say.

Mark Delaney: So thank you both for that helpful context. My other question was just around bookings and the bookings environment. You are off to a very good start with bookings in the first quarter relative to the prior $6 billion plus target for the full year. Maybe help us better understand what the current engagement environment looks like. Are customers still active with working on new vehicle designs and conducive to getting additional awards this year? Or has there been any pause or delay in some of those engagements given the macroeconomic and tariff environment that perhaps is taking up more of your auto OEM customer focus at the moment? Thank you.

Sachin Lawande: Yep. Mark, I think that is a very good question. And as part of our engagement with customers, especially in this time, I have been personally in front of almost all of our customers in Asia, Europe, and in North America. And would say that the environment has been remarkably stable both in terms of just the operating environment as well as the longer-term plans of customers. And that is reflected in our Q1 performance as you can see both in terms of sales, but also new business wins. And I expect that as customers are working through these tariff-related challenges, they will continue to look through the cycle and want to make sure that they are positioned well when this thing does come to a conclusion, whichever way it does.

So I expect that new business activity will remain robust throughout the year. The pipeline of opportunities that we see is pretty robust. Across all of our product lines. So we feel that with the start that we have had in Q1, we would be in a good position to achieve our target and also cross our performance that we have had over the last couple of years in terms of new business wins. And that will continue to position us well going forward.

Mark Delaney: Thank you.

Operator: Thank you. Our next question comes from the line of Dan Levy from Barclays.

Dan Levy: Hi. Good morning. Thank you for taking the questions.

Operator: First, can you just give us a sense to what extent there has been

Dan Levy: any sort of impact to the production schedules you have seen, any call-off activity and maybe you could give a sense how much pull forward of volume there has been. We have heard about some customers sort of building up some excess inventory in preparation for May 3. Yeah. Yeah. So, it is really interesting that

Sachin Lawande: and that we did not really see any meaningful pull ahead from our customers. In fact, customer orders were remarkably stable throughout Q1 to the levels at the beginning of the quarter almost to the end, were the same. And yet, we did see that dealer inventories did get pulled down, which probably suggests that some of the consumer pull ahead might have been managed through the existing dealer inventories. I would say that the order scenario looks pretty stable even for what we would consider as a high confidence range in Q2. So it does not reflect any reduction in production. So we will have to wait and see, but so far so good.

Dan Levy: Okay. Great. Thank you. And then as a follow-up, maybe you can give us a sense of your supply chain if you have seen any incremental cost hitting, I know that you are mostly manufacturing in Mexico. Has there been any impact on your supply chain you know, any cost hitting you? And then should we look at, to the extent that you do incur costs, how much was the chip crisis of 2021, 2022, and your negotiations with OEMs on a comp for how discussions may play out with, your customers?

Sachin Lawande: Yeah. Yeah. So the short answer to the supplier question is that we have not seen any meaningful increases in cost. In fact, I would say virtually none. And I think part of the reason is that our suppliers their direct costs have not been impacted. As far as we can tell. From what has happened with respect to the global tariff situation. So again, just to be clear, we really do not have any supplier-driven cost increases that anticipate that we would have to work through. So that is the good situation. In terms of your question about in you know, what can we learn from the last crisis? There is a lot that we have learned and we have put in place. Of the things that we have done very well is to diversify our supply base and where we have now many more options in terms of finding alternate sources or components.

Obviously, there will be some that will always be more challenging than others, but we are in a much stronger situation now to be able to deal with any sort of a supply-related situation as compared to the last cycle.

Dan Levy: Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Joe Spak from UBS. Sir, please go ahead.

Joe Spak: Thank you. And I just want to commend you for all the

Dan Levy: the detailed information, especially given

Joe Spak: all the uncertainty. It is, I think, supremely helpful. Jerome, just in your example you gave about, you know, if it plays out like S&P, says and, you know, you think you would be sort of the lower end of your guidance range. So if I am following your math, right, that is a hundred 30 million know, annual impact, so about 65 for the back half of the year when the tariffs come in. So to get to the low end of your guidance range versus the midpoint you said you were tracking to, are you sort of assuming, like, you know, 80% sort of offset to that cost? Or, like, you know, what is your plan to sort of price? Like, what would you baking in on that in terms of that outlook? Based on your conversations with your customers?

