Visteon Corporation Aktie

Good morning. I'm Ryan Ghazaeri, Vice President of Investor Relations and Corporate Strategy. Welcome to our Earnings Call for the Second Quarter of 2026.

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 Statements 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.

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 1 hour, and we'll open the lines for questions after Sachin 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 over the call to Sachin.

Thank you, Ryan, and good morning, everyone. Visteon delivered another quarter of solid execution despite a challenging industry production environment. Customer vehicle production declined approximately 5% during the quarter, yet our sales remained essentially flat year-over-year, resulting in approximately 4 percentage points of market outperformance.

This performance was driven by the continued ramp of recent launches, particularly in Europe and India, underscoring the benefits of our diversified customer base and expanding product portfolio. Adjusted EBITDA was $116 million, representing a 12.1% margin, while adjusted free cash flow remained positive. Our balance sheet continues to be healthy, ending the quarter with $650 million in cash, providing flexibility to invest in growth while returning capital to shareholders.

Beyond the financial results, we continue to execute on the strategic priorities we outlined at Investor Day. We launched 24 new products across 11 automakers and secured $2 billion of new business awards, bringing first half bookings to $3 billion and keeping us on track for our full year $6 billion target. We also expanded our SmartCore high-performance compute business with another premium brand under the Geely Group, further strengthening our position in AI-enabled cockpit computing and reinforcing our confidence in the long-term growth opportunity for that product offering.

Finally, this morning, we announced a $200 million accelerated share repurchase program, representing the next step in executing the capital allocation framework we outlined at our Investor Day in June.

Let me now turn to our second quarter sales performance on Page 3. This slide shows our regional sales performance in what remained a challenging production environment. Customer vehicle production declined in every major region during the quarter, yet our diversified customer base, recent product launches and disciplined execution enabled us to outperform underlying market trends.

Starting with the Americas, sales reflected the headwinds we have discussed previously, lower customer production, reduced BMS volumes with GM and Ford vehicle discontinuations. Those headwinds were partially offset by the continued ramp of Nissan multi-display systems and Volkswagen infotainment programs, allowing us to perform broadly in line with the underlying customer vehicle production.

Europe was our strongest performing region. Sales increased despite weaker customer production, driven by excellent launch execution. Our panoramic display program with Audi, multi-display systems with Renault and the new Mercedes display launches all contributed to strong regional momentum and meaningful market outperformance.

In rest of Asia, underlying demand remains strong. Growth in India more than offset currency headwinds and the roll-off of the Mazda program in Japan. SmartCore programs with Mahindra, along with infotainment launches with Tata and continued 2-wheeler growth supported another quarter of solid execution.

Finally, in China, our sales reflected continued weakness in the value segment of the market following the changes in government policies and incentives and the ongoing loss of market share of international OEMs. However, the premium domestic OEM segment remained considerably more resilient. That's an important distinction because our strategy is increasingly aligned with those premium domestic manufacturers.

During the quarter, cockpit domain controller programs with customers such as Zeekr continued to build momentum. And with our high-performance compute launches starting later this year, we believe we are well positioned in the fastest-growing portion of the Chinese market. Overall, the quarter demonstrated that while customer production remained under pressure, our regional execution, diversified customer portfolio and ongoing launch cadence enabled us to deliver a resilient sales performance and position the business well for the balance of the year.

Turning to Page 4. This quarter was another demonstration of Visteon's ability to execute at scale. We successfully launched 24 new products across 11 automakers, keeping us on pace for another year of high launch activity and providing a strong foundation for second half growth. More than half were display products, reflecting the industry's continued migration towards larger, higher content digital cockpits, an area where Visteon has established clear technology leadership.

The Mercedes-Benz S-Class Superscreen highlighted on the right is an excellent example. The system integrates two large displays under a single cover lens, creating a seamless premium cockpit experience. It also incorporates advanced features such as switchable active privacy for the passenger display, illustrating the increasing software and engineering content in modern display systems. Importantly, our momentum with Mercedes extends beyond the flagship vehicle.

During the quarter, we also launched display systems on other high-volume Mercedes platforms, expanding our premium display technology across the OEMs portfolio. We continue to broaden our customer and geographic footprint in the quarter. We launched a dual display system for Nissan's flagship minivan, the Elgrand, a center display for Renault Boreal, digital clusters with Hyundai in India and multiple additional display programs supporting our growth across Europe and Asia.

The quarter also highlighted the progress we're making beyond passenger vehicles. We launched the digital cockpit platform on Royal Enfield's first electric motorcycle, the Flying Flea as well as a connected digital cluster with Hero motorcycles. These programs demonstrate how we are leveraging our proven cockpit technologies into adjacent mobility markets where digitalization is accelerating and our existing platforms provide solutions at an attractive cost structure.

Overall, these launches reinforce several important trends. First, our portfolio continues to migrate toward higher-value display and software-defined cockpit technologies. Second, we are successfully expanding across premium and mainstream vehicles and in adjacent mobility segments. And finally, our ability to execute a high volume of complex launches around the globe continues to be an important competitive advantage and supports confidence in our long-term growth outlook.

Turning to Page 5. New business wins totaled $2 billion during the quarter, bringing our first half bookings to $3 billion and keeping us on track for our $6 billion full year target. Approximately 45% of our wins in the second quarter came from North America, where we added two customers in the commercial vehicle segment in addition to winning business with our traditional passenger car customers. Asia represented about 30% of bookings with Europe contributing the remaining 25%, resulting in a well-balanced geographic mix.

Importantly, the quality of our bookings continue to improve. Approximately 60% of first half wins came from our strategic software-defined vehicle portfolio, including SmartCore cockpit domain controllers, high-performance compute platforms and advanced display systems. In addition, we secured approximately $340 million of new business in commercial vehicles and 2-wheelers, demonstrating continued progress in expanding beyond traditional passenger vehicles.

Let me highlight a few of the strategic new business wins in the second quarter. First, we secured another SmartCore high-performance compute program with another premium brand under the Geely Group. This expands our HPC footprint within the group, adds another premium vehicle brand to our customer base and further strengthens our leadership position in AI-enabled cockpit computing, an area where we continue to see significant long-term growth opportunities.

Second, we made important progress in commercial vehicles. We added two new commercial vehicle customers in North America, including our first integrated cockpit win with a specialty vehicle manufacturer that includes digital cluster, center display and surround view system. We also secured a surround view system business with a leading global commercial vehicle manufacturer for the North American brands. These wins extend our commercial vehicle strategy beyond Europe and demonstrate that our cockpit platform is increasingly relevant across multiple mobility segments.

Third, we won multiple display programs with an existing customer in North America across multiple future vehicle platforms. These awards support our transition towards software-defined cockpit products with this customer and strengthens our position for future business with this important OEM.

Finally, we added a Japanese OEM to our customer portfolio with our first win for a digital cluster program that will launch on multiple vehicles for Japan and U.S. markets. Beyond the immediate revenue opportunity, this represents another important step in broadening our customer base in Japan, a market where we have consistently demonstrated our ability to expand relationships over time.

Overall, our first half bookings reinforce the strategy we presented at Investor Day. We are increasingly concentrated in higher-value software-defined cockpit products, expanding into adjacent mobility markets and continuing to diversify both our customer base and geographic exposure.

Turning to Page 6. Let me turn to our outlook for the balance of the year. The first half demonstrated that our strategy is translating into execution. We delivered $1.9 billion of sales, $3 billion of new business wins and 44 product launches, creating a solid foundation for both our full year outlook and our longer-term growth objectives. Looking ahead, we expect Visteon sales to grow in the second half compared to prior year, supported by the ramp of recently launched programs and a strong second half launch schedule.

This is despite customer vehicle production being forecasted to be down by about 5% in the same period. Our sales are expected to grow in all regions, except in Americas. The launch of new cluster programs with Toyota in North America are partially offsetting the headwinds from lower customer production, lower BMS volumes and the roll-off of a legacy cluster program with GM.

In Europe, we expect another period of strong execution with mid-teens sales growth despite lower customer vehicle production. Our recently launched display programs with Mercedes, Audi and Renault are doing very well, and we will also start production of our SmartCore cockpit domain controller with a premium German OEM. In the rest of Asia, we also expect mid-teens growth with ramp-up of SmartCore program with Mahindra, display launches with Toyota and ramp-up of programs with Hyundai and Tata. And in China, although customer production is forecasted to decline, we expect to return to low single-digit sales growth as our first SmartCore HPC programs launch with Geely and Chery.

Overall, we expect mid- to high single-digit market outperformance in the second half. While weaker customer production will continue to temper industry growth, our launch cadence is expected to more than offset those headwinds, supporting sales growth this year while building the foundation for stronger growth in 2027.

Turning to Page 7. Let me conclude by summarizing what we accomplished this quarter. First, we continue to outperform the market. Despite weaker customer production across all major regions, our recent product launches enabled us to deliver approximately 4 percentage points of market outperformance.

Second, we continue to strengthen the business for the future. We secured $2 billion of new business awards with the majority aligned to software-defined vehicle technologies and adjacent growth markets while maintaining a robust launch cadence that supports both our second half outlook and our longer-term growth objectives. Third, we remained disciplined operationally and financially. We continue to make progress recovering higher memory costs, secured the supply needed to support upcoming launches and generated positive free cash flow.

And finally, this morning's announcement of our $200 million accelerated share repurchase program represents the next step in the capital allocation framework we outlined at Investor Day. Overall, this quarter provided another important proof point that the strategy we outlined at Investor Day is supported by our operational execution. We remain confident in our outlook for the second half of 2026 and in the long-term growth opportunities ahead.

With that, let me turn the call over to Jerome, who will review our financial results in more detail.

Thank you, Sachin, and good morning, everyone. We delivered financial results in the second quarter that demonstrate our resiliency in what remains a dynamic operating environment. Our performance reinforces that we continue to make progress on the commercial and cost actions we outlined earlier this year.

For the quarter, sales were $960 million, down 1% from the prior year, while outperforming our customer weighted production with growth over market of 4%. This was driven by strong launch execution on customer programs, most notably in Europe and in India. Additionally, we progressed well with our semiconductor cost recoveries in Q2, and we secured agreements with many customers, allowing us to offset the increase in memory costs incurred in the second quarter.

Adjusted EBITDA was $116 million, representing a margin of 12.1%, an improvement of more than 1 point from the first quarter, reflecting the progress we have made with our customer recoveries and efficiency improvements. Adjusted free cash flow was $20 million, positive for the quarter despite an increase in inventory as we continue to build resilience in our supply chain and the timing of cash settlements of previously accrued tax expenses.

In June, we completed the acquisition of an engineering service company for $20 million, further enhancing our functional safety and safety system architecture capabilities. We also returned $16 million to shareholders in the form of dividends and share repurchases. We ended the quarter with $650 million of cash and net cash of $351 million, which allows us to deploy a significant amount to shareholders in the second half of the year.

Turning to Page 10. Sales for the quarter were $960 million, a decrease of $9 million year-over-year or 1%, primarily driven by a decline in customer production volumes and the nonrecurrence of favorable one-time commercial items in the second quarter of 2025. These headwinds were largely offset by a solid growth over market of 4% when excluding pricing, customer recoveries and currency. The additional memory cost recoveries we secured with our customers in Q2 were sufficient to offset our normal pricing reductions.

Currency impact in the quarter was largely neutral on the sales side. EBITDA was $116 million or 12.1% for the quarter, our best EBITDA margin since Q3 of 2025. This was driven primarily by the recoveries we secured in the quarter, combined with strong cost discipline. On a year-over-year basis, EBITDA declined $18 million.

As a reminder, and as we noted in our Q2 2025 earnings call, Q2 2025 EBITDA was exceptional and benefited from $10 million of several nonrecurring items, mostly commercial in nature. Besides this $10 million, we also had $8 million of negative year-over-year currency impact, mostly driven by the devaluation of the Indian rupee and the Japanese yen as well as the appreciation of the Mexican peso. These two factors explain in simple terms the year-over-year decline in EBITDA.

At a more granular level, year-over-year engineering increased as we continue to invest in the next generation of software-defined vehicle products, mostly for the European, Indian and Chinese markets. The engineering services acquisitions we've made last year as well as the acquisition I mentioned earlier, also increased our engineering cost run rates. These additional costs were mostly offset by operational efficiencies.

Finally, as cost recovery is a critical component of 2026 results, I would like to provide some more details on this topic. With regards to recovery agreements with our customers, we made meaningful progress in the quarter, consistent with the assumptions embedded in our guidance and highlighted in Q1. We were able to recover most of the memory cost inflation incurred in Q2 with retroactive agreements compensating for the lack of deals with some customers. We continue to meet with our customers and expect to close the agreements that remain open in the second half of the year.

Overall, our performance in the quarter was strong when adjusting for currency, was in line with our expectations and represents the sequential improvements that we were anticipating going into the year, driven by recoveries, product costing actions, vertical integration and engineering productivity.

Turning to Page 11. Adjusted free cash flow was $20 million in the quarter and negative $3 million for the first half. The first half reflects several key dynamics. First, adjusted EBITDA in the first half was primarily impacted by the timing of semiconductor cost recovery negotiations, which are expected to be fully closed in the second half of the year. On the trade working capital front, this line item has been a use of cash for the first half of the year. This has been a deliberate decision driven primarily by specific actions, increasing inventory levels to support higher minimum safety stock levels and to allow us to build a better supply chain resilience.

Cash taxes were higher in the second quarter due to a onetime tax settlement in India related to prior years. Consistent with prior years and as we expected, the first half of the year generally has more cash outflows for items like the annual compensation, which is paid in Q1. While these items limited cash generation for the first half, we believe we will be able to generate cash to the levels we are guiding to for the full year.

And finally, capital expenditures were in line with our expectations as we continue to support new program launches, capacity expansion in India and the monetization of our IT infrastructure. During the second quarter, we completed the refinancing of our $300 million term loan facility and $400 million revolving credit facility, extending the maturity to 2031 and giving us a flexible capital structure to execute our capital allocation plan. We ended the quarter with $650 million of cash and $351 million of net cash after capital allocation. As we highlighted at our Investor Day, our current cash levels position us well to deploy capital in a disciplined and balanced manner.

Turning to Page 12. Consistent with our Investor Day messaging, we are reaffirming our full year guidance across all key financial metrics. For sales, we continue to expect between $3.625 billion and $3.825 billion and are trending towards the high end of the range at $3.8 billion. Our sales reflect our year-to-date performance, continued progress on customer recoveries as well as a strong second half launch cadence, partially offset by softer customer production. Our launch cadence includes digital cluster and display launches with our top growing OEMs as well as large SmartCore CDC and high-performance compute program launches in China.

With regards to adjusted EBITDA, we continue to expect between $455 million and $495 million and are trending towards the midpoint of the range of approximately $475 million. As mentioned during our Investor Day in June, cost pressures initially seen in memory are now extending to other purchase components, making it difficult to fully offset inflation in 2026 despite our teams taking further actions to recover and offset these additional costs.

In spite of these headwinds, we expect margins to improve throughout the rest of the year, driven by more customer recoveries and the ramp-up of our cost initiatives across product costing, vertical integration and engineering productivity.

Finally, with regards to adjusted free cash flow, we continue to expect between $170 million to $210 million, while trending towards the low end of the range of $170 million and having a good line of sight to the second half cash generation. EBITDA in H2 will support higher cash flow for the remainder of the year as recoveries and cost actions carry margins toward the full year guide. We also expect working capital to improve with some consumption of the first half inventory build while receiving cash on recovery agreements we secured late in the second quarter.

Another significant piece of the second half performance is related to first half items that will not reoccur, such as our annual incentive compensation payout, the India tax settlement and other seasonal cash outflows. Overall, we plan to maintain more elevated inventory levels through the balance of the year, a deliberate choice to protect our customers' launches and production schedules given the current semiconductor and memory environment. Nevertheless, the underlying cash generation capability of the business remains strong, and we have good visibility to a robust cash inflow in the second half.

Turning to Page 13. I would like to close with our capital allocation announcement this morning. With the support of our Board of Directors, we have entered into a $200 million accelerated share repurchase agreement, which we expect to complete by early Q4 of this year. The program will exhaust the remaining capacity of our 2023 authorization and will utilize a meaningful portion of the new 2026 $800 million authorization we announced at Investor Day.

At our Investor Day, we targeted to return approximately $1 billion of cash to shareholders between 2026 and 2029. We also highlighted that we need $150 million of net cash to run the business. Our net cash position at the end of June was approximately $350 million and therefore, supports the near-term deployment of $200 million.

The ASR is the first step in delivering on our $1 billion target. It allows us to retire a significant number of shares immediately. It demonstrates a clear pace of execution as we repurchase $800 million over the plan period, and it provides what we believe is a compelling use of our capital at current valuation levels. We have intentionally matched the completion window of the ASR with our second half cash generation, giving us flexibility to execute capital returns in excess of the accelerated program in Q4 while maintaining the minimum net cash framework we outlined at Investor Day.

Importantly, even after funding the announced program, we maintain a healthy balance sheet and flexibility to invest organically in the business going forward as well as to pursue disciplined bolt-on M&A as we did this quarter with our engineering services acquisition. Maintaining financial strength remains a core pillar of our capital allocation philosophy and a competitive advantage.

Turning to Page 14. In summary, the second quarter reflects resilient underlying performance in a challenging production environment, continued progress on recoveries and cost improvements and an important step in delivering on the capital return framework we outlined at our Investor Day. We remain confident in our full year outlook and in the long-term opportunity ahead as we execute on the plan that we outlined in June.

Thank you for your time today. I would like now to open the call for your questions.

[Operator Instructions] Your first question comes from the line of Tom Narayan of RBC Capital Markets.

This is Thomas Ito on for Tom. I guess, first, at your Investor Day, you guys flagged that GM sort of moving to in-source their CVCs. Given that several of your key Chinese OEM wins on CVCs are with these large sort of tech-savvy players like Geely and Chery, I guess how do you think about the in-sourcing risk from the Chinese OEMs over time? And do you think that risk could be higher or lower in China relative to some of the Western OEMs? And then I have a follow-up.

Yes. Let me take this question and answer it a little more broadly because I suspect that many would have similar questions today. So first thing I would say is both Ford and GM are very important customers for this, and we continue to engage with them on new business opportunities. If you look at our first half new business wins, about 20% of those wins came from these two OEMs, mostly Ford in this period for displays.

As I mentioned on Investor Day, our portfolio will change from traditional products to more SDV products, starting with displays and eventually, hopefully, CVCs and HPCs. Now coming to your question about in-sourcing and what do we see and how we think about it, the first thing to note is that the pace of change of technologies in the industry has just been accelerating, and it continues to accelerate. So as OEMs are even dealing with the challenges of launching CDCs, they have to deal with HPC and AI and all these technologies that are coming at the industry at a very rapid pace.

And this challenge is even greater for larger OEMs that have multiple vehicle segments and regions to support. So if you think about how the large Chinese OEMs are dealing with this, they're actively collaborating with strategic suppliers for specific types of products and technologies. That's one of the reasons why we've been successful in China with CDC and now with HPC.

And so coming back to Ford and GM with the work that we have been doing on the advanced technologies with HPC and AI and launching and gaining that experience in China ahead of everybody else, we expect to find areas to collaborate with these OEMs for future programs, especially around these technologies. And I should also mention that the sales plan that we presented at Investor Day was based on a very thorough evaluation process that we -- and we didn't include any unsubstantiated sales just based on Ford, if you will.

But that doesn't mean that we do not have a pipeline of opportunities to pursue and hopefully outperform that sales plan. We have line of sight to multiple such opportunities with these two customers that we are actively pursuing. So this gives you a sense of how we think about this. It's really not that we have a limited set of opportunities in this environment where technologies are coming at the industry at a very rapid pace, and we have the opportunity to really lead in what we are really good at, which is this advanced electronics and software, which today is represented by HPC and AI.

Got you. Very helpful. I guess as a follow-up, you guys demonstrated some pretty resilient growth over market through the first half, given the tough production environment. I guess given that, is there a specific gating factor preventing you from being a little more -- even more aggressive on buybacks today, especially considering where the stock is trading? I guess in addition to leaving some room for M&A, is there like a minimum cash floor or maybe even a net cash target that we should be thinking about?

Yes. It's Jerome. I'll take that question. You're absolutely right. We've indicated during Investor Day that our net cash target was $150 million. And we finished the quarter with $350 million of cash -- net cash on the balance sheet. So therefore, having $200 million that we could deploy essentially right away.

And we indicated, again, during Investor Day that we would deploy this pretty quickly. That's really the rationale for the ASR that we've announced today, $200 million that will allow us to retire shares pretty quickly. And it's the first step really deploying a large amount of capital towards shareholders. We committed to return close to $1 billion over the period of '26 to '29 in the form of dividend, but mostly share repurchases. And that's what we are executing towards. So it's really our plan, following up on our plan as we laid it out during Investor Day.

Your next question comes from the line of Rajat Gupta of JPMorgan.

I wanted to just double-click a little bit on the recent Micron agreement. Curious if you're able to provide any more details on what it gets you? Any early read on pricing?

Is this more of like a price agreement, more of like a supply agreement just to lock that in for the next couple of years? Any more details you can give us around that would be helpful. And I have a quick follow-up.

Yes. So the first thing I would say is with the recent memory technology changes that have happened, the kind of memories that we use in auto have been in tight supply all this year, and it's expected to only get more challenging in terms of supply next year. And auto is a long cycle industry. And besides price, we need long-term product availability and more importantly, controlled transitions when older memory technologies are being retired.

So what this agreement does, the one that we've signed with Micron is that it gives us a better assurance on supply with better long-term visibility into availability of memory. It also gives us better price predictability with better commercial terms if we were not to, for example, have this agreement. And then very importantly, the insights that we have on the planning that enables us to then reduce risk for the long-cycle automotive programs.

So these three things, right? So supply assurance, pricing predictability and better planning is essentially what we get from this agreement that we have signed. Now having said that, I want to be very clear that even with the agreement in place, we anticipate 2027 to be quite challenging in terms of getting sufficient supply to meet our demand as we see the demand where we sit today. So we have been working with multiple alternate suppliers to bring them on board and to close any gap. And we will know more as we progress further in the second half of this year.

We're also redesigning some of the products so that we have more flexibility in using memory parts from different suppliers. So the combination of this supply agreement that we have with Micron, the additional memory alternate suppliers that we are bringing on board and the redesigns, I think we are doing pretty much everything we can to give us maximum flexibility first to tide through 2027, which we expect to be the more challenging year. And then hopefully, things should start to get slightly better in '28 and beyond as more capacity comes online to provide the industry with memory.

Got it. That's very helpful color. And then I wanted to follow up on the SmartCore wins and just like the overall SmartCore opportunity starting in China. Can you give us an update on like how the margins are coming through as you start ramping up the production here and the shipments? Any early read on that relative to the corporate average?

Exactly. So in any complex programs like SmartCore or SmartCore HPC that attracts a lot of engineering just because of the heavier content, the launch margins are going to be a little lower than the steady state higher volume margins. So 2027 -- sorry, 2026 first is going to be our launch year, the second half, also extending into, I would say, the first half of 2027.

And the real volume shipments should begin in '28 and onwards. So we expect margins to gradually track the higher volumes and improve into '28 and beyond. And we expect them to be very similar to our average margins. So I would not want you to think of them as necessarily being a drag for certain on our margins. And we expect to -- as the volumes increase to continue to improve from there.

Your next question comes from the line of Emmanuel Rosner from Wolfe Research.

I was hoping to follow up with you, Sachin, on the topic of the in-sourcing. It feels like for the longest of time, it always felt like an investor worry that this may happen, but OEMs were never really able to pull it off for various reasons, but there were a lot of execution problems. Now it seems like it's sort of like happening.

And I'm just curious to hear from your perspective, what are sort of like the changes that have happened that enable OEMs to do it? What are the challenges they're facing? And any sort of like gating factors? Why would it be like one specific product line and not in another one? Like how do you see this evolve more holistically?

Yes. I wouldn't say that that's the right characterization that it is happening. We -- as you have been tracking this industry long enough, you have seen such intent from various OEMs throughout the last several years. And what has turned out to be the case more often than not is that the OEMs have changed plans after progressing a little bit further in their activities.

So what we're seeing here, to be clear, is that we are not seeing anything different than what we've seen in the past. And we fully expect it to play out similarly as it has played out with other OEMs previously. That's just our expectation, right? You will have to ask these OEMs eventually to get more insights. But the experience that we have and the past examples that we have in front of us just tells us that it's extremely difficult to launch CVCs and HPCs doing all of those things in-house, especially for larger OEMs. And that doesn't change for anything of anybody, and that's been how it has been.

So we think that we can be a good collaborative partner and support all OEMs in the transition through these technologies. We have been doing this successfully for several years, and we expect it to be the case as well with the customers we have.

And then just following up on the inflation in DRAM and electronics. When we do our own math around some of the commentary you provided and the implied margin headwinds, it suggests that the costs you'll be absorbing maybe, I don't know, $8 million to $10 million in 2026, maybe like $20 million in '27. And I'm not sure if those numbers are directionally in the right ballpark.

But just curious if you can expand on what's driving this? Because I think in your prepared remarks, you were saying, expanding to other electronics, it's going to be hard to recover in '26, but it looks like you also have a larger unrecovered headwind assumed in '27.

Let me take that one. I think we need to step back a little bit and understand how things have progressed since the beginning of the year. And there are kind of two big buckets that we're dealing with, the memory cost increases and then which were kind of known at the beginning of the year, which have stayed reasonably stable. We've seen some increases beyond what we had originally guided to. That's the first bucket.

And then there's a second bucket, which came in later in the year, which I'm going to talk about. So let's talk about the first bucket first, memory cost increases. We are progressing exactly on plan. The impact that we are seeing is approximately 2.5% of our sales, similar to what we indicated during Investor Day. We've been slow in Q1 in recovering as we had anticipated. And we did a good job in Q2 catching up with many customers and securing a lot of deals on memory recoveries.

That allowed us, in fact, to be neutral from a recovery minus cost standpoint in the quarter. We are anticipating that the few customers where we don't have yet an agreement will be closed -- will be settled in Q3 and possibly in Q4 as well. But overall, we'll be on target as far as memory is concerned for the full year.

Beyond that, as I said, we are seeing -- and we've seen that starting at the beginning of the second quarter, we've seen some other inflation costs, and we are tackling this as we speak. We intend to go back to our customers to try to get some recoveries. As you can understand, we've had a first wave. It's now a second wave. It's always difficult to go back, but we'll do that. And at the same time, we are also discussing with our suppliers to try to find some offset. So we're tackling both aspects for these other cost increases that we're seeing since the second quarter.

Your next question comes from the line of Joe Spak of UBS.

I actually want to pick up right there because we've been doing similar math on the memory recovery, and it looks like you're basically assuming, I don't know, something close to 90% recovery. But I guess what I'm confused by is like I understand what's going on now where like you had to pay the price and now you need to go back to the customers.

But I am confused as to sort of why that doesn't change in the future with the SCAs because then you know the price, right? So why can't that just be the price you charge and get closer to 100%? Maybe it has something to do with what percent of the business the Micron deal covers, which I think Sachin, you sort of alluded to that there's still more work to do. But also then you saw some of the automakers also enter into these agreements. So like doesn't that help as well? Like I'm just -- maybe you could sort of just explain.

It does. So let me clarify that. So the agreement certainly help because it takes away this whole notion about us trying to come to them for price increases. This is now public knowledge, all of our customers know this as well. But as you just rightly pointed out, the agreements are just with Micron and Micron is not the full extent of the memory supply to the industry or to us.

There are other memories that we also had to deal with, right? So there's DRAM, there's flash, there are different types of memories within each category that we have to work with. But in general, though, we fully anticipate to go out to our customers to recover 100% of the cost increases next year. Let's just be very clear about that, right?

Now what Jerome has been talking about are non-memory-related semiconductors. Again, I think there's some confusion there, right? So memory, separate topic. There is other semiconductors that are also seeing some cost and price increases. The discussion was more about those. It's smaller in scope. It's widespread, and we also have alternative options, by the way. This is not the same situation as memory. Hopefully, that's clear.

Yes. So maybe just to be clear on that. I think like at the Analyst Day, you said something about like a 100 basis point impact. That was not just memory. That was all electronic-related inflation.

It was everything, but it's mostly in 2027. We expect the bulk of it to come from memory cost increases.

Okay. But these additional electronics, like that's embedded in that 100 basis points...

That's correct. Absolutely, yes. But as said, you have what we know, which is coming from Micron and then you have other more dynamic memory suppliers as well with different...

Yes. the way Micron is able to supply us everything we need, it's a different discussion, but we are expecting it not to be the case.

Your next question comes from the line of Itay Michaeli of TD Cowen.

So I'll ask one more on just the memory cost recovery. Just over time, I know it's uncertain kind of where memory prices will go, but do you expect you will eventually kind of recover all of it just sort of a lag effect that as inflation continues to intensify, you just kind of have to absorb it temporarily.

And related to that, to what extent are just some of the new customer wins you've had, which is great, perhaps also contributing to sort of a bit of a lag on recovery as maybe you don't choose those recoveries as aggressively as some of your other customers perhaps?

Yes. So I'll answer the second question, Itay, first. So the new wins that we have, we are already including the higher cost of memory in those business engagements. So it's really more a question about the existing programs that we have. And in terms of what happens in the future, so the way we are looking at it is for 2027, it's really a matter of securing supply.

So right now, in total, the industry is not going to get as much memory as it needs just from the traditional suppliers. So we have to go out and secure the supply. There will be a cost to that supply, and we fully expect to be able to recover that. Now there's a cost to also on our side to engineer the products that I mentioned earlier to be able to support all the various different types of memories, qualify them, et cetera. A portion of that cost, we may have to absorb. That is part of what Jerome has in his discussion. Now as we go forward, this increased supply is going to give us more optionality and more competitive pressures to help drive the memory cost down and hopefully also improve our margins in the process.

Great. That's helpful. And maybe just a quick follow-up, switching gears. Just wanted a bit more color, if you can, on the new Japanese OEM customer win, I think with digital clusters that you talked about. Kind of curious how this opportunity came about, maybe kind of what the future could hold. And how much of this opportunity is embedded in the out-year financial forecast?

Great. Thanks because this is actually a very important part of what we wanted to communicate. Now unfortunately, as you know, most customers don't like us to share details and the name until the product is launched. So I'll stay away from that.

But I will say that this is an OEM that is not part of the global top 12, but the volume is very meaningful, and they can be a very good contributor to our revenues in Japan and North America. And we have never been a supplier to this OEM. And our growing, I would say, reputation in Japan is really what created this opportunity. And we see a significant future opportunity to expand.

But on the specific win itself is for a digital cluster, there are, I believe, three vehicles in the initial award with more to follow. And I think this is going to be a very good customer for us for many years that helps us in both regions, North America and in Japan.

Next question comes from the line of Dan Levy of Barclays.

I wanted to double-click on some of the China dynamics. You underperformed in the quarter. The revenue was down, but I see on your slide here, you're talking about getting back to growth in the second half in China, some of the premium domestic concept and you have HPC launches. Maybe you can just double-click on the visibility of that flip to growth and just what was happening in the second quarter that doesn't happen in the second half?

Yes. Yes, let me address that. So as I'm sure you are aware, the domestic market in China is going through what appears to be a structural change and overall demand is down driven by the changes -- recent changes in government policies as well as incentives. And most of the drop is impacting ICE vehicles.

And even EVs that are not considered as smart cars are impacted and are not doing as well as EVs that are considered as smart cars. And so the demand for smart car EVs, what we refer to as industry is now starting to call as the premium tech segment in China, that portion of the market is doing well. And that shift is fundamentally helping domestic OEMs that have this portfolio of vehicles and is hurting most international OEMs.

So our sales in Q2 were up with those domestic OEMs that have this portfolio, and it was hurt by the lower volumes with international OEMs. Now this dynamic changes as we go into the second half with the launches that we have talked about HPC, where we see a sequential growth from first half to second half and then this growth should continue into next year. But overall, if you look at our performance, I would say that we performed more or less in line with the domestic market performance.

And maybe to add on to that, by the end of the year, we'll be close to 60% indexed with domestic OE in China. So we are -- as we are launching these high-profile products, it will rebalance our positioning towards more Chinese domestic OEs.

Okay. Great. Second question, I wanted to double click. I think this was mentioned earlier that as you're ramping some of the Chinese customers with HPC. And I think what we've seen in the past is that there's not the same visibility or security on programs for some of the Western suppliers with Chinese where there could be more rapid mix shifts or the Chinese -- displays that we are seeing with other suppliers.

So what's the confidence that as HPC ramps that you have that visibility of being a supplier? And maybe you can also just address this as far as the export volumes, how critical this is from an export perspective.

Yes. that's a good question. And I think there's really two or three dimensions to how to think about it. I mentioned that the Chinese OEMs are kind of evolving their strategy to work more collaboratively and closely with a set of strategic suppliers for the long term, especially on products that require ongoing software maintenance and the regional diversification.

So when you think about HPCs with AI, we have to think of the AI technology as being regulated and specific to the regions. So these vehicles that the Chinese OEMs are launching in China with the AI technology that is appropriate for that region is not suitable at all to be sold into Europe without significant amount of change. And in many cases, this regulations are already in place like in the U.S. or emerging in Europe, which will fundamentally prohibit any AI IP that originates in China.