Sachin Lawande: Yeah. Thanks, Joe. So

Jerome Rouquet: S&P, and we wanted to give this in our prepared remarks is just one scenario, and there are many out there. But just on that one, your math is

Dan Levy: correct. Our customers would go,

Jerome Rouquet: or would decline a further 3%, and that is about $130 million of impact in terms of sales. We are using and assuming based on what we have seen in prior years, a 30 a 25% impact, we were, we would assume as well that we are recovering 1% of the tariff impact, which at 2.5% 2.5 million times four weeks times eight months would be about $80 million. So the impact would be essentially on the volume. We would be able to offset some of that with a good head start that we had in Q1 and with some minor adjustment as well to our, spending. So that would, give us essentially a four fifty number for the full year at which is at the low end of our original guidance. Now it is just one scenario, and we are going to wait to have a little bit more clarity on tariff and visibility on production schedule.

Before we come out with something. The key thing at Sachin mentioned, we are very active these days on, potential actions that we can take, not just on the supply chain side, but as well on, on our cost structure, and we are busy on these points.

Joe Spak: Yeah. No. Thanks. I appreciate that a lot of moving parts. So I just wanted to get a better sense for sort of what you guys were trying to assume on your end in a potential scenario, understanding there are many. The second question is you know, I think in ’24, about 7% of your sales were in China, but not for China exported to other markets. But I do not think was any of that destined for the US, or is that really more for the rest of Asia Pacific and Europe? And is there any impact from the business, I guess, you do in China for export and not for domestic consumption?

Sachin Lawande: Yeah. Joe, I think very little of what we do in China actually makes its way to the US. I think specifically, there are some Nissan vehicles that carry some content that we manufacture in China, but it is very small.

Joe Spak: Thanks so much.

Operator: Thank you. Our next question comes from the line of Emmanuel Rosner from Wolfe Research. Sir, please go ahead.

Joe Spak: Thank you very much. Actually, another question. I am

Dan Levy: China, if I may. So it continues to be a very challenging, you know, region.

Joe Spak: For a lot of companies, but certainly including

Dan Levy: Visteon. Can you remind us your strategy there

Joe Spak: where you are in your efforts to sort of rebalance, you know, customer mix, and I guess, from a timeline point of view,

Sachin Lawande: when would you anticipate to serve really improve this, you know, growth on the market, situation? Yeah. Yeah. No. That is a great question. And China does remain one of their that I think we will be working through this year and probably also into next year. But one thing I would like to say is that the whole trend of global OEMs losing market share which has continued, In Q1, although from a year-over-year perspective, it looks like they lost for the ground. At least from a sequential basis, they are starting to see some sort of a floor developing. Now it is just one quarter’s worth of data, so we will not claim any you know, relief just yet. But it is encouraging nonetheless to see that. So what is our strategy?

Our strategy is to work with a mix of domestic OEMs, that are doing well in China. They have scale. But also global ambitions, and that is important. And then with global OEMs, we will be working with those that we believe will still have a meaningful share in that market over the next few years. In the latter group, we believe those would be the German OEMs in particular, luxury OEMs, and some Japanese OEMs particular Toyota. If you look at Toyota’s performance in China, in Q1, was actually a positive share gain that they had in that region. And they have recently announced that they will have the first fully owned manufacturing plant for NexSys Brand In China and that is a very good sign. And as you know, we have been growing our relationship with Toyota, and that has progressed very well.

Now with the Chinese domestic OEMs, we mentioned in on this call our very first win, which Cherry. And Cherry is a great example of the type of OEMs that we want to support business with. There are OEMs that have scale, It will probably hit 3 million units this year of vehicle production. With a significant portion of that is sent for exports. And that is where we can help them. And in turn, we expect that that would help us with them also to a certain extent in China. So that is our strategy. Now in terms of when would this start to actually look that way in the numbers, We expect this year to be kind of our transition year for our business in China. We expect to start to slowly grow next year onwards. And our expectation is in the time frame say, 2027-2028, that we would be back to where we used to be at, say, in 2023 and ’24 at the beginning of this down cycle that we saw during ’24.

So we hope to be able to recover the lost sales in China by then. That is great color.

Dan Levy: My second question is around the you stated focus on billing a cash position in the current uncertain environment. You just maybe tell us what this involves? I think there was some mention of reducing some discretionary expenses. I am curious how to think about other spending such as CapEx. So just broadly, what is in this year’s strategy from a

Joe Spak: cash preservation point of view?