So this requires these OEMs to have a set of capable suppliers that have this ability to support them in different regions with different AI software technologies. I think this point is somehow not easily understood. So I want to make sure that it's very clear to everybody. This changes the dynamic in terms of the relationship very fundamentally. It's not just you give me a box and I will replace it with someone else's box tomorrow. It requires an ongoing engagement between the two parties.

And therefore, we have to think of it as a more longer-term relationship. Obviously, we need to do our part and execute. We're not going to accept our lack of performance just like in any situation. So it's -- in my mind, it's up to us to continue to execute and deliver the value that they expect from us I do not see this as the same type of business model as before.

The other thing to keep in mind is the set of suppliers that have these capabilities is fundamentally going to be a smaller set because you have to have a strong CVC capability, proven experience there and then to be able to build AI on top of it. It's very hard to jump straight into an HPC without having gone through the CVC path. That will be also another factor that will maybe help it out somewhat differently than in the past.

Your next question comes from the line of Winnie Dong of Deutsche Bank.

I just wanted to clarify the new HPC win announced in the quarter, that is incremental to what was announced at the Investor Day. And then I was wondering if you can also talk about the customer pipeline there in terms of interest from either domestic customers or those that have overseas ambitions? And I have a follow-up.

Yes, yes. So the HPC win that we announced is incremental to what we had assumed for HPC sales right? So in 2027, what we have talked about at Investor Day, this was not part of it. But we will have to talk about our overall 2027 sales later this year as we incorporate all of the other input into it. But as far as HPCs are concerned, that's an incremental.

And to the second part of the question that you've talked about, so we have, as I mentioned before, three OEMs and within that, lots of discussions about expanding our footprint within those OEMs and also actively engaged with others in China. And you can imagine who these companies would be, OEMs that have export markets today that they are serving. Similar technologies. And the discussions are, I would say, very active. There's a lot of energy being spent right now in coming up with our new solutions and next sort of generation of AI capabilities with all of the evolution that's happening in AI models, which I'm sure you are aware of as well.

Great. And then if we go back to the Investor Day deck on the revenue ramp down from GM and Ford, just wanted to understand to what extent is it sort of like a base case scenario or more of a worst-case scenario? Do you have any conservatism built in it? And then if we were to think about the opportunities for supplying other components such as displays, is there any way to quantify those opportunities and therefore, they can serve as offsets to those declines?

Yes. So as I mentioned, and I'll make sure to reiterate, we certainly took a very thorough approach and did not include anything that we thought was not a clear line of sight in terms of the business with these two OEMs. So you can say that in that sense, it is a conservative view of our outlook, and we wanted to make sure that we are very transparent about what we are seeing.

And at the same time, it's really important to stress this point that it doesn't mean that we are not seeing opportunities with them. We are continuing to have many active discussions with Ford and GM. A lot of that right now is centered around this year, in particular, more displays, and we're just starting to engage with them on electronics as they think about the next several years of the vehicle needs for cockpit electronics for CVCs and the HPCs.

And we have an extremely, I would say, unique vantage point to bring value to them in terms of helping them understand what the market situation is, what our experience has been in China and the various options available to the industry and the deeper insights into what goes into really what makes a good or perhaps not as good as advertised solutions for SoCs that they should be picking. So we are having those discussions currently. We expect that on the cockpit electronics front, from a timing viewpoint, these are probably not something that we will be talking about in terms of decisions this year, probably next year. So we have a busy couple of quarters ahead in terms of engagements with them to further the discussions along, and we'll be in a better position to share with you how we think about opportunities in the future.

But just to leave you with that, that we certainly look at this as a sort of the baseline from which we hope to build further upon. The timing, obviously, we'll have to come back to you with that as we know more. Unlike in China and India, where we've been able to turn very quickly from award to revenue. In fact, this has been one of the things with this $3 billion of new business wins that we have had in the first half, we have had this set of bids contribute revenue as early as 2027 in a meaningful way. That's not how it typically works with OEMs in Europe and in the U.S. So the timing impact of everything that I've said previously in terms of our discussions with them, we will know more as we go.

Okay. Thank you, Sachin. Thank you, Jerome. This concludes our earnings call for the second quarter of 2026. Thank you for participating in today's call and your ongoing interest in Visteon.

This concludes Visteon's Second Quarter 2026 Results Earnings Call. You may now disconnect.

Great. All right. We're going to go ahead and get started. Good morning, everyone. Welcome to Visteon's 2026 Investor Day. I'm Ryan Ghazaeri, Vice President of Investor Relations and Corporate Strategy. On behalf of Visteon executive team, the speakers and everyone else here from this down in the room, I want to like to thank you guys for all coming here today. I really appreciate you guys being here in person as well as on the webcast.

As a heads up materials for today's presentation will be posted online or actually have been posted online to visteon.com/investors. For the fun stuff now. Before we begin today, I'd like to remind everybody that this presentation contains forward-looking information. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks factors and uncertainties that could cause our results to differ materially from those expressed in these statements. Please refer to the page entitled forward-looking statements here as well as the presentation posted online and in our SEC filings.

So as -- to kick off our presentation today, we have Sachin Lawande, our President and Chief Executive Officer, to go through the company overview, the secular trends in our industry and the -- how Visteon is positioned to win in this market going forward. You'll also hear from several of our business leaders to provide a deeper overview of our product technology, customer strategies and the innovation we're bringing to our manufacturing operations.

You'll then hear from Jerome Rouquet, our Senior Vice President and Chief Financial Officer, to discuss our financial outlook as well as our capital allocation plans. As you can see, we have 2 Q&A sessions for the day. That's throughout the day. Please submit your questions via the link that was provided to you during the reservation or event registration. We also have QR codes that are scattered around the room on the table so you can use that QR code to get to the link as well. If, for any reason, you have technical issues, you can contact us or e-mail us online at investor.visteon.com. And with that, I'd like to invite Sachin to the stage to go over our company overview and our strategy. Sachin?

Thank you, Ryan, and good morning, everyone. Welcome to Visteon's 2026 Investor Day. You guys are able to hear me okay? Very good. Excellent.

Before I start, I would like to thank the Visteon team that has worked very hard to put today's program together. Let me start with a quick introduction to the company. So Visteon is a leading supplier of cockpit electronics and software to the global automotive industry. At our core, we are designing and delivering the integrated hardware and software systems that sit at the center of the vehicle's user experience. The company operates in 17 countries with about 10,000 people allowing us to serve automakers everywhere in the world.

Now since 2019, despite COVID, supply chain disruptions and tariffs impacting global vehicle production as well as costs, the company delivered outstanding financial results as you see on this page. Our adjusted EBITDA grew 110%, a margin expansion of over 500 basis points and we generated over $1 billion in cash.

However, looking forward, the order industry is going through a significant technology transformation driven by the increasing importance of software. And the work we have done over the last 2 to 3 years really positions the company very well to take advantage of this industry transition. Now what differentiates Visteon from our competitors is that we have the broadest cockpit electronics portfolio in the industry allows us to serve all vehicle segments and markets.

We have deep expertise in key hardware and software technologies, including AI that supports the transition of the industry to software-defined vehicles. We also have a very unique platform-based product development approach that enables us to scale while keeping costs and quality in check. And lastly, we have a highly optimized engineering and manufacturing footprint and operational discipline to drive superior financial results.

So today, you'll hear a lot about these topics from myself and from my colleagues, along with some proof points that gives us confidence in our long-term future. So a key strategic advantage of Visteon is the breadth of our product portfolio and the multiple avenues that it creates for growth.

Automotive, as you know, is a mature industry. And long-term outperformance depends on our ability to either increase content per value or expand our customer portfolio or enter existing markets. Over the last few years, we have actually done all 3. Our product portfolio covers all products that are needed for today's cockpits, allowing us to participate in the growing electronics and software content that's being added to vehicles across passenger cars, commercial vehicles and 2-wheelers.

And since our last Investor Day 3 years ago, we have expanded our product portfolio to address the emerging technology trends, connectivity in cars is growing, camera-based features like surround vision is expanding into all vehicle segments and since the last couple of years, we have launched our own connectivity and camera modules. Later on, you'll be able to see them on the left-hand side over there. And instead of buying them from Tier 2s, we are using our own so that we can capture more of the content.

We also introduced a high-performance version of SmartCore. As the industry shifts towards more centralized computing, it allows us to support the industry's transition and you will see demos of the product at the back over there. We maintained a presence in the electrification electronics which provides us with exposure to the long-term growth of electric vehicles with onboard chargers, [ DC/DC ] converters and battery management systems.

And finally, as software and system complexities increase, carmakers are increasingly looking for expert services. Through the acquisitions that we recently made, Jumper and [ Spiegel ] Institute and more recently, vehicle view. We added expertise in the fast-evolving areas of connectivity, UX and UI and functional safety. In addition to driving services revenues and profits, these acquisitions also helps us deliver more sophisticated systems in the future.

So another important element of our strategy has been the deliberate expansion and diversification of our customer base. Now since 2019, we have added 16 passenger car brands spanning both established global carmakers as well as emerging industry leaders. And of the 23 automakers that today make more than 1 million cars each annually, we have 18 as Visteon customers. That gives us a broad exposure to regions, to vehicle segments and technology adoption curves all over the world. Collectively, these 18 account for almost 85% of all cars produced in 2026.

The order industry is also going through one of its most significant shifts in recent years in terms of market share of OEMs. And Visteon has done very well in are navigating this change, and many of these emerging leaders are now Visteon customers now we have extended the same strategy beyond passenger cars to commercial vehicles and 2-wheelers. These segments are undergoing many of the same digital transformation challenges and transformation itself that they are making. And it presents opportunities for Visteon as adjacent growth markets.

Today, we serve 6 commercial vehicle OEMs, including the leaders -- technology leaders, in particular, [ Scania ] and Volvo and we have engagements with virtually all of the major two-wheeler OEMs, including the largest, which is Honda Motorcycles. Now together, this expansion and diversification of the customer base strengthens our growth profile but also makes our revenue more resilient and more balanced across the OEMs.

So let's take a step back and look at what has changed since our last Investor Day in 2023 and more importantly, how do we respond to those changes. The industry was differently than many had expected. EV adoption, in particular, slowed down in U.S. as well as in Europe, and competition shifted quite dramatically towards emerging OEMs, especially in China. Also, software, AI and central compute increasingly became important drivers of vehicle architecture.

Now rather than simply reacting to these changes, we repositioned Visteon to align with where the industry was heading, and we focused on 3 priorities. First, we expanded and diversified our customer base, as I just mentioned. Focusing on those OEMs that were underrepresented in our revenues. This included our Toyota, Honda and Mitsubishi Motors in Japan, Chery in China, OEMs such as MS [indiscernible] or [ Maruti ] Suzuki in India and other OEMs. Now we strengthened our position with some of the growing OEMs in the industry and also improved our customer concentration and reduced our dependence in some of our traditional customers and their product cycles.

Second, we broadened our product portfolio. I mentioned SmartCore, the high-performance SmartCore earlier as well as connectivity and camera modules. We also expanded into OLED-based displays to complement our growing business with [ TFT-based ] display products. Now these products positions us to participate in the next phase of the software-defined vehicle growth, and we have already won more than $2 billion of business with OLED-based displays and SmartCore HPC.

Third, we increased our exposure to high-growth markets. India, rest of Southeast Asia and South America are expected to grow faster than the more mature markets in the next few years. And we have expanded our engagement with the OEMs that are leading in these regions. And we have also invested in engineering and manufacturing to support our growth.

Now together, these initiatives has diversified our customer base and strengthened our competitive position, which creates a stronger foundation for growth in the next phase of our company. To better understand our growth opportunity, it's really important to understand how the vehicle electronics architecture is evolving and why that evolution is driving significantly higher content per vehicle.

The industry is transitioning from the traditional hardware-defined architectures to software-defined architectures, and ultimately, to AI defined architectures that are built around centralized computing platforms. In traditional architectures, functions such as clusters, infotainment, connectivity are managed by separate ECUs and are sourced from multiple suppliers. It typically creates content opportunity in the range between $125 to $350 per vehicle. This traditional architecture is the dominant architecture in the industry today. About 70% of the cars that are going to be built this year are going to use this type of an approach.

Now these vehicles still require more sophisticated digital cockpits with larger displays and richer user experiences. And Visteon remains very competitive in this segment as reflected by our wins with Toyota, with Hyundai and Stellantis and others. The next major step in the evolution of the architecture is the consolidation of ECUs into larger domain controllers. And the cockpit is the first domain that this is happening at scale.

Now cockpit domain controllers integrate multiple cockpit functions onto a single computing platform, reducing the number of ECUs and enabling richer software experiences. And as cars transition to CDC, the content opportunity increases between $250 to $500 per vehicle. Now CDC architectures also drive demand for larger and more immersive displays like you see on my left over here. And that creates an additional source of content growth within the cockpit. I'll discuss that a little bit more later in my presentation.

Now this transition from traditional architecture to SDV architecture with cockpit domain controllers in more advanced displays is the most important value creation opportunity in the industry over the next few years. Now Visteon has established itself early through our SmartCore technology, which was one of the first CDCs in the market. We now have multiple production programs with about 8 customers for SmartCore and that are more in development. SmartCore is one of the more important drivers of our growth outlook that we will discuss later today.

The next phase of evolution is already starting to emerge in China that [ STV ] adoption is already high. I should mention that although we talk about this transition from traditional to STV, it's not happening uniformly across the world. China is leading at about 50% penetration. And this year, about half of the cost produced in China will use [ DCs ], Europe is behind at about 20% to 30%. The rest of the world is just emerging. So they're all operating at different speeds.

Now China, leading OEMs are taking the next step forward by moving beyond cockpit consolidation to multi-domain consolidation and bringing AI at the core of these new experiences. And that's where SmartCore HPC comes in. So SmartCore HPC consolidates cockpit functions. It also integrates gateways and integrate other body [ ECUs ] and you will see some examples of that later on.

We are already working with the leading Chinese OEMs to introduce this new architecture and bring that into production. And so the key takeaway that you should take from this slide is that this vehicle architecture change from traditional to STV and then to AI DV is what is driving significant content per vehicle uplift in the industry. Now because Visteon plays at each of these phases of the evolution, we are in a very strong position to grow as the industry goes through this transition.

So this slide will get a little bit deeper into what is SmartCore HPC and what's the value proposition and what do we see as the opportunity ahead of us. So agentic AI, which is a term by now, I'm assuming everybody is familiar with, has the potential to make the driving experience a lot richer, more personalized and also more productive.

However, bringing AI into the car presents some unique challenges. AI models were designed to be run in cloud environment with specialized computing infrastructure that takes a lot of computing power, high bandwidth memory and significant energy consumption, resources, which are fundamentally constrained inside the vehicle.

So SmartCore HPC uses latest silicon technology, but very importantly, very advanced power and thermal management techniques to enable OEMs to run AI in the vehicle because we are not talking about running AI models in the cloud. And that enables these OEMs to deliver always on low-latency AI experience right in their vehicles.

Now as I mentioned, we're working with 3 leading Chinese OEMs, Geely, Chery and [ Syk ]. They're one of the largest the largest OEMs in China. And we'll be launching SmartCore HPC in their upcoming vehicles with a particular focus on AI-enabled experiences. Now SmartCore HPC beyond bringing AI also enables the next phase of ECU consolidation.

In one customer example, we have 13 ECUs being consolidated into SmartCore HPC. And it includes the front and the rare cockpit domain controllers, some body control functions, seed controllers, wipers, lighting, et cetera. This consolidation drives cost reduction of about 30%, it lowers wiring complexity and also weight and fundamentally creates a platform that will enable richer AI-driven experiences in the future. Now this economics works particularly well in China because their premium vehicles today already carry a lot of content.

So this consolidation makes sense. In many other regions of the world, that's not the case. Now also in China, as you may know, AI has kind of entered into public consciousness, and it's also a marketplace differentiator for OEMs. Looking ahead, we estimate the China HPC serviceable market to grow to about 2.5 million vehicles by 2029. And our objective, similar to the first generation of SmartCore, is with SmartCore HPC to target a leadership position with about 10% to 20% of the market share.

We are seeing interest from OEMs outside of China for AI in the cockpit, but we haven't included any assumptions of any revenue contribution in our plan just considering that many of these OEMs are still in the process of launching their CDCs and the longer development schedules of these OEMs probably means that their launches will happen after 2029. So the previous slide focused on the hardware side of bringing AI experiences in the cockpit.

This slide discusses the software capability behind it and how we are taking it into other markets. Now AI has evolved from perception AI, which brought object detection and classification using deep learning models to now generative AI, which brings a higher level of intelligence with reasoning and planning. Now AI brings intelligence, but running AI in edge devices requires additional software often called as an orchestrator that can take complex requests and bring them down into smaller workflows and managed memory and errors as well as interact with systems and services outside of the device.

CognitoAI is Visteon's corporator software. And it's the first software in the industry that is designed specifically for the vehicle environment. Now we're also taking company to AI and leveraging it into AI-enabled IoT devices. IoT has been around for some time, but the combination of AI and IoT has the potential to deliver significantly more benefits. Remember that IoT was all about collecting data and pushing it into the cloud, but a lot of data without the intelligence doesn't make a lot of sense.

So these products that we call our [indiscernible] Sigma that we recently announced, our targeting surveillance, monitoring and inspection applications, for factory automation, industrial as well as retail markets. And we are working on this in close collaboration with Qualcomm. In fact, the hardware is based on the [ Dragon Wing ] platform of Qualcomm. And besides collaborating on the development, we are also collaborating on the go-to-market of these devices. We expect to start to launch and deploy these devices beginning of next year.

Now looking further ahead, the emergence of the so-called physical AI with world models for real-world applications, including self-driving offers an additional very exciting potential for us to expand our AI strategy. Again, so what's the key takeaway? AI at the edge is really driving a significant transformation and adding significant content and value to devices, not just in automotive. And with the investments Visteon is making in software and hardware and AI itself, we are positioning the company to participate in the growth of value creation that's going to happen with AI.

So I mentioned earlier that displays are also a beneficiary of this transition to STV. The use of more powerful cockpit domain controllers directly enables the use of larger and more sophisticated displays. However, OEMs are taking different strategies with respect to their displays depending upon the vehicle segmentation regional consumer preferences as well as the cost and the prices.

In the mainstream segment for high-volume vehicles, we see that the displays are getting larger and they follow tablet designs with narrow borders and high-quality graphics. The content range here is somewhere between $125 to $200 per vehicle. Now premium vehicles use larger displays, either a single large display or multiple displays that are optically bonded to a larger covered lens. You'll see some of those types of displays on my left here during the break.

Now Visteon has developed some technologies, some proprietary technologies to allow us to control and reduce the cost and make our displays more competitive. These types of displays increase the content opportunity between $200 to $350 per vehicle. Now at the upper end of the market, OEMs are introducing pillar to pillar displays that span virtually all of the dashboard. The extreme size of those displays brings a lot of challenges.

There's a lot of light leakage which results in driver distraction, and we need to deploy sophisticated technologies to control the light leakage. And the very tight tolerances and high-quality requirements from OEMs makes manufacturing a significant challenge. Content opportunity as a result, grows even higher between $400 to even up to $1,000 per vehicle.

Now Visteon, over time, over the last several years, we've been in displays, has built deep expertise in many parts of the display manufacturing process. And as the displays get larger, the panel itself, which is what we buy from display panel suppliers, becomes a smaller portion of the cost. And over the years, we have been vertically integrating, bringing in-house many of the process and components that are outside of the display panel in the display stack, which is one of our key competitive advantages when it comes to displays. And together with SmartCore, displays are the key driver of the next phase of our growth outlook, as you will see later in my presentation.

Now as vehicles evolve, and essentially become computing platforms that are connected, they must continuously adapt to changing technologies, standards and customer expectations. OEMs are increasingly confronted with a rapidly changing technology landscape and are looking for partners that can help them navigate these evolving technologies that are especially critical to their future, including connectivity, as I mentioned, user experience, functional safety and now more and more AI.

Now the same technologies are also fundamental to the evolution of Visteon's technology platforms. So our M&A strategy has had a dual focus: one, to expand our software and engineering capabilities, but second, to strengthen our role as a strategic development partner to OEMs through services.

Now since 2024, we have executed our 4 acquisitions that support both these objectives. [indiscernible] added connectivity and telematics expertise as connectivity has evolved from 4G to 5G and now it's going to go into 6G and satellite communications connectivity has become even more strategic to OEMs. [ Spiegel ] Institute brings UX and UI expertise as displays get larger and as AI becomes more integrated into the cockpit, designing intuitive and differentiated user experiences becomes a competitive advantage for car makers.

[ Vehicle ] added deep expertise in an area called functional safety, which is very important when you try to integrate different ECUs into a single ECU. They have one of the deepest capabilities in that area, which will enable us to further consolidate additional ECUs as we move from software-defined to AI defined and then ultimately, a central single compute system for the vehicle. And into finally strengthened our software capabilities because they brought software-defined radio technology into Visteon, helping us, again, go forward on our journey of moving from hardware-centric to software-defined features.

Now individually, each one of these acquisitions brought in critical technology, but they're also generating revenue and profits. That's kind of the beauty of the strategy that we have put in place. So I mentioned that the adjacent markets of commercial vehicles and 2-wheelers are interesting growth opportunities to Visteon and what has been happening in the passenger cars is also starting to happen in these 2 markets.

Two-wheelers historically have used clusters with either analog gauges or very small displays. However, they're changing rapidly, with riders expecting the same type of digital experience that they get in their cars on their 2-wheelers. Electrification is also increasing the amount of information that has to be presented to the riders. So we are seeing rapid growth of larger display digital clusters with smartphone connectivity and this is also starting to become a competitive differentiation amongst the OEMs.

The addressable market is very large. Even if you exclude China, that's about 50 million units every year and the content value opportunity ranges from $40 to $80 per vehicle. Commercial vehicles, similar story, increasing safety regulations lead management needs and also rising driver expectations. Again, the same dynamic they're expecting in their vehicles, what they see in their personal cars.

And Europe, in particular, which is ahead of the rest of the industry, we are starting to see commercial vehicle OEMs equip cockpit domain controllers, similar to what we deploy in passenger cars into their heavy-duty commercial vehicles. In U.S. and India, our other 2 serviceable markets, OEMs are modernizing their cockpits. They're not quite at the level that European OEMs are, but they're using digital clusters, infotainment, and surround view systems that add in deployment today.

Now what's important is both these adjacent markets are using products and technologies that we have already developed for the passenger car market. And since our last Investor Day, we have secured a significant amount of business both on the 2-wheeler side as well as commercial vehicles. And as a result, the combination of these 2 is a meaningful contributor to our long-term growth.

So that brings me to a discussion about why do we win. We believe Visteon is uniquely positioned to win as the industry transitions to software-defined and ultimately, AI defined vehicles. In a long-cycle industry like automotive, success is determined by the ability to consistently deliver innovation, product cost and quality and more recently, speed. Now our advantages today are based on 5 differentiated capabilities.

Number one is technical depth. We have developed a very comprehensive cockpit technology platform that covers all functions needed for the cockpit. Second is platform leverage. As our reusable hardware and software platforms get richer, they enable us to deploy design, develop and deploy these cockpit systems faster while maintaining quality and control on cost.

Third is timed innovation. We have consistently been able to position Visteon ahead of the major technology transitions that have happened that are related to the cockpit. This AI is just on the proof point with SmartCore HPC. Fourth is localized scale. Our global manufacturing footprint in close proximity to our customers enables us to be more responsive and also have more resilience in the supply chain in all key markets that are of importance to automotive OEMs. And the last one is cost discipline. Our global engineering and manufacturing model is enabling us to scale while maintaining cost control and maintaining competitive cost structures.

Now we are continuing to strengthen these advantages, but we are further extending our mode with some selective investments. The first being the investment that we are making into AI that I discussed earlier. We are building deep capabilities in AI and AI DevOps to enable us to deliver the next generation of AI-based products into automotive and other markets.

The second is vertical integration by increasing the ownership of key technologies but also components, we are increasing our supply chain resilience, at the same time, we are able to mitigate cost. Third, targeted bolt-on M&A. We continue to pursue targeted acquisitions along the similar lines that I described with the ones that we have executed so far. And it's important to note that we always do this with a lot of capital discipline. And then the last part is software talent development. It's a very important piece as we grow and our engineering platforms and competency centers around the world are doing a lot of work to make sure that we have a scalable and continuous pipeline of talent to meet our needs as we grow.

Now together, these 5 differentiated capabilities in the investments, the food investments that we're making, it's going to create a very sustainable advantage for the company for long-term growth.

So this slide shows our revenue outlook through 2029. It's important to note that our assumption for customer vehicle production is generally in line with S&P Global. And the main message here is that our portfolio is going through a significant transformation. Traditional products like clusters, infotainment, are important today. But as we go forward into the future, more of the growth will come from the higher-value software-defined vehicle-related products.

We expect, as a result, SmartCore [ CDC], SmartCore HPC and advanced displays to make a larger portion of our revenue as we go forward. We also get benefit from the expansion into the adjacent markets. Commercial vehicles in 2-wheelers are going to be a meaningful contributor and with a lower contribution coming from engineering services and the new IoT products that I mentioned earlier.

All these growth initiatives are able to offset some of the legacy programs that are rolling off and will help drive sales from approximately $3.8 billion in 2026 to $4.8 billion in 2029. Jerome is going to talk more about this data.

So let me conclude by talking about our strategy. Our strategy is actually very simple. It's really lead in expand the platform, grow the market and compound the advantage. First, we are already at the center of the industry transition to software-defined than AI defined vehicles. Our leadership position in centralized computing, advanced displays and AI puts us in a great position to capture more of the content and value as the industry transitions their architectures.

Second, we're expanding beyond passenger cars. Our technology platforms are highly transferable from passenger cars to 2-wheelers and commercial vehicles and other mobility applications as we have seen and that expands our addressable market. Third, we are aligned with the industry's fastest-growing categories. That's centralized compute, larger displays, software and lastly, we are compounding the advantage through disciplined investments as well as M&A and continuing to invest and grow in our engineering capabilities. Together, these 4 pillars reinforce each other and grow our market opportunity.

Now to execute the strategy requires a leadership team that has experience in handling industry transitions, scaling operations and delivering consistent results. So today, the leaders that are going to present after me have a tremendous amount of experience in product management, in manufacturing operations, customer excellence as well as in financial management. So with that, I'm going to hand it over now to my colleague, Bob Vallance, who will talk about our platform strategy. Bob.

Okay. Thank you, Sachin, and good morning. I'm Bob Valence, and I lead the product lines at Visteon. As an introduction, I've been in the automotive electronics business, let me go one slide forward. All right. There we go.

I've been in the automotive electronics business for over 3 decades, and I was part of the Visteon spin-off from Ford in the year 2000. Over the years, I've worked in product and customer roles, spent time in engineering and operations and worked in every region of the world, including 6 years building our business in China.

While in China, I left Visteon in 2008 during the global financial crisis and went to Johnson Controls, where I ended up running the electronics business within their automotive group. I came back full circle in 2014 when Visteon acquired the [ JCI Electronics ] business. What's more interesting to talk about today, however, is what we've done since that time.

Under Sachin's leadership, we embarked on a journey over a decade ago to transform the company from a traditional Tier 1 supplier that focused on customer projects to a product-led technology company serving the cockpit, the automotive cockpit market. We've made significant progress in this transformation and installing the right product leadership was a key part.

Today, I'd like to introduce 3 of those leaders who are with us at this event and we are playing key roles in driving this transformation. First, I would like to introduce Siva Kumar Yaddanapudi, who goes by [ Y Siva ], thankfully, is the Vice President of our cockpit electronics product line with more than 24 years of experience. He began his career at Visteon as a software architect, working on in-vehicle networking technologies and later on connected cockpit technologies. [ Y Siva ] went on to build and scale our Android-based infotainment platform, and later led the development of our SmartCore cockpit domain controller platform. Today, he's also leading our high-performance compute initiatives, focused on enabling AI powered and cockpit experiences for AI defined vehicles.

Next, I'll introduce Harsha Padmanabha. Harsha is with us today, Vice President of AI, Product and Technology Development with more than 23 years of experience across multiple industries. During his 8 years at Visteon, Harsha has played a pivotal role in building several of our core software platforms, which are now deployed with multiple OEMs globally.

In 2024, he helped initiate Visteon's AI journey, spanning both edge AI and hybrid cloud developments, which led to the formation of our AI organization in our leads. Prior to Visteon hardship built products and businesses across graphics, software and AI, including entrepreneurial ventures with successful exits.

Finally, I'll introduce Freddie Matsumoto. Freddie is with us today, Vice President of our display product line. Freddie brings 28 years of experience in the display industry with 20 years in automotive. During his 9 years at Visteon, he has led display product strategy, product management and engineering across a rapidly evolving display portfolio.

Freddie has also led the advancement of technologies from conventional TFT LCDs, to many LEDs and OLED solutions, serving a broad range of vehicle applications. He's also been a driving force behind Visteon's vertical integration strategy, which you've heard about, which is a key theme for displays, and I'll talk more about that later.

So these 3 leaders and their teams will be doing the product demos after our presentation this morning. So let me now draw your attention to what we have accomplished as a product-led organization over the last few years. Sachin has outlined the journey in the industry from the traditional hardware approach that has existed for decades to software-defined vehicles and more recently, to AI defined vehicles. As Sachin mentioned, the markets have not evolved uniformly.

Today, we are dealing with very different markets and segments within those markets around the world. And while the markets have become increasingly complex, it's important to point out that through it all, we have developed a solid track record of anticipating these market trends and correctly timing innovation to meet the market demands, resulting in what we believe to be a product portfolio that has the best product market fit in the industry. But equally as important, we have developed key capabilities and reusable platform assets, which have had a compounding effect of allowing us to do all of this while reducing our overall engineering cost and time to market.

Let's go one level deeper into this for both cockpit electronics and displays on the following slides where I will share more detail and some examples. This slide describes our journey from traditional hardware-defined products to products that enable software-defined vehicles and, ultimately, AI defined vehicles. This time line shows how Visteon has built a broad product portfolio in the cockpit space along the way.

I'd like to highlight 3 key takeaways that have set Visteon apart during this time and have underpinned our success. Number one, our ability to anticipate technology shifts and bring timely innovation; two, our ability to execute efficiently and three, our ability to move quickly. We started with digital instrument clusters and audio systems. As infotainment moved to the Android operating system, we spotted this early and quickly brought in Android expertise and developed an Android-based infotainment platform. And we were first to market with SmartCore cockpit domain controller or software-defined vehicles. We later added cameras and connectivity solutions. And today, we are extending these platforms into high-performance compute for AI cockpits with our Cognito AI.

Successfully doing this requires more than product development and requires building entirely new capabilities. In addition to Android expertise, we also developed expertise in virtualization and hypervisors advanced compute architectures and now AI. Each new capability we built in or we built up or brought in became foundational for the next stage of growth.

The second takeaway is that we have achieved this while maintaining strong engineering discipline. In many companies expanding into new technologies means continually increasing engineering spend. Our experience has been different. Through our platform strategy, we have actually reduced engineering spending from earlier peak levels, and we are now holding engineering spending relatively flat while developing more customer programs in parallel than ever before.

This leads to the third takeaway, speed. The automotive industry is changing faster than ever. Automakers need partners who can respond quickly to new market requirements. Because we develop reusable assets rather than one-off solutions, we can significantly compress development time lines and bring products to market faster. Let's look at the platform strategy that makes all of this possible.

To set the context for our platform strategy, it will be helpful to take a closer look at the hardware defined world we lived in for decades. In this world, there are no platforms. no significant standardization of any type. Automakers define each product based on what they need. There is an attempt for reuse within some automakers, but very little to show for it at the end of the day and virtually no reuse possible across automakers.

What this means to the suppliers is that each project stands alone and must be engineered from scratch. Many automakers and suppliers are still operating in this mode today. It is a cycle that is extremely hard to break and takes years to do so. Yet in this environment, we found a way step-by-step to develop platforms with the product-led organization Sachin put in place.

First for instrument clusters and later for infotainment, as I mentioned earlier. If we had not done this, we would not have been in a position to take advantage of the breakthrough opportunity the software-defined vehicle opened up for us. This big breakthrough came when we were first to spot the potential as part of the software-defined vehicle trend to combine the instrument cluster and infotainment functions into 1 ECU and driven by a single SoC. We were able to bring our cluster and infotainment platforms together and build on top of them to create the SmartCore CDC. And we just did it again.

As we anticipated the AI defined vehicle trend, we were able to take our SmartCore CDC platform and build on top of this to create what we call smart core high-performance computer, HPC, which also includes our AI framework. We were able to do this quickly and position ourselves as the best partner for 3 of the leading Chinese automakers who will be the first to bring the AI cockpit to the market later this year.

I'd like to punctuate this success story with a recent example that clearly drives home the point about the power of our platforms. We recently won a CDC program with a European automaker driven by an urgent market need, this program had to be done in 12 months from a warrant to production.

As illustrated on the right side of the slide, our CDC platform has over 1,800 software blocks of code representing more than 25 million lines of code. We were able to completely reuse over 1,400 of the 1,800 blocks, which is more than 75%. With this approach, we were able to dramatically reduce the development effort and cost while delivering this complex product in 12 months. This is the power of our platform.