Jerome Rouquet: Yes. And I would say, Emmanuel,

Dan Levy: we are

Jerome Rouquet: continuing as we have done in the past to focus on cost controls as well as cash generation. So nothing really fundamentally changes here. And we have done a good job in, executing very well quarter in, quarter out. And this quarter is also another demonstration that we are able to do that very well. So we have got a few scenarios whereby depending on the volume, change severity, we would action different plans. So I will not go into details, but, it would go from minor discretionary spending reduction to a bit more structural, changes, again, without jeopardizing the future investments that we have been making in both CapEx, but as well in engineering, especially as we are making sure that we are, supporting our strategic objectives. So nothing, maybe to discuss in great detail during this call, but we are, again, scenario planning.

Joe Spak: Great. Thank you.

Operator: Our next question comes from the line of Colin Langan. From Wells Fargo Bank. Please go ahead.

Colin Langan: Oh, great. Thanks for taking my question. Just a basic question. Believe your comment was that margins in the quarter normalized would be slightly over 12%. I think they were thirteen eight. That sounds like there are 16, 17 million unusual items in the quarter. Is that right? And what are those unusual items?

Jerome Rouquet: Yeah.

Colin Langan: That is correct. Yes. So we have

Jerome Rouquet: close to $15 million of what I would characterize as one-timers. Most of them were commercial items that we were able to close out in Q1. Many of these are, in fact, were expected to close throughout the year. But thanks to the diligence of the team, we were able to close them out early and very late in most cases to cost recoveries that we have, negotiated with our customers. For example, when a program changes, we potentially incur a cost, we are recovering these costs. So a lot of these costs, in fact, most of them were related to the prior year and we were able to successfully close these, these items. You will find the impact of these one-timers pretty well spread on the P&L. So just a minor amount in sales, in manufacturing as well as in engineering recovery. So it is kind of spread all over, our P&L. And you are correct. Our normalized margins without this would have been slightly over 12%.

Colin Langan: Got it.

Colin Langan: And then just you know, if we think about tariffs, any view on how the

Dan Levy: competitive landscape could change, particularly if maybe tariffs on stuff out of Mexico are lower than what maybe ends up around the rest of the world. Do are all your competitors also in Mexico, or is there a potential that, you know, other competitors are more disadvantaged if they face a higher tariff than some other part of the world?

Sachin Lawande: That is a very good question. And the answer is that not all of them are in Mexico, and some have been shipping products from Asia. Which certainly would be a disadvantage in this situation. Are some, obviously, that are in Mexico like us. But there are also a few that have their operations in Asia, and if, you know, that turns out to be the case like you discussed, it would certainly be an advantage to the ones that are operating out of Mexico such as us.

Colin Langan: Got it. Alright. Thanks for taking my question.

Operator: Thank you. Our next question comes from the line of Federico Mirendi from Bank of America. Please go ahead. Hello, Mr. Federico? I guess you are on mute.

Sachin Lawande: And let’s go to the next question. Let’s move on to the next question, please.

Operator: Our next question comes from the line of Itay Michaeli from Citi Cowan.

Itay Michaeli: Great. Thanks. Good morning, everybody. Just going back to

Joe Spak: the new business wins in the quarter, $1.9 billion. Sachin, was that above your internal expectations? And could you exceed the $6 billion target for the year? And then a bigger picture question is tied to the new business wins. As you have been booking kind of $6 plus billion over the last few years, does that set up the company to potentially see some revenue acceleration beyond the 5% that you have laid out through 2027? Sort of in the mid- longer term as these wins translate to revenue in the future?

Sachin Lawande: Yes. To answer the second question first, the stronger we perform new business wins, you know, in the earlier portion of that period that you mentioned, clearly, it helps us perform better and our plan, obviously, is to exceed what we have communicated. So that is clearly the objective here. In terms of the timing of the wins, sometimes the timing is difficult to predict because of you know, when the award decision gets made. I would say is that coming into the year, we had seen the pipeline

Jerome Rouquet: to be

Sachin Lawande: very robust. In fact, this is one of the strongest pipelines of new business opportunities I have seen I would say, over the last five years because the last few years, we have been impacted by some sort of a you know, crisis or the other. And it was really refreshing to see the industry kind of getting back into the a mode of innovation and design. Very strong displays opportunities driven by the larger displays starting to migrate into the mass market. Which is exactly what we had been anticipating. And we have set ourselves up to take advantage of that trend by equipping all of our plants in different regions to be able to build displays that makes us pretty unique in terms of our capability versus the competition.