Let me summarize the platform benefits more broadly on the next slide. To summarize how the platform benefits have benefited us -- the platform approach has benefited us. I will look at what we accomplished in the last 3 years since we were here in New York. In total, we have on more than 100 customer projects in cockpit electronics in the last 3 years. While we develop these projects in parallel, we are dealing with increasing complexity at the same time.

If you consider that an infotainment system is 2 to 3x as much engineering as an instrument cluster, you can get a sense of the magnitude of the work. Where things get even more interesting is with the smart core cockpit domain controller. We have won more than 25 customer projects since we started this product line prior to 2020. And 15 of those wins have come in the last 3 years.

When you consider that the engineering effort is more than the combined effort of an instrument cluster and an infotainment system. This will give you an idea of how much work it is to do 15 new programs in parallel. This is truly unique in the industry. And the final proof point for the power of our platforms is our move into HPC with 3 Chinese automakers in parallel. The amount of work involved and the necessity of closely collaborating with each automaker would make doing one of these projects at a time, a real challenge for most suppliers.

Our ability to do 3 at a time with a time to market of about a year is perhaps the strongest testament to the power of the platform approach. And then when you step back and realize that we're actually doing all of these things at the same time, this will give you a complete picture of how we are scaling our products in markets around the world that continue to demand this entire range of products from entry-level instrument clusters to AI cockpits.

Now let's turn our attention to displays. Story for our display platform approach it first appears to be different than cockpit electronics. Displays are highly customized products, which have become the primary interface in the immersive cockpit experience that Sachin talked about earlier. This creates a unique set of challenges from the cockpit electronics challenges, which are more about software.

But there are some parallels we can draw and what is the same is our reusable platform thinking. I would like to explain how we have approached displays to position ourselves as a leader in this space. It starts with the work we did pre-2020, as Sachin mentioned. We brought in display expertise originally for digital instrument clusters and stand-alone center displays. We also anticipated where the market was going and made the decision to go deep into the design of the display components working closely with panel makers, cover lens suppliers and various other suppliers across the display system value chain.

This early work we did for single displays, such as developing thin display form factors narrow border design, enhanced optical performance, in-house optical bonding of cover lenses, mechanical design, thermal management and other key elements could then be scaled when the time came to move to dual displays and eventually pillar-to-pillar displays, using both TFT LCD and OLED technologies. What we've built in the last several years is a platform driven by vertical integration. This has strengthened our technical capabilities, improved our cost competitiveness and development efficiency.

So let's go deeper into the platform approach for displays. This slide shows the breakdown of a TFT LCD display system and it gets to the point that Sachin had made earlier as well. You can see where the value resides on this slide. At the center of the exploded view on the left is the display panel itself. Above the panel, you have the cover lens and optical bonding and below the panel, you have the backlight, metal carrier, et cetera.

There are 3 key takeaways I want you to get from this slide. Number one, 5% of the value of a display system is not with the panel makers. Number two, typical Tier 1s buy from the panel makers and other suppliers and do some level of assembly. Number three, Visteon is different. We are deeply vertically integrated from top to bottom in the display system, and I'll go into some of that.

It should be clear from this slide why vertical integration is so important. Visteon built a dedicated display organization a decade ago and established a technical center in Taiwan, bringing in deep Tier 2s level expertise, including engineers specializing in TFT LCD panels, OLED backlighting, cover lenses and optical surface treatments. And I think it's important to point out that these engineers, many of them worked for Apple and -- worked on Apple and Samsung and other projects like that. These are not all automotive engineers. This is a mix that we brought in.

As a result, we developed internal capabilities in key areas such as in a narrow border designs, advanced optical performance, large-format displays and curve displays. We also have developed a strong portfolio of proprietary IP along the way.

But there's another important part to the story I want to make sure to get to. What we integrate, we standardize. Although customers want custom solutions for their unique vehicle designs, there is still much that can be done to standardize key elements in the display system to create reusable platforms. For example, customer requirements for sunlight readability can vary widely. We built libraries of optical configurations that can meet each requirement quickly.

For the display panel, we develop and procure at the base panel level, which allows for much greater standardization. For a 12.3-inch and 10.25-inch displays as an example, which will still account for approximately 40% of the market by 2030. We are driving standardization, enabling us to source panels with consistent specifications for multiple suppliers.

Finally, it's important to emphasize that this level of vertical integration is also a key enabler for localization, which is important both to customers and in our manufacturing process, as Joao Paulo will talk about later.

So let's summarize the platform benefits of displays on the next slide. Similar to the cockpit electronics summary slide, this slide gives you a perspective on what we have done with our platform approach for displays in the last 3 years since we were here. Let me walk you across the page.

In total, we have on more than 80 customer projects in the display product line in the last 3 years. Every one of these display projects is considered a custom application by our customers and requires close collaboration with our customers throughout the development period, and we are executing these programs in parallel. In the same period, the complexity of display systems has continued to increase. When you consider that a growing portion of our business wins are in the more complex display systems, the amount of work to develop these systems in parallel is also increasing. But every project benefits from our platform approach as well with standardization of key elements of the display system, which allows us to reduce the engineering cost and development time to meet the increasingly demanding requirements of our customers.

Now let's transition to how we are managing our platform strategy as we move into the future. Until now, I have primarily covered what we have done to leverage our product-led organization and platforms over the last decade to get to where we are today. I would now like to turn our attention to how we are managing our platforms going forward as the changes in the business come at us faster and faster. We must continue our track record of anticipating these changes acting quickly and leveraging our platforms. And what better way to talk about this tend to use AI as an example.

We certainly have a good starting point here with our HPC and Cognito AI platforms and our position with 3 of the leading Chinese automakers to launch AI cockpit systems this year. But let's talk about some of the challenges that come with implementing AI in automotive and the work we are doing to lead and find solutions in this space. As we compare the AI and automotive worlds, we can see in the left chart the AI world is putting out new models at a faster and faster pace and with increasing complexity. The pace is relentless. It's not slowing down.

Now look at the right chart, Automotive is the opposite. Once a car is designed, it's locked in for 3 to 7 years, fixed compute, fixed memory, hard limits on heat and power and a long qualification cycle before anything ships. The cloud changes weekly, the changes to a car can be measured in years. This is the tension on this slide. deploying AI in the cloud is easy you just add more servers. -- deploying AI in the car is hard. You have to fit fast-moving intelligence into hardware that is frozen in time by comparison.

And that is exactly where Visteon sits. We are helping to bridge this gap. We partner with the automakers, taking the latest models running on the cloud and customize and optimize them to run on the automakers specific hardware within their limits. We turn what's possible in the cloud into something that actually ships in the car. And being that bridge isn't just a one-trick solution. It takes a full platform approach.

Let's take a closer look at that. Being the bridge means owning the whole stack and building key capabilities, as Sachin mentioned earlier, we split this into 2 parts. On the left side is AI engineering, the work of shrinking and shaping models so they run on a car distilling big models down, designing them around the actual chip blending on device and private cloud and squeezing the most out of limited memory.

On the right is AI infrastructure, everything that keeps it running and trustworthy, the data pipelines, simulation and validation the GPU compute to train on, the safety and benchmarking and the ability to monitor and update the car over the air after it ships. While many companies are involved in this space, very few are capable of taking this on end-to-end. This comprehensive end-to-end approach to bridge the gap between the AI and automotive worlds is what makes our approach unique. And as we collaborate with leading automakers, our position gets stronger, and that is why we believe this approach scales from one program to many.

So I'll wrap up my presentation now on this slide. As I close, let me leave you with 3 reasons why we believe Visteon is well positioned to continue to lead as a technology company and capitalize on the foundation we have built over the last decade. First, we are a product-led organization with the right leadership team in place. We have transformed the way we operate from a traditional supplier focused on customer projects to a technology company that owns its product and technology road map, correctly calling market transitions, bringing timely innovation and building platforms that scale.

Second, we have built what we believe is the industry's broadest and most comprehensive cockpit product portfolio, and we are uniquely positioned to address the evolving needs of automakers across vehicle segments, regions and architectures, giving us multiple avenues for growth. Third, we have consistently demonstrated the ability to identify important technology shifts early and move decisively. And as the industry transitions towards AI defined vehicles, we believe our platform approach and our close collaboration with leading customers will continue to position us to capture the opportunities ahead.

Thanks for your time today, and we'll turn it over to Ryan for Q&A.

Thanks, Bob. At this time, we're going to keep Bob here and we're going to have Sachin come on for our first Q&A session. This Q&A session will be followed by a break that we'll have for about 15 minutes. Much to my surprise, Sachin spoke less than I expected. So we're actually running ahead of time. But we've got a few questions that have rolled in the QR codes that you guys have on the tables, maybe not everybody has the right in front of you. So please share we'll allow you to ask questions as you'd like, but we have received a couple of questions both online and in person.

So just to start -- I'll start with one question that was submitted online. You talked about China HPC through 2029. Have you made any inroads with European OEMs? I guess any OEMs for that matter, outside of China? And when do you expect these non-China business to come through?

Yes. I think I alluded to that in my presentation. The answer is yes. We have a lot of engagement with virtually all of the leading OEMs that you can imagine in Europe as well as in Asia, including Japan, the challenge isn't that they do not understand the value proposition and that this is the future. They all do. They have a few challenges that I mentioned.

They're still in the process of launching their next-generation cockpit domain controllers. And they are also looking at some of the costs associated with it, which -- as you saw from the presentation, in China with their integration approach, they're able to offset. This takes a lot of heavy engineering. This is going to take a little longer for the rest of the world to be able to catch up to China. However, as you can also imagine, it's a competitive dynamic that they will not be able to avoid.

So we fully expect them as the AI technology matures and the silicon options also broaden that the rest will follow. From our viewpoint, we really take this first engagement that we have with the different OEMs as a learning opportunity. We have to solve some really hard problems. We shouldn't be under the impression that going from a CDC to an HPC with all of that integration and AI is just a run-of-the-mill activity. It takes a significant amount of lift Bob mentioned the capabilities that we have to develop, and we have to scale. We have a lot on our hands with 3 OEMs, and we would like to see some progress and some capabilities develop before we aggressively push it with other customers.

We've got a couple of questions on HPC consolidation. So I'm going to try to combine these a bit, but we received a question from Rajat Gupta from JPMorgan. Thank you for -- and investors. So how does SmartCore [ HBC ] strengthened Visteon's position with future vehicle architectures and then the combination, what is the urgency being shown by OEMs to move to more zonal and central compute that might require a quicker need for Visteon to add [ ADAS ] capabilities?

Yes. So that's the second part is an interesting question because it's just a logical expansion of this integration of gateway body to now ADAS. However, there's a big, big difference. When you move into ADAS as versus everything else that has been discussed previously, you bring into a safety-critical applications. So we are now combining your normal nonsafety critical, right, which is referred to as QM with safety critical functions and that raises the bar in terms of the complexity, significantly higher.

Now the silicon to support that is starting to emerge. We always think first in terms of is the silicon capable of doing it. If the underlying the very bottom most layer isn't capable of supporting it, software cannot do all of the magic on its own. So the initial silicon that we have for the domain consolidation for HPC does not yet have that level of sophistication where you can also bring ADAS, but that's coming very soon.

So as the silicon emerges -- and that's the reason why we do acquisitions like [ vehicle VO ] so that we have the capability, that's exactly the capability that you need, what is referred to as functional safety, which is how do you partition the whole system to ensure that ADAS gets the resources that it needs that whatever else is running, which is more and more as we integrate more does not somehow impact the mission-critical ADAS capability. And that's where we see the industry go into the future.

Now to answer the first part of the question, the driver here is consolidation, right? So if the OEMs need to bring AI, there's a certain level of cost involved in bringing AI that simply comes from the higher compute and memory needs. So that has to be offset by something, and that something tends to be the integration.

So as I mentioned, with vehicles in China, particularly in the premium segment, already having a lot of technology content consolidation, obviously makes more sense to happen there first. Now when you move to outside of China, we still have those types of vehicles, maybe not as many in terms of the percent of the total market as compared to China, but we have all of the premium vehicles that have significant content. So we expect that premium luxury side of the market to follow for no other reason than to be able to compete with the Chinese vehicles that will eventually come into the markets that are today served by the global OEMs.

All right. We'll try to converge again with some of the questions. I'm going to paraphrase here, but Dan Levy asked a question related to vertical integration displays. So I'm going to just ask the question with the investor's question as well.

There are a few of your Tier 1 competitors that have been exiting the display market. Do you have a sense for the margin differences or the cost advantages that are between you and the other display Tier 1 and then what about the panel manufacturers as well?

That's a very good question as well. And I think Bob gave a great perspective on how to think about the different cost elements that cost drivers of display, especially as they get bigger. If you think about the smaller displays, there are typical 8, 10, 12-inch size displays, that's pretty much a commodity. There's not a lot of value add that happens there. And for that reason, if for anything, we use that, it is for integrated products for the traditional architecture vehicles.

But the bulk of our displays opportunities are coming from the larger displays, like the ones that you see here as OEMs tend to go into STV, right? SDV require separation of displays from the compute and the displays also tend to get larger. There, the value that is assigned to the panel itself is actually only a smaller portion of the overall. At the same time, however, if you do not have the vertical integration capabilities that we have that took us about 7, 8 years to put into place, it's not a very attractive business because you then have to get all of that from somebody else, someone else takes the bulk of that value.

So I wouldn't want to comment on what the other Tier 1s are doing. We used to be one of those before as well. right, buying these display panels. And we had a choice to make, either we get out of the business, like many of them did or we go into it. What was the reason why we decided to go in. As we saw the industry shift over to STV, it became abundantly clear that displays would be a major portion of the value. Why would we get out of a big portion of what was happening in the cockpit, right? And we could see the 2 go hand in hand. The more electronics you do, the more displays you need.

So we chose a different path. And that was though in 2018. Now whoever would like to come into this space will need some time to get all of the capabilities in place, including the panel suppliers who may have the 25% that we showed, but they still need the rest of the capabilities.

Let me add one point, if I may. And this Joao Paulo will talk about later. With the panel makers being all in Asia and most of them being in China and a lot of the other suppliers that go into the display value chain also residing in Asia. You can imagine there's a lot of discussions these days about supply resiliency and things like that. Visteon is uniquely positioned to localize, as I mentioned before. So we didn't just vertically integrate in one location.

We did it everywhere around the world. And we can bring the value much more of the value of the overall display system closer to the customer in region closer to the customer. That is huge when it comes to supply resiliency. And so that's another benefit that came as a result of us being vertically integrated.

Good segue with China. So Winnie Dong asking the question, what kind of from Deutsche Bank. What kind of competition are you looking at in China? Are there any specific segments you're looking at for the growth, whether it's more exports or more domestic?

China certainly has a set of competitors that we are watching very closely. These is somebody that we respect quite a bit. And we learned from them as well. So there is no harm in being smart about learning from what you see has done well.

However, let me just paint the broader picture for you. If you think about what has happened in the China market, the domestic demand is kind of now getting restructured with the changes in the incentive model that is now in place. And the competition is intense. So for most suppliers, including the domestic suppliers, making profits in the bulk of that supply chain is extremely hard.

That has limited the scaling up can't live in this industry, if you're not profitable over a lengthy cycle because it's very hard to change the economics of a business if you do not really have the profitability built into the foundation of what you do, right? So we don't really see the scaling up of many of those competitors that have been around. It has been very few. This is probably the only name that I can point to that has achieved a certain scale you would have expected with 30% of the market being in China that you should see more suppliers emerge. That has not been the case. That's point number one.

The second point is with the focus on exports, and with the focus on AI, AI tends to be a regulated technology. Chinese AI is not going to be allowed in the U.S. or in Europe and vice versa. So OEMs need global partners that have capabilities but are able to operate at China speed. This very simple message internally that we have for Visteon, right? You're a global technology player, but you need China speed. Both have to be true, not just one. And that's the differentiation that we are trying to put in place. Everything that you saw us talk about today so far has been with that in mind.

Now having said that, I would never count the competitors from Asia out. And we also, therefore, pay a lot of attention to our cost structure, so there are 2 things that we have to always watch for besides our technology, right, speed and cost. And a lot of our discussions today are really about that. And so we today, from a cost structure perspective, we believe we are competitive with anybody, including the suppliers in China, our fixed cost, right?

And then with the speed, the platform approach, I think we are actually ahead of many of these guys, it brute force, putting a lot of people, which is largely what's happening in many parts of the world cannot last for too long. And to build a sustainable business, we need a different approach.

Now one thing that we didn't mention, and this is the last thing I'll stop here. AI, we are not stopping at just AI into our products, AI is coming into our engineering capabilities in terms of how we build the products, which is the next level of optimization that will happen in terms of capabilities.

Well, Joe Spak just asked a question that is a perfect segue because he asked from UBS. How do you expect the split between hardware-defined software-defined and AI defined vehicles 5 years from now? And who do you believe are the main competitors on the AI defined side?

So if you look at our plan here, our traditional business will probably come down to maybe 1/3 of the overall. As I said, vehicles by 2029 will be STV vehicles. Not AI defined necessarily [ SDV], right? And so that means the rest 50% are still traditional, but the value is definitely higher on the STV side. So we expect maybe 25% to 30% of our revenues to be our traditional. The bulk of the other revenue is [ STV/AIDV ] and the AI piece for the rest of the decade is largely China. That's the way we should think about it.

Great. Another great segue. Colin Langan from Wells Fargo said slides flagged that there's a decline in sales to the traditional autos. Why not continue to support these programs? Are they not profitable?

It's not that we don't want to support these programs. And we are, like we talk about Toyota all the time, and we'll talk more about Toyota later today. And that's your classic traditional architecture OEM as a customer to us for the next few years. And we're very happy to serve that market, right? But the bulk of our customers are actually going into SDV, and we see greater content opportunity, greater technology play and that means obviously, better margin structure.

So our interest is in accelerating the trend. I should mention one more thing, which may not be obvious from a distance, what's happening with the memory dynamics. I'm pretty sure you are all aware of what's going on there, that will also push the industry to adopt consolidated architectures sooner. This traditional architectures require traditional technology, holders, SoCs, older memories. And if all things were equal, that's fine.

You can continue to work on that for a long time. But what have we learned in the last few months that those traditional technologies are not going to be in the level of supply that we would all like. So the industry is going to shift. There will be a bigger consolidation even from OEMs that were not prepared for it. And that's our opportunity.

I'll add one more point as well on that. When we talk about the whole -- the transition from hardware to software to -- as we talked about, Visteon has the entire portfolio that covers that. And what we can do, no matter which OEM, every OEM, it's only a discussion about the steps and the timing. There's no debate about the direction anymore as it was true some years ago. So we can help every OEM take the next step. And those are the kinds of conversations that we have with the OEMs is how do you take the next step along that path with the next vehicle opportunity.

Switching gears a little bit. So Tom, from RBC asked, you have $1 billion in revenue uplift from nonautomotive. You mentioned 2-wheelers, CVs and now IoT. What about leveraging BMS for energy storage?

Good question. And energy storage, we looked at that actually a few years ago, maybe 2 or 3 years ago, even before this AI hype investment into data centers and so on, hit the media. And we arrived at a conclusion that the value that is a strive to what we do compared to the value about -- that goes into the battery technology itself that it didn't really make sense for us to go into it unless we wanted to get into the battery technologies. So that's one thing.

The second thing is that's an entirely different market. It's different buying patterns, different ecosystems, get into a space that is a little further away than where we stand today. So if you think about the adjacencies that we have stepped into -- they are very near adjacencies, very comfortable in terms of the risk and our ability to be able to mitigate them.

Now you might question is IoT a similar situation. And in many ways, from a product viewpoint, IoT is very similar to what we're doing in automotive. So at least one part of the equation, the product side of it, we have a lot of control and understanding about that. And on the other side, in terms of the go-to-market and the market development, that's an area where we will need to learn and develop our capabilities.

But the value proposition in terms of what we bring versus in the energy storage entirely different. What we can bring in terms of the uplift to IoT, a typical IoT product with an AI doubles or triples in value. right? And that's the AI that we bring. That is not the case with an energy storage where we bring BMS and the bulk of the values in batteries that we do not supply.

Following up on that question. Just related to electrification products in general -- you're clearly downplaying electrification products, electrification seems to be out of focus, what is to play with this product line?

Yes. So we are essentially taking a wait-and-see approach with electrification, right? So what we see, we see that demand in the U.S. is weak at best. And Europe, although there has been of late, a lot of demand increase in electric vehicles, driven by what's happening to energy prices there. We'll need to see whether this is sustainable.

If things change and if it goes backwards, like what we saw here in the U.S., we don't want to be in the same situation that we were in just a few quarters ago and get [indiscernible] from one position to the other. So in the meantime, though, we continue to serve our customers. We have 2 here, 2 in Europe. We are paying close attention to what's happening there. And we have some modest investments in other areas.

As I mentioned, broadening our product portfolio, power conversion in particular. So we'll continue to do that and watch. I do believe long term, EVs will grow. Is that the best investment for us to do now questionable, given where the market stands? And with the overcapacity that we see in China, I'm hesitant to follow something where the markets themselves fundamentally are in growing and there's a lot of capacity.

All right. I'm going to try to squeeze in a few more questions. We got about 5 minutes Dan asked 2 questions, but they're kind of related. So I'm going to try to combine them, Dan from Barclays. [ VW, Rivian ] JV is providing a model for OEMs to more directly own architecture and underlying ECUs. To what extent HPC enables OEMs to have sufficient ownership over ECUs/complexity reduction? And then I guess to follow on that, what is the competitive set on HPC?

So when you go from a stand-alone product or even the CDC to HPC, the level of collaboration between the OEM and the supplier has to go up by definition because it's integrating a lot of the ECUs that doesn't come from the supplier. The 13th [ is use ] that I talked about, getting integrated into our HPC. Most of these are not done by us. So clearly, the OEM has a big role to play as the person that is bringing all of that technology in, working with whoever the suppliers are and integrating it onto the HPC.

So what we see as a business model change, especially when you go from a CDC to an HPC and also on account of this AI life cycle, how tight it is compared to the automotive life cycle that Bob discussed that the model changes from a typical supplier where the relationship in terms of engineering ends when the vehicle ships and then you still stay ongoing supply to a much longer core development activity because of the constant refreshes of models that are required.

So we are setting ourselves up and we were doing this even anticipating this in the past, that the product line architecture is critical to do this. Now if you were not to have a product line which meant we only had project teams. The project teams end and the product ships, that's the model that the whole industry has been using and which, by the way, most of the OEMs are using. They are financial systems, their internal teams are not set up for a continued engagement over multiple models on the same technology.

That was the big difference between this tech companies coming into automotive who built a tech platform and they released vehicles versus OEMs that build technology forecasts and change technologies with every car launch. So that change is what we have also implemented with our product lines. And that's very fundamental to how the future of the industry will look like in terms of collaboration.

Now you asked about the competitive set. So one thing that as you can think about it, you can be an HPC supplier, if you're not a CDC supplier today. There's no room for you to be a cluster supplier and an IVI only supplier and leapfrog to an HPC supplier. So that tells you who that set is. It's a fairly narrow set, and they have to then have AI capability on top of that to aspire to be an HPC supplier. So that set is also narrowing.

Okay. I'm going to try to squeeze in 2 more questions. Two of them are actually combined. So can you talk about the regulatory situation in Europe that might help penetrate the Chinese OEMs as they produce in Europe for your products? And what is our strategy to help serve the Chinese OEM?

One of the biggest regulatory reasons is AI actually. If you look at the discussions that we have with our OEMs in China that have export ambitions A lot of it is on account of the fact that they are seeing regulations increase and are also anticipating additional regulations to come on the horizon. AI is a big piece of that.

They recognize that anything that touches AI and connectivity will be heavily regulated by all jurisdictions, right? So Chinese technology, AI technology, connected cars are going to be a difficult proposition and therefore, they need partners like us. So that's the main one. And then there are others that are, I would say, is more secondary.

Great. All right. Last question for this session. What are the gaps that Visteon needs to fill given Qualcomm and NVIDIA, both now have full stack L2 ADAS solutions, and they're also your partners?

What's interesting is when you look at the ADAS stack right? The [ L2 ] stack in that configuration, especially when you go to end-to-end AI, it just becomes a safety stack. That's from the primary stack. You always run 2 stacks. You run the stack and you run a stack et stack is essentially there to ensure things don't go off the rails.

So what we expect is that all silicon vendors will just supply you and help to stack, it's a cost of doing business for them. Nobody is going to engineer safety stack that really just doesn't get used. The real value is in the end to end. Now end-to-end AI for ADAS, that is truly capable of reaching at some point in the future the level of capability of Tesla, there are not too many options.

However, this [indiscernible] NVIDIA with the Cosmos world model is a very promising step in that direction, and they are our close partners, and we are developing a lot of capability in the whole end-to-end chain that Bob showed on his presentation slide. So that capability is key. It's not a trivial task to take that on, but we see that as an opportunity in the future.

Perfect. All right. You made up time. We're [ 37 ] minutes or [indiscernible] seconds over now. So we're going to take a 14-minute break instead of a 15-minute break. We'll be back here at 10:45.

[Break]

Thank you. Thanks. All right. We're going to go ahead and get started back up here again, but people get situated. So we've got 3 more speakers and then a Q&A session. We'll have Francis Kim start, followed by Joao Paulo, focused on manufacturing operations and then finish up with Jerome Q&A. And then we also have lunch that I'll let you guys check out after the Q&A. So I'd like to introduce Francis Kim to the stage.

Thank you, Ryan. Before the numbers, a word on the lens I bring to this have spent close to 20 years in electronics. It came up through consumer electronics into automotive at LG and move to Visteon while I was in Germany. And I have led Visteon's business there with some of the most demanding customer OEMs in the world. I've also seen this [ carpet ] business from both sides, competing against Visteon and now competing for Visteon.

Today, I lead our global sales organization, and I also run our rest of Asia business. That gives me a view across the customers, regions and awarded business behind our strategy. So as I go region by region today, my message stays the same. We do not chase volumes, we place our content where the value is moving.

Let me start with a shift behind all of it. This is the single most important frame for everything that follows. These are the 12th largest automotive manufacturers globally and how their production has changed since 2019. Rather than focusing on any single company, focus on the overall shift. Domestic Chinese OEMs have taken global share. And China is now the world's largest car exporter. And that has reshaped this complete list. Three of these 12 are now Chinese BYD, Cherry and Geely. They are up triple digits. Several long established names here are down 20, 30, even close to 40%. Our response has been deliberate, with global vehicle production expected to stay broadly flat. We are focused on our technology and content where value is accelerating.

That strategy is clear in our customer portfolio. Toyota, the world's largest automaker is becoming our top 3 customer and expect it to be up to 8% and of company sales by 2029. We're gaining real momentum at Hyundai and [indiscernible]. And in China, we identified the software-defined vehicle transition early and positioned ourselves as the AI cockpit and SmartCore high-performance compute development partner for 3 leading domestic players, Geely, Chery, and SAIC on their premium brands.

The key point is simple. We are not relying on industry volume growth. We're increasing content with the customers and platforms where technology adoption is highest, which supports both growth and a higher quality revenue mix. Before the regional tour, one frame that ties the rest of my section together. Our revenue is well diversified across all 4 regions and each is adapting to its own market dynamics.

In the Americas, software-defined adoption is still early, which gives us runway to refresh existing architectures with modern cockpit content. In Europe, it's the opposite, fast software-defined vehicle adoption, tightening regulation and Chinese competition are all pushing content up. In rest of Asia, digitalization and India's two-wheeler boom create new upside as our legacy Japanese programs roll off on cycle. And in China, the era of incentive-driven volume is actually over. The next leg is tech premium and high-performance compute led. Four different drivers, one shared conclusion. In every region, the cockpit is where value is concentrating.

Let me show you how we win in each, starting with the one region that needs the most explaining. Let me begin with the Americas, where we are managing through a near-term transition. According to S&P light vehicle production forecast, the market is expected to grow about 8% between 2026 and 2029. Our revenue, however, declined from roughly $1.2 billion to approximately $1 billion.

The reason is straightforward. Our 2 significant legacy programs are rolling off, Ford's legacy cluster programs, and GM's reconfigurable clusters for full-size trucks and SUVs. But those headline numbers do not fully reflect what is happening underneath the business. As legacy programs roll off, our display and copy domain controller business are growing. Exactly the softer defined vehicle-driven shift we have been building towards.

Revenue from our growth customers increases from approximately $400 million to more than $600 million by 2029, surpassing our Ford and GM revenue. Importantly, this growth is concentrated in higher value content aligned with the softer defined vehicle transition. Our recent wins include display programs at [ Scout], SmartCore programs at [ Triton], a new commercial vehicle business with international and Oshkosh.

Customers that were not part of our portfolio only a few years ago. So while the revenue base changes, the quality of the business improves, we're expanding our customer base, increasing content per vehicle and strengthening our position in next-generation cockpit architectures. That positions the region for a healthier and more diversified growth profile over time.

Now in Europe, the headline here is simple. It grows even while absorbing the roll-off of several sizable legacy programs, long-life clusters and displays. For context, vehicle production according to S&P LVP is expected to grow about 4.6% between 2026 and 2029. Our sales grow faster from about $1.4 billion to $1.7 billion, just over 20%. We're beating the market.

And here is why. This is not a volume recovery. It is content expansion and regulation is actually driving it. The EU new general safety regulation, now mandates, driver monitoring and the displays to support it. Vehicles are now required to be cybersecure and to support over-the-air software updates. and the 2026 update to Europe's NCAP crashes ratings makes advanced in-cabin technology, essential just to earn pipe stars.

Some of this is now law. The rest isn't. But no carmaker can sell competitive vehicle without it. Either way, value shifts from stand-alone clusters to integrated copy domain controllers and advanced displays. So yes, Europe steps down briefly around 2027 as legacy programs roll off ahead of new launches ramping. But underneath the business is rotating into exactly the right content.

By 2029, new CDC and display awards leave us with a stronger, more SDV aligned revenue base. We have won and launched the premium end of it. the Audi panoramic display, the Mercedes [ MBUX], Superscreen, and the same [ SMICore ] platform is scaling into trucks at [ Scania]. Part of the trading group and Volvo Trucks and Volvo Construction Equipment. That is the trade-up captured in one region. We're no longer selling a cluster. We are delivering the displays across the cockpit and the computer that runs them more content per vehicle and better quality revenue.

Now the region where I see the strongest growth ahead rest of Asia. Our sales grew to $1.43 billion by 2029, and close to 70% and more than 10x the pace of the market itself. And within that, our 2-wheeler revenue more than triples -- the chart here tells the rest in 2 lines. Our legacy Japanese business, Nissan and Mazda rolls off as those programs age out. But everything else, India, ASEAN and the new platforms more than doubles. The new business doesn't just replace that decline. It overwhelms it and the wins behind that are concrete, not hopeful, [ Mahindra's ] flagship SUV running a centralized computer with 3 12-inch displays and platform expansion at Toyota the CMR cluster and the Lexus ES display.

Toyota deserves its own slide, but first on India. India is the engine inside that engine. So let me stay on it for a moment. Look at the trajectory from under $100 million of cockpit sales in 2019 and to about $900 million by 2029. And this is not a forecast we are reaching for. It is built on a steady cadence of wins from our first SmartCore in 2021 to a wave of new awards ever since. Three forces line up here at once, which is rare.

India's vehicle production is growing faster than any major market on earth. The mass market is moving to advanced displays, not just premium exactly what we built and 2-wheelers are digitizing on top of all of it. And here is what makes it real. Both of those $900 million is already booked. Nearly $2 billion in signed business across passenger cars and 2-wheelers in just 3 years. Toyota represents one of the best examples of our customer expansion strategy.

Our first Toyota award came in 2021. Since then, the relationship has expanded rapidly with approximately $2 million of new business booked between 2023 and '25 and '22 product launches forecasted from 2026 through 2029. As a result, Toyota revenue is expected to increase more than fivefold to approximately $390 million by 2029, making to 1 of our top 3 customers. Our technology will be on 6 of Toro's 10 best-selling vehicles and 7 of top 10 best-selling Lexus vehicles by 2029.

Toyota for us is more than a single account. It shows how our growth model works. We typically begin with a focused technology win. We then execute, build credibility and expand across additional vehicle lines and platforms. Once they established, these relationships tend to be highly durable and create opportunities for long-term, profitable content expansion as well. And Toyota is the clearest proof of it.

Two-wheelers may be the most underappreciated part of our story. It's a large market, about 51 million units a year addressable outside of China, across India, Southeast Asia and the rest of the world. And it's going through exactly what cars went through a decade ago, digitalization. We've seen this move before, and we know how it ends.

Here's why it's ours to win. In cars, we compete against every global supplier in two-wheelers, the field is regional. Capable players but each strong in one or a few markets with no global cockpit platform behind them. Our edge is a proven automotive cockpit platform we can put on a motorcycle faster and at competitive cost. And the economics are what make this attractive, not just the wins, we are not engineering a 2-wheeler cockpit from a blank sheet.

We are adapting a platform we already built for cars. The hardest, most expensive engineering is largely done through our platform strategy. 2-wheelers are early on that curve on that same curve. That's why the market leaders are already with us, Honda, the largest 2-wheeler maker on the planet, plus Hero, TVS and [ Royal Enfield ] and the premium microns, one in Europe and Harley-Davidson. From mass market commuters to premium motorcycles, we are on both ends of the curve. And our 2-wheeler revenue is compounding at over 38% a year.