So we do expect to have a disproportionate share of the debt market. We also see a very strong pipeline in CDCs, copy domain controllers, and instrument clusters even. We thought would start to taper down, but we see robust activity especially in Asia. And so I would say that with sets of up very well for this year. Maybe this is also an indication of what we will expect to see the industry get into this new cycle coming out of the last few years.

Itay Michaeli: That is very helpful. Thank you for the

Jerome Rouquet: a quick follow-up, Sachin, hoping you could give a bit more color on the conquest win with the domestic Chinese OEM and maybe just talk about potential further opportunities for additional conquest wins going forward.

Joe Spak: Thank you.

Sachin Lawande: Absolutely. And I think we mentioned that the customer there is Cherry, and we have not done business with Cherry in the past. And this is a customer that also has evolved quite a bit. If you know Cherry from, I would say, ten years ago, they are not anything like you know, they used to be. Now. They have a very broad range of products. They have been very successful. In exporting their vehicles. They are now focused on Europe as an export market and South America. So our first win with them is for a large display that is going into the European market, and we have subsequent opportunities of following up with them. In fact, our team is in China this week for the Shanghai Auto Show, as you may know. And there have been follow-on discussions with Cherry and with other customers as well.

We certainly expect that this first win will translate into subsequent or business opportunities with them. But, you know, we will have to first execute this one very well. It is a very aggressive timeline in terms of production. It also helps us because it impacts our revenue positively earlier. And I think this is kind of the examples that you will see more of especially with those OEMs who are moving very quickly, They have their targets for exports we are in a good position to support them. In their export ambitions. So we hope this would be first of many with this OEM and others that we have targeted in China.

Joe Spak: Terrific. That is all very helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Luke Junk from Baird. Please go ahead.

Luke Junk: Good morning. Thanks for taking questions.

Joe Spak: Sachin, maybe we could start just with some additional context around your expectations for display growth this year in terms of what is within your control relative to where newer programs are ramping right now just where they are in the ramp. Additional launches, have a little anti-tune, kind of just the overall shape of demand in displays as we go through this year. Certainly, comps pretty easy in the first quarter here. That normalizes to some extent going forward. So just do not want to overextrapolate what we saw here in the first quarter year on

Sachin Lawande: Yeah. Yeah. So first of all, in terms of new product launches, you know, we started the year pretty strong with 16 launches. And we have a pretty robust set of launches planned for the rest of the year. I believe that number is somewhere around 90 if I am correct here, which would indicate pretty robust activity. If you all see in terms of the growth of our displays, which was a robust you know, strong double-digit growth in Q1. We expect this to continue because we have a strong pipeline of new launches coming through, and displays will grow in terms of our share of the revenue. They are already a couple of points greater than last year. And we expect that to continue this year to improve and also next year. So we have I think, set ourselves up well for displays to emerge as one of our leading product growth categories in sort of in addition to digital clusters.

Luke Junk: Got it. And then follow-up question, maybe a little bigger picture in nature, but just like to get your thoughts on working with China local OEMs on export business and to what extent it is or is not maybe fundamentally different in terms of design cycles, pricing, you know, things of that nature relative to China for China business, just where you are able to get better traction from an export standpoint? Is it different engaging in terms of export business? Or is it more so that there is a different quality excitation as they are exporting into the West, which gives you some advantage versus local peers? Thank you.

Sachin Lawande: Yeah. Absolutely. And as you know, there are very distinct differences in quality expectations for products sold in China versus outside of China. Which is one of the reasons why we believe we are in a very good position to support these OEMs. So what does not change however, is they are very aggressive time schedules which is, you know, typically a year or at most a year and a half, And you know, we at Visteon have been anticipating this and especially for displays, we are able to leverage the capabilities that we put in place. Now in terms of cost and pricing, in China, it is also a lot more challenging And, again, you know, it goes hand in hand with the technical requirements. If the requirements are a little more flexible, let me put it that way, then that also would take a different direction in terms of pricing and cost.

But as you export, you have to meet different requirements than what are the case in China. And so we are able to defend our pricing a little bit better for exports.

Luke Junk: Very helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Tom Ryan from RBC. Please go ahead.

Joe Spak: Yeah. I guess

Dan Levy: I just want to understand how

Joe Spak: the contracts you guys have with

Dan Levy: the OEM customers work

Joe Spak: So if there are production cuts presumably, they would be a portion

Dan Levy: of makeup that the already designed within the contracts. Or is this all negotiated? Just I am trying to understand how that works.

Sachin Lawande: Yeah. Yeah. So there is a certain level, a range let me call it that, that is contemplated in the contracts typically. So if the production cuts, still keep it within the range, then it is normal business. Outside of the range, yes, then that requires a discussion and negotiation on the cost recoveries.