Commercial vehicles are a genuinely new growth engine for us. And here, the driver is regulation and productivity, not relying solely on vehicle volume. In Europe, 3 forces converged at once, safety regulation, fleet operators demanding connected and managed cockpits and driver comfort as fleets compete to attract and retain scarce drivers. Together, they force truck makers to consolidate the cockpit which proved real OEM demand for integrated driver-facing compute. Exactly what we built.

So we built one viable platform, and we are rolling it out in waves. Europe proved it, regulation forced the conversion. The Americas are expanding it we see growing demand towards more content per vehicle. And India and the rest of the world are our next target, the next wave, where most of the growth still sits ahead of us. The customer list is already blue chip, [ Daine, Scania], MAN, Renault Trucks, Volvo Trucks and Volvo Construction Equipment, Oshkosh and international. And the business here is compounding at over 43% a year.

Across all 3 regions, by 2029, we see up to 3 million trucks a year at $200 to $400 of cockpit content each. At $600 million to $1.2 billion market opportunity, we have proven the platform and won anchor customers which positions us well to compete for a meaningful share as it develops. We've now seen our growth engines, the regions, Toyota, 2-wheelers, commercial vehicles. And one thread runs through all of them. Our growth comes from content, not unit volume. China is where the threat was tightest. And it's transforming fast enough that I've given its own section. At the start, I told you China's incentive-driven volume era is over.

And the next leg is tech and premium. This is what that looks like. China's car volume is essentially flat, but that flatline masks a structural shift. Around 2025, the incentive policy changed and the market we set. It stopped running on subsidies for entry-level vehicle volume and started running on demand for technology and premium content. You can see the shift in 2 moves.

First is share. Auto production is flat. But underneath Chinese OEMs are taking it and global OEMs are giving it up. And the inflection is right at the 2025 policy change. Second, value. The growth that's left is moving upmarket into premium segments built on intelligence, luxury and lifestyle. The domestic leaders winning this aren't competing on price anymore. They're competing on technology.

For us, that played out in 2 phases. As the model unwound, our China sales dipped. Then came back stronger to a new high of $693 million by 2029. The chart shows why the mix completely flipped our sales to domestic Chinese OEMs more than doubled, while our sales to the global OEMs more than half. We did not just write the recovery. We changed who we write with. That reversal is the whole point.

The OEMs winning in China are the ones treating technology leadership as the battleground, which is exactly where we compete. The domestic leaders driving it, Geely, Cherry, SAIC, are the customers we partner with on AI-driven eCOS. China did not get smaller. It got stronger and then it got better. And it rewarded the suppliers position for what comes after the reset. We are one of them.

As said, the value is moving upmarket. So let me show you exactly where it's going. China's market stacks into 4 tiers. At the base entry and mainstream, the mass market, biggest by volume. Above them is premium. We established luxury names now joined by domestic premium brands like [ Zika, Freelander and Voya], And at the top, the tech-first brands, Xiaomi, Li Auto, [ Xiaopeng]. Who built cars around software and intelligence. Until 2025, almost all the growth came from the bottom. Entry and mainstream selling volume at competitive prices. That engine is now under pressure and the growth has moved up.

You can see it on the chart the premium and [indiscernible] first brands expanding while the mass-based flattens. And the top is exactly where we are focusing on: premium tech first and the mainstream leaders climbing into them. These are not customers who want a part suppliers simply. The tech first brands are racing on cockpit technology and the ambitious mainstream players.

Chery, Geely are pushing just as hard. They need advanced compute AI carpet and they need a partner who can build it with him, which is exactly the role we have built ourselves for, not a supplier, but a co-developer. Let me show you then how that's playing out for us. So why us? Why the 3 of the leading Chinese OEMs choose us as the codeveloper of their AI cockpit, not a simple supplier?

It comes down to what AI has changed. With AI in the cockpit, 2 things got hard. Hard enough that these OEMs needed a true partner who could build with them, not just sell to them. First is speed. AI-based cockpits move at China's pace, and China's pace is relentless. Not every suppliers can keep that up. We can because we spent years building the platform that lets us. China speed is not something we improvised, it is something we engineered.

Second, the life cycle never ends. AI models refresh far faster than the hardware they run on. So this is never a onetime sales. It is continuous co-development release after release, and the proof is on the board that you see on the right. Over $1 billion in lifetime high-performance compute program wins. We are the only Tier 1 chosen by 3 of the leading Chinese OEMs for the AI-powered compute, GD, Cherry and SAIC's IM brand. And with SmartCore high-performance compute on Qualcomm's Snapdragon [ carpet light ]. We are among the first to bring a mature production-ready AI coped to scale.

Now here's why this is bigger than China. AI itself is regulated. Today, these cockpits are built for the domestic market. But these OEMs are not staying home. Terry is already one of the China's largest exporters. Geely's brands span the group. And as their cars cross borders, their cockpit also will need to cross with them. That's the shift. AI did not just win us programs in China. It turned us from a supplier into a technology partner, positioned to grow with the most ambitious carmakers in the world, in China and well beyond it.

I opened up by telling you that growth has been positioned across this industry. You've now seen it market by market, and you have seen that we were positioned with it. So let me leave you with the one idea underneath all of it. We do not grow because the world build more cars. We grew because the world builds smarter ones. Growth itself is moving across regions, customers and segments and our footprint is moving with it. Technology is raising the content in every cockpit, and our global scale is what lets us capture it faster. And more broadly, than most. The industry is changing. We are not chasing that change. We are built for it. Thank you. Next, I'll turn it over to my colleague, Joao Paulo. Thank you.

Thank you, Francis. Good morning, everyone. My name is Joao Paulo Ribeiro. I'm the Senior Vice President for Manufacturing Operations, Supply Chain, and it's a pleasure to be here today to discuss how we think about manufacturing operations at Visteon and how manufacturing operations became a strategic differentiator that supports growth, profitability and capital efficiency.

As you've heard throughout today's presentations, vehicle architectures are becoming more digital and software-defined, driving more content and greater manufacturing complexity. At the same time, much of the industry's growth is coming from regions such as India, South America and Southeast Asia, where success requires localized manufacturing, resilient supply chains and disciplined capital deployment.

Our strategy is built in 3 pillars: first, a globally optimized manufacturing footprint located close to customers and concentrated in best cost countries. Second, Visteon manufacturing technologies, automation and AI that improve productivity, quality and scalability.

Third, selective vertical integration that lowers cost and improves supply chain resilience. Together, these capabilities support growth, expand margins, improve returns on invested capital, and create a more resilient business.

Let me start with our manufacturing footprint and why it provides structural advantage. Our manufacturing footprint has been intentionally designed to balance cost competitiveness, customer proximity and operational resilience.

Today, we operate 14 strategically located manufacturing facilities supporting customers globally. Each week, we ship more than 1 million products and support a highly complex launch environment with 86 new model product launches in 2025.

Importantly, 97% of our manufacturing headcount is located in best cost countries, creating a structural cost advantage while maintaining proximity to customers. Another differentiator is our ability to internally develop and deploy innovative manufacturing solutions and technologies across our global network.

Most importantly, this footprint provides the capacity and flexibility required to support future growth without significant infrastructure investments. Having the right footprint is absolutely essential, but the next step is ensuring that we continue investing in the right locations and with the right technologies and capabilities as customer demand evolves.

Our investments are focused on supporting growth while maintaining strong capital discipline. Examples include our new facility in India will go into production in 2027 to support local growth -- local OEM growth and 2-wheeler programs.

In addition, we are expanding our plant in Thailand to support Japanese OEMs across the broader Asia region. At the same time, we are also expanding our manufacturing capabilities through targeted investments in technologies such as display bonding and magnesium injection molding.

Our advantage is not simply investing in capacity, it's investing smarter. But by leveraging internal developed equipment and the very effective equipment reuse program that we just implemented, we can scale faster, expand capabilities and support customer growth while deploying substantially less capital.

Having the right footprint, again, is important, but not enough. The real differentiator is what we can do inside those facilities. This is where our innovative manufacturing technologies become a significant competitive advantage.

As automotive electronics become increasingly sophisticated, manufacturing complexity continues to increase. Displays inside our cars are becoming larger, thinner and more complex while quality standards continue to rise.

SDV products such as cockpit domain controllers and high-performance computing platforms contain an order of magnitude, much more components than the traditional instrument clusters and infotainment systems with the heavy software complexity nowadays.

But at the same time, manufacturing cycle times must continue to decrease. Our response has been to develop specific manufacturing technologies that directly address these challenges. The next 4 examples I will show you are not technology demonstrations.

Those highlight a capability that differentiates Visteon. We have the ability to internally develop and globally deploy manufacturing technologies that drive productivity, reduce costs, improve quality and support margin expansion.

The first example I'm going to show focus on automation for one of the most complex displays in the industry, which is actually on the display over there. The process that you can see in this video was developed entirely in-house by Visteon to manufacture a highly complex curved display for a premium OEM. These products are among the most challenging displays in the industry to manufacture at automotive grade quality and scale, given the tight tolerances, the radius that we have to perform in the glasses and the optical quality that we have to obtain.

The ability to manufacture curved displays at high volume with competitive yields represent a significant technical and manufacturing advantage that few suppliers can achieve. A key takeaway is not the automation, but it's the business outcome.

This in-house developed manufacturing process delivers approximately 30% faster production speed with around 40% lower cost than external suppliers and a 70% reduction in direct labor requirements, which is a meaningful competitive advantage as cockpit systems continue to evolve.

This is a clear example of how manufacturing innovation creates barriers to entry. We support growth, improves profitability with the type of solutions and definitely solidifies our position with leading OEMs. Let me walk you through the next example to illustrate how we are redesigning manufacturing processes to improve speed, cost and scalability.

This video showcases the third generation of our Visteon display bonding technology in a high-volume 2-wheeler program. Developed and industrialized entirely in-house, this process fundamentally simplifies display bonding by eliminating the need for a perimeter dam, reducing material consumption, process complexity and equipment requirements.

As a result, production cycle time reduced by 75%, while material cost decreased by more than 10%. The simplified process and significantly higher throughput allow us to produce substantially more with less equipment while improving productivity, profitability when compared to the previous generation of bonding solutions.

Most important, this is not an off-the-shelf technology. This Visteon technology delivers lower cost, higher productivity, lower capital requirements and the capability that is very difficult to replicate.

The next example we will show you how we are applying artificial intelligence to improve operational performance across our factories. This internally developed AI platform continuously monitor production activity in real time, identifying conditions that can lead to downtime, productivity losses or even safety risks.

This system identifies situations where machines or operators require support, enabling faster intervention before issues impact operations. The result is approximately a 10% productivity improvement through reduced downtime and faster response to operational issues.

Developed in-house, it can be deployed globally without recurring software licensing costs typically associated with these third-party platforms. The concepts and capabilities developed to improve our factory's performance also contributed to the development of D6Sigma, Visteon's new industrial edge AI product line developed in collaboration with Qualcomm Technologies.

This demonstrates our innovation originally created to solve operational challenges within our factories can evolve into scalable technology solutions with broader applications in the industry. The same AI capabilities can that improve, in this case, productivity can also be applied on quality management.

Let me show you. Our AI-enabled quality monitoring solution improves inspection accuracy and has reduced false rejection rates by approximately 75% because it was developed internally, deployment is straightforward and can be rapidly scaled across our global manufacturing network without -- with minimum programming needs.

More importantly, this solution can be deployed across more than 3,000 existing vision systems worldwide with minimal additional capital investment. This allow us to improve quality performance at scale while maintaining a strong capital discipline.

To summarize, the common theme across these examples is our ability to create operational advantages through in-house developed technologies. But let me walk you through another area where we are creating structural advantage that has been repeated before from -- with my colleagues.

Beyond automation and AI, we continue to expand our vertical integration strategy to reduce cost, improve competitiveness and supply chain resilience. Displays are becoming larger and more sophisticated, and they require increasing complex structural frames to integrate them into the vehicle cockpits.

Visteon is uniquely positioned with in-house lightweight magnesium injection molding capability, producing these critical components internally and enabling a superior combination of weight, cost, quality and design flexibility at a much lower cost than buying these parts in the market.

We are complementing this capability now with an in-house premium cosmetic powder coatings on injecting magnesium parts, eliminating the additional need for plastic components to trim the parts and further reducing cost and manufacturing complexity.

These capabilities are already generating strong customer interest with business awards on passenger vehicles and 2-wheelers, demonstrating our selective vertical integration supports long-term margin expansion and supply chain resilience.

Needless to say, these capabilities are extremely difficult to replicate because they combine deep process know-how, manufacturing expertise and vertical integration experience. So let me finish with this slide.

Looking forward, our priorities remain very clear: support increasing complex displays, cockpit and high-performance computing products through the next generation of advanced manufacturing technologies, continue expanding in the fastest-growing markets and scale AI-enabled systems and vertical integration initiatives across our operations.

We want also to execute this while maintaining disciplined capital allocation and attractive returns on invested capital. And if I have it to leave with one message today, it is this one. Manufacturing operations is not simply a cost center.

It is a competitive advantage. Our footprint supports growth. Our proprietary technologies improve productivity and quality. Our vertical integration strategy lowers cost and enhances resilience. And together, these capabilities enable profitable growth, margin expansion and stronger returns on invested capital, creating long-term value for our customers and shareholders. Thank you. And let me introduce now Jerome to take us through the next presentation.

Thank you, Joao Paulo. Good morning, everyone. Capitalizing on the key themes that have been highlighted today, I will start with our performance over the past several years, showcasing solid execution in a very dynamic setup.

I will then provide an update on our 2026 outlook, highlighting that we are currently trending towards the high end of the range for sales and towards the midpoint of the range for EBITDA. After that, I will introduce our midterm financial targets, outlining key building blocks that will drive meaningful growth over the next few years.

And then finally, I will walk through our capital allocation framework and how we plan to deploy capital to support growth while increasing returns to shareholders. So let me first step back and look at our performance over time.

We start in 2019, which provides a clean baseline before COVID. Since then, the operating environment has been highly dynamic. We have navigated the impact of the pandemic, multiple semiconductor supply disruptions, shifts in customer mix, especially in China and an ever-evolving powertrain landscape, all this while going through a structural transition towards SDV. Against that backdrop, our performance has been resilient.

Looking at sales, customer production over this period declined by approximately 14%, while our sales have increased by 28%, 0.3% if you exclude customer recoveries. Looking at sales, this reflects a constant outgrowth driven by content expansion and SDV alignment.

Over the last 3 years, growth has been more moderate, reflecting China market shift between domestic and international OEMs and a slower EV adoption, especially in the U.S. Both dynamics have been headwinds to Visteon's growth in the last few years.

However, the underlying drivers of the business remained solid with all regions outside of China growing revenue over the last few years on average mid-single digits. During this period, we also laid the foundation for our next phase of growth led by the SDV transformation, adding new products, new customers, new nameplates and new nonautomotive segments.

Adjusted EBITDA margin has improved by more than 500 basis points since 2019, reaching over 13% in 2025, driven by scale, a favorable mix shift towards higher-value SDV products with strong cost focus and operational efficiency.

Adjusted free cash flow has increased fivefold with conversion rates recently above our 40% objective. This reflects both increased earnings and disciplined working capital and CapEx management.

Finally, our ratings with S&P and Moody's have improved 3 notches since 2019, now just below investment grade. Moving to our outlook, we're not changing our guidance, but I would like to highlight that our sales are currently trending towards the high end of the range.

Our EBITDA is tracking towards the midpoint of our range and adjusted free cash flow is tracking towards the low end of the range. Starting with sales, we continue to see stable overall demand based on current customer schedules.

The continuation of the strong sales trajectory we showed in Q1, boosted by high-profile launches as well as memory recoveries is expected to support revenues trending towards the high end of the range.

On profitability, EBITDA performance remains solid, supported by operational execution and the progress on customer negotiations for memory recoveries. However, further cost pressures initially seen in memory are now extending to other purchase components, making it difficult to fully offset inflation in 2026.

For this reason, despite sales tracking towards the high end of the range, we believe that our EBITDA will be tracking towards the midpoint of the range or $475 million. On the free cash flow side, as indicated in our Q1 earnings call, we're tracking towards the low end of the range.

This reflects a deliberate increase in inventory targeted at derisking supply continuity in key components such as semiconductors and displays. This will impact 2026 cash flow and continue into 2027, but this does not change underlying cash generation of the business.

As you know, the semiconductor memory industry is going through a significant structural change with suppliers putting priority on higher growth technologies, leading to tighter capacity and cost pressure as well as accelerated end-of-life activities in automotive.