Dan Levy: And we have those of the commercial items.

Jerome Rouquet: That we have been negotiating, not necessarily this quarter, but in past quarters. Were related to these kinds of

Dan Levy: topics where volumes were lower, and we went back and were able to negotiate. It sounds like normal range would not obviously include

Joe Spak: what is happening here. So

Dan Levy: would it is it safe to say Correct. That the S&P global numbers happen? Okay. So most of it is negotiated And then

Joe Spak: okay. And then you know, prior to all these tariffs announcements, they were quite there were a series of deal announcements for across the tier ones, some M&A the messenger stuff like that.

Sachin Lawande: You had mentioned in the

Dan Levy: prepared comments about

Joe Spak: potentially doing M&A once clarity you have gained

Dan Levy: But just curious if

Joe Spak: how you would characterize the M&A environment. You know, presumably, it might be

Sachin Lawande: a good time to do deals given the price valuations, or is the uncertainty kind

Dan Levy: the trump card

Sachin Lawande: unintended? That kind of stops you from maybe contemplating that. In nature? Thanks. Yeah. No. No. I think that is a very good question. And

Sachin Lawande: we do think the same way that this is a very good environment to be on the lookout for adding some capability or perhaps you know, even different product lines. But our first priority, as you can appreciate, is to ensure that we are able to safely negotiate the current environment of tariffs. Assuming that that is something that we can address in the next couple of quarters. I think Visteon is in a very good position to continue to grow and some of that will happen through M&A. So we do continue to look and we do agree with you that it is a good time to be looking. And we should, you know, look at

Dan Levy: what opportunities that might present to ourselves.

Jerome Rouquet: And maybe as mentioned in prior quarters as well, we have a pipeline of bolt-on acquisitions, so we are pretty active on this topic.

Dan Levy: Thank you.

Operator: Thank you. Our next question comes from the line of Ron Jewsikow from Guggenheim.

Joe Spak: Yeah.

Dan Levy: Good morning, Sachin Jerome. Thanks for taking my question. Maybe this

Joe Spak: first one is for Jerome, but just for a clarification on the commercial recovery items. Kind of that 16 million to $17 million benefit in the first quarter,

Dan Levy: None of that was in advance of kind of

Joe Spak: potential future tariff procurement costs. And then also that bucket in the 10 Q looks like it was $30 million top-line benefit this quarter, but that does include

Dan Levy: design changes. I am just

Joe Spak: curious if there is anything else worth calling out that kind of drove that line this quarter.

Jerome Rouquet: Yes. To your first question, nothing is obviously in anticipation. It is everything is well related to past.

Dan Levy: Costs that we have incurred.

Joe Spak: When we have that we have recovered in Q1. So, again, it is

Jerome Rouquet: it is outside of, Q1 from a cost standpoint, and therefore, it is truly a one-timer. Maybe back to your first question, if you do not mind repeating it.

Joe Spak: Just that bucket in the

Dan Levy: 10 Q where that sits, it I think it includes design changes as well.

Joe Spak: It was, plus $30 million versus the same quarter last year.

Dan Levy: Is there anything worth calling out just because I think with annual price reductions and things like that, it does look like a pretty big source of top-line upside. This period. So we

Joe Spak: we

Jerome Rouquet: we always have design changes, so that is a regular item. So they were in the 15 or $16 million of one-timers that we had this quarter. You did have some impact on engineering recoveries. But it is different from, design changes. So, again, these were, truly one-timers that are truly outside of the normal course of business. And that is why we wanted to, highlight them.

Dan Levy: Okay.

Joe Spak: That is super helpful. And then Sachin, noted the stabilization and kind of Chinese OEM share shifts this quarter, which I do think has been quite surprising and maybe a bit underreported. For the industry. I guess, is your sense that that is kind of the start of a new trend or a bit of an aberration? Because I guess, just with kind of the price cuts we seem to see every quarter from Chinese local OEMs, it is tough to imagine this trend continues. But I imagine you are a bit more connected than we are to that.

Sachin Lawande: Yeah. No. No. I do believe that the rapid declines that we saw in 2024 and that was bound to, at some point, turn a corner primarily because global OEMs are also not just standing still. Right? So they are launching new vehicle models and there has been a slew of announcements at Shanghai Auto Show this week about the models that they are launching exactly in response to the things that they have learned about the Chinese market. So as those changes and those launches flow through, we expect that there would be some more stable stabilization of their market shares in that region. And Toyota’s performance you know, really is a good indication. Toyota mostly sells ICE vehicles in China. Yes. They have a few EVs, but that is not what is driving the sales.

Yet they have been able to hold their own which is a clear indication that the consumers there do look for quality for a brand. Right? And in that regard, would not count the global OEMs, especially those that have strong brands reputation for quality, customer service, etcetera. I would not count them out just yet. So I do believe it is an underreported story, like you said. But, again, I think it is just one quarter in the making, so maybe it will catch more traction as we go forward.

Joe Spak: You. I really appreciate you taking my questions. Our next

Operator: question comes from the line of Edison Yu from Deutsche Bank. Please go ahead.

Joe Spak: Hi. Thank you. This is Linnie on for Edison.

Operator: I was wondering if you can walk us through, you know, the facilities in North America outside of the US, and potentially how relocation scenario might look like. Is that in the playbook eventually? We see these tariffs sustaining, or is the direct hit from tariffs really manageable for me, you know, recoveries and customers that it is not something that you would have to think about.

Joe Spak: Okay.

Sachin Lawande: I guess if you are asking whether we would consider a plant in the US, away from Mexico, I would say that it really all depends on how the tariffs are settled out and what our customers’ production plans

Dan Levy: are

Sachin Lawande: as a result of that. So our focus, obviously, is to be a good part to our customers, number one. Right? And if it means that if we have to make a change in our manufacturing footprint, as long as the business case is there to justify it, we would be fully prepared to do so. At this point in time, the way it is currently set up, it is not clear that there would be any benefit

Joe Spak: of making a change

Sachin Lawande: that can change at any moment as you know. So I think the key takeaway for you is that we are fully capable of doing it. We have a tremendous execution competence here at Visteon. They are extremely close and working closely with our customers to figure this out. But it will depend on ultimately what the at least a mid-term visibility looks like, if not long-term. For us to be able to make this kind of decisions.

Jerome Rouquet: And that has been echoed by our customers as well saying, do not make harsh decisions until there is clarity on the tariffs. And that is essentially our position for now.

Operator: Gotcha. Thank you. Very clear. And then my follow-up is, I was wondering if you can comment on the BMS sales in Q1 and how that is relative to expectations. And then you mentioned the four European EV OEM. Just wondering how the one came about and what if you can help us size sort of, like, the revenue of opportunity there. Thank you.

Sachin Lawande: Right. As I mentioned, I think in the last

Joe Spak: quarters,

Sachin Lawande: earnings call, our customers for BMS in North America had built a pretty robust level of inventory with anticipation of a higher sell-through of EVs. And while EV sales have gone up, in the US, Those sales levels have not been at the levels that were anticipated. So there is sufficient inventory in the supply chain and in the channel those OEMs. So we were anticipating our BMS sales to be lower this year than last year. And there was a factory shutdown also in Q1 at GM that was also planned by the nothing that was a surprise to us. So our Q1 sales reflect all of that. Now with the tariff-related uncertainty, we will have to see how that develops. And if you notice, and P Global has down their expectation for GM EV sales.

Perhaps acknowledging some level of impact there. We will have to see how that develops now. The other question, right, the fourth customer that we won, Outside of China, what we see with respect to electrification is that customers are taking a step back and consolidating and revisiting the plans to build electrified vehicles. And I say electrified because combination of fully electric as well as plug-ins. And with a lot of focus on cost. First and foremost, but also performance. It has become very clear that for EVs to be successful, and they have to be there will be a bigger portion of the powertrain mix than it is so far. Focus has to be on those two attributes, cost and performance. I take a lot of good feeling from the win because it was a win of a very high-profile business out there that was completed heavily by every supplier.

And our capabilities with respect to technology and cost were very well recognized, and that is why we were successful. So it tells you that our power electronics products and BMS are both competitive and technology leading. And for us, in particular, we need to be present in those types of products because EVs are the ones that will drive the electrification-related innovations in the industry. And that is what will impact ultimately

Joe Spak: how

Sachin Lawande: electronics will look like. So those things are related and our presence in those segments is very important for us to have that capability that can impact a broader portion of our business.

Operator: Great. Thank you so much.

Operator: This concludes our earnings call for the first quarter of 2025. Thank you, everyone, for participating in today’s call and your ongoing interest.

Joe Spak: Thank you.

Operator: This concludes Visteon’s third quarter 2025 results earnings call. You may now disconnect.