To mitigate this, we have implemented a proactive strategy focused on long-term supplier engagement, capacity agreements, diversification and commercial recoveries. A key milestone in this effort has been the execution of a multiyear capacity agreement with our largest memory supplier, strengthening visibility and supply continuity for the next few years.

In parallel, we continue to develop strategic partnerships with other key suppliers to further improve supply flexibility and support future technology road maps. In addition to strengthening strategic supplier relationship, we are actively diversifying our supply base by evaluating alternative sources, including nontraditional automotive suppliers where technically appropriate.

From a costing standpoint, we believe our 2026 exposure is now largely contained, although, slightly higher than the original guidance assumption we had at the beginning of the year. We now expect memory-related cost inflation to represent about 2.5% of sales for 2026.

With regards to recoveries, we're progressing well, and we remain on track to recover most of these costs for the full year. These recoveries represent approximately 50 basis points of margin impact, dilution and leakage to our 2026 EBITDA.

Looking ahead, pricing will depend on supply-demand dynamics and additional capacity coming online at some point will help ease some of the price pressure. So for planning purposes, we have assumed an incremental cost headwind of approximately 4% of sales in 2027.

This is based on what we know today, and we're assuming that the majority is expected to be recovered from customers. The total impact from memory inflation is anticipated to have a further incremental margin impact in 2027 of approximately 100 basis points.

To be clear, though, I would like to stress that this is a planning assumption, and we will continue to actively manage both sourcing and commercial discussions as conditions evolve. Before going into our midterm targets, let me break down our performance versus what we laid out at our 2023 Investor Day. Beginning with sales.

As previously mentioned, the industry at the time looked very different, stronger international OE momentum in China, accelerating EV adoption, especially in the U.S. and a strong global pipeline of new product launches.

Our growth expectations at the time reflected those dynamics. But over the last 3 years, these dynamics have evolved significantly. In China, market share shifts have impacted international OEs very negatively.

In the U.S., U.S. adoption has been significantly slower than anticipated. And more broadly, we have seen a higher level of program cancellations across the industry. As a result, our sales trajectory has been below our 2023 expectations.

However, recognizing this, we have taken decisive actions to reposition the business, and we have built a more diversified growth algorithm going forward with tangible proof points. On the profitability side, despite lower volume, we are still within reach of our 2023 target for margins, which was 13.5%.

Importantly, if you were to adjust for the impact of lower sales, our underlying margin performance would be well ahead of our 2023 plan, highlighting the potential margin expansion that we have as we grow sales.

This reflects constant execution across multiple levers, including disciplined commercial actions, product cost optimization, improved engineering productivity and increased vertical integration. On the cash flow side, from 2023 to 2026, we're on track to generate approximately $900 million of adjusted free cash flow, exceeding our original target of $800 million.

This performance has been supported by strong earnings, disciplined working capital management and a focused approach to capital expenditures while continuing to invest in the business.

So overall, while the top line came in below our original expectations, the quality of our earnings and cash generation has improved. We have also built a more resilient and diversified foundation for the next phase of our growth.

Let me now move to our outlook and walk you through the key sales-metric assumptions that we have supporting our midterm targets. So to put things in perspective, we are not only showing on the right-hand side of the slide, key sales metrics embedded in our outlook, we are also comparing these with the key assumptions from our last Investor Day as well as how they developed to date.

Our planning is broadly aligned with the latest June S&P forecast, which is expected to be flat for Visteon's customers from '26 to '29. This reflects ongoing mix as well as regional dynamics. It is important to mention that our growth is not dependent on underlying production growth.

It is more and more driven by content expansion, new customer wins and growth in nonautomotive markets, reducing our reliance on overall industry volumes. By the same token, reliance on new customer car and cockpit launches on which Visteon will have content going forward has been much derisked compared to the high number of new launches that were anticipated in 2023.

A few other data points highlight as well that our outlook is balanced and taking advantage of multiple growth drivers. First, customer concentration is decreasing meaningfully with no single customer expected to represent more than 15% of our sales by 2029.

Therefore, our top 3 customers in 2029, Ford, VW, and now Toyota will represent no more than 1/3 of our business. Second, we are positioning ourselves mostly as a cockpit supplier and no more than 2% of sales will be generated from battery management systems in 2029.

Third, our exposure to international OEs in China continues to decline as we reposition the business towards domestic players. And fourth, nonautomotive markets, 2-wheelers, CV, but as well IoT are becoming a more meaningful contributor of our sales, reaching 13% in 2029 versus 5% today.

These businesses tend to be countercyclical to the automotive business. Finally, recoveries will continue to be part of our sales for some time given the impact that we currently see on semiconductor cost increases, especially on the memory side.

Overall, while production remains flat over the period, our growth is becoming more diversified and resilient, reflecting the progress we have made in strengthening our growth model. Building on these assumptions, we expect to deliver consistent growth over the period, reaching approximately $4.8 billion of sales by 2029, an 8% CAGR. Moreover, this is driven by a diversified set of growth drivers, not a single factor.

Starting with targeted growth customers, our expansion with Toyota and Lexus will contribute more than $300 million of incremental revenue by 2029, supported by 12 cluster and display programs launching between '26 and '29 across 22 car lines.

Toyota is expected to reach 8% of sales by 2029. Additional targeted Asian OEs, Tata, Mahindra, Maruti Suzuki in India, Hyundai, and Kia in Korea as well as Honda in Japan are expected to contribute approximately $170 million.

Combined, all these targeted Asian customers, including Toyota, will represent close to 50% of our growth going forward. In China, we are repositioning towards domestic OEs and next-generation cockpit platforms, and these are expected to contribute around $400 million of incremental revenue.

Non-automotive sales will expand significantly over the next 3 years, driven mostly by 2-wheelers and commercial vehicles. On the 2-wheeler front, sizable wins in India and more specifically with Honda launching in 2027 will add to this diversification outside of automotive.

Launches on commercial vehicles with Scania and Volvo Truck will also contribute to this diversification. We're also assuming a modest level of sales from IoT in this nonautomotive bucket, leading to further diversification.

By 2029, these 3 markets are expected to represent close to 13% of our sales. Finally, some of our traditional customers, mostly Ford, GM, Nissan and Mazda are expected to decline over the period.

Combined with some specific product roll-offs, we're expecting North America customers to be a headwind to our 2029 outlook, partially offset by key European customers like Volkswagen and Mercedes and Engineering Services.

In summary, our growth is expected to be supported by a broad set of drivers, reducing reliance on any single customer, region or product line. Our strategic initiatives are reshaping our portfolio across regions, customers and products.

So looking at the regions, our portfolio continues to get indexed towards high-growth markets and a larger share of our business will be shifting towards Asia over time. This reflects strong underlying market growth in the region and increased exposure to new customers, including targeted Asia growth customers as well as growth in the 2-wheeler market.

We expect China and India Visteon's sales to double in size, supported by our increased presence with the domestic OEs in China and multiple growth initiatives in India. By 2029, Asia is expected to represent approximately 44% of our sales, up from 32% today.

Europe continues to grow steadily, supported by SDV-related programs and new product launches aligned with next-generation platforms. In the Americas, we expect a gradual decline with the D3s, primarily due to product roll-offs, partially offset by diversification with Japanese OEs and commercial vehicle customers like TRATON and Volvo Truck.

Overall, the shift in regional mix reflects a more balanced and growth-oriented portfolio. Turning now to our product portfolio. Our growth is mostly driven by cockpit domain controllers and displays and reflects the shift towards digital and centralized architectures.

Equally, we should not forget that our traditional products are still representing 45% of our business in 2029. Cockpit domain controllers are expected to grow significantly as OEMs adopt more centralized computing platforms, both in China with domestic OEs and globally with standard domain controllers.

This includes high-performance compute platforms in China with Geely, Chery and SAIC as well as more standard domain controllers in India with Mahindra and Renault and BMW in Europe. Consistent with what we have seen in recent years, displays also remain a key growth driver, supported by a strong pipeline of launches across both automotive and nonautomotive customers like Toyota, Mercedes and Volvo Truck.

Finally, on clusters and infotainment, while we expect some decline in stand-alone clusters and infotainment products over time, it is important to note that this is more than offset by the incremental content that we are capturing in new SDV architectures.

So in summary, by 2029, we expect 3 product lines, CDC, display and cluster to exceed $1 billion in sales, reflecting both growth and mix shift towards higher-value content. Turning now to profitability, we're targeting an EBITDA margin of 14.1% by 2029 with steady expansion over the period.

This improvement is driven by a combination of scale, product cost optimization and continued efficiencies in engineering productivity and SG&A. In addition, we are progressively leveraging AI-driven tools to improve productivity and enable growth without a proportional increase in resources.

At the same time, we will continue to reinvest in the business, especially in capabilities and technology platforms such as CognitoAI to support long-term growth. We expect incremental margins to be around 20% with contributions from volume leverage and cost initiatives.

From a phasing standpoint, 2027 includes an incremental headwind from memory inflation of approximately 100 basis points of margin. This is compounded by the roll-off of legacy recoveries and the nonrecurrence of certain 2026 onetime items.

Margin expands more meaningfully in 2028 and 2029, supported by volume growth, easing inflation and operational efficiencies. Overall, this reflects a consistent path to margin expansion while continuing to invest in the business.

Turning now to cash flow, we expect to generate approximately $1 billion over the period, progressively increasing our conversion target from the mid-30% range in 2026 to 60% in 2029. This improvement is driven by EBITDA growth, operating leverage and disciplined capital management.

From a phasing standpoint, working capital is expected to be a headwind in the near term, mostly due to higher inventory levels before normalizing over the period at structurally higher levels.

Capital expenditures are expected to be at approximately 3.5% of sales over the period, supporting growth and vertical integration. Overall, this reflects a highly cash-generative and capital-efficient model.

Turning to capital allocation. Our priorities are maintaining a strong balance sheet, investing for growth and returning capital to shareholders. Our emphasis will be on returning a more meaningful amount of cash to shareholders.

We believe that this will continue to drive long-term shareholder value. Maintaining financial flexibility remains critical for us given the cyclical nature of the industry. At the same time, as the business has become more resilient and diversified, we are focused on managing our balance sheet efficiently.

We do not intend to exceed our targeted net cash levels, which we have set at $150 million with our debt remaining unchanged at $300 million. Second, we will continue to invest in the business to support future growth.

This includes disciplined capital expenditures to fund new programs, vertical integration and technology platforms as well as selective bolt-on M&A, strengthening our capabilities and expanding our offering.

And third, we're increasing our focus on returning meaningful capital to shareholders. This will be driven primarily through share repurchases, complemented by a dividend that we expect to grow modestly over time.

Overall, our framework is designed to balance financial discipline, continued investment in growth and increasing returns to shareholders while maintaining flexibility through the cycle. Between 2026 and 2029, we expect approximately $1.25 billion of cash available for deployment, combining free cash flow generation of approximately $1 billion and existing cash on the balance sheet of approximately $250 million.

Our priority is to return a significant portion of this to shareholders. We're targeting approximately 85% of this available cash, around $1 billion to be returned to shareholders through a combination of share repurchases and a modestly growing dividend.

Share repurchases will be the primary mechanism, providing flexibility and allowing us to adjust for market conditions, while the dividend provides a consistent and growing component of total returns.

The remaining 15% of cash will be used for debt service, restructuring-related outflows and other obligations, including dividends to JV partners, ensuring we continue to manage the business efficiently.

At the same time, we will remain selective with bolt-on acquisitions. We want to keep a disciplined approach, focusing on opportunities that are strategic and financially accretive. Some of the M&A opportunities that we evaluated earlier this year did not meet our disciplined criteria, and therefore, we did not proceed.

We will remain selective and pursue M&A only when it creates clear value, adjusting our capital structure if needed. Overall, this framework allows us to continue investing for growth while returning significant capital to shareholders.

As part of this allocation strategy, we're announcing today a new $800 million share repurchase authorization through the end of 2029. This represents a significant commitment to return capital to shareholders and reflects our confidence in the cash generation profile of the business.

Over the period, this program is expected to result in significant reduction in shares outstanding. Combined with our dividend, this effectively translates into returning approximately 100% of free cash flow to shareholders over the period.

Overall, this reinforces our commitment to deliver consistent and meaningful shareholder returns alongside continued investment in the business. So in closing, we are confident in the path for Visteon.

Over the past several years, we have fundamentally strengthened the business. We have expanded and diversified our growth drivers. We have improved our margins and built a more resilient operating model.

Looking ahead, we see a clear and balanced value creation framework. We're targeting high single-digit sales growth, continued margin expansion to over 14% and cumulative free cash flow generation of approximately $1 billion over the period.

At the same time, we expect to return approximately $1 billion of capital to shareholders, primarily through share repurchases, complemented by a growing dividend. Overall, this is a model that combines growth, profitability, strong cash flow generation and meaningful shareholder returns. We believe that this positions Visteon to deliver more predictable performance and sustainable value creation over the cycle. With this, let me invite the team back on stage, and I will open it up for Q&A. Thank you.

Right. Can you guys hear me?

Yes, we can. We had a question from the prior session that I moved over, just thought it was more appropriate. This is from Shreyas Patil from Wolfe Research. With growing CDC and HPC revenue, more engineering services and a high degree of vertical integration in displays, should that support an increase of incremental margins overall versus your baseline of low 20%?

Yes. Let me take that one, Ryan. So overall, the shift that we are seeing towards high-value products, SDV, yes, mostly the SDV transformation is leading to higher content and therefore, higher volume. We get a lot of leverage through more sales related to these products increasing, and therefore, that has -- that will be helping our margin quite substantially. I would say that about 2/3 of our margin expansion in our 3-year horizon is coming from increased scale, and these products are definitely contributing to this.

Can you walk through -- this is from Joe Stack from UBS. Can you walk through your memory assumptions in the midterm outlook? What type of pricing and pass-through and/or recovery from prior are you assuming over the period? How does that impact the margin trajectory? And if we were to break down the 8% CAGR, how much of that is related to CPV growth for mix shift? And how much is -- let's just stop with memory first and then focus on how much...

Yes. Glad that you called on memory. That's a very important point.

And as you see beyond 2027.

Yes, especially as we go not only into '27, but as well beyond. So as I've mentioned, memory cost increases have been quite substantial already in '26, and that's related to the tight supply that we're seeing.

We think that as we go forward, especially in '27, before additional capacity comes on board, we think that supply will be probably even tighter in 2027. And therefore, prices will probably go up even more substantially than what we've seen in 2026.

So -- and you've seen just this morning, in fact, the Apple releasing some news about their increase in memory prices, and therefore, passing that on to customers. So as far as we're concerned, we have about a 50 basis point impact to our margins in 2026 related to memory cost.

And we're assuming -- and it's at this point, an assumption. We're assuming that we'll have a 100 basis point incremental impact in 2027. We will continue to monitor the situation, especially on cost, but as well, obviously, on supply.

And we are assuming that most of that will be recovered from suppliers, but will still -- from customers, will still have a pretty significant negative net impact going into '27. As we are going into '28 and '29, we've assumed some slight relief, but the reality is that these memory costs will still remain quite elevated in '28 and '29.

Overall, just to step back, the 100 basis points that we are seeing incrementally in 2027 will stay all the way to 2029. So without memory cost impacts in 2029, our EBITDA would have been closer to 15%. So that gives you the size of the impact of memory.

As a follow-up to that, Winnie Dong wanted to understand if you can talk about the drivers for the step-up in the latter part of the forecast in 2021.

Yes. So memory cost, as I said, remains fairly stable from '27 to '29. We've assumed just a little bit of easing, but nothing major. Most of the improvement that we see in the margins going forward for '28 and '29 are coming from, obviously, volume and scale as well as an improvement in AI-driven initiatives impacting mostly favorably engineering and SG&A as well as the improved benefits that we have on vertical integrations. So I would say that we're still using many, many bullets, if I can use that word, to be able to improve our margins in '28 and '29, not just one single driver that will help us.

I'll give you a break here, Jerome. Media reports have indicated that USMCA require increased U.S. content requirements. While we know that you are MCA compliant -- USMCA compliant, how might increased U.S. content requirements impact your North American footprint and sourcing strategy from Dan at Barclays?

Yes. Maybe I'll take that one. So content increase requirements are fundamentally problematic for the whole industry because when it comes to electronics, there isn't a lot of U.S. content that we can switch to, right? So we believe it's going to be a broad-based impact if that were to happen in our assumptions here, we have assumed that there are no changes to USMCA that continues. However, I do want to leave you with another point that's important to understand. When we talk about USMCA and increase of duties, et cetera, the devil is in the details.

There's a lot that has to be understood about exactly which product, which category, how is it defined that is only really clear when all of the rules are established, making a broad-based statement about that is generally a bad idea. This has been our experience over the last few years.

So I would suggest one more thing and then we can move on with the footprint that we have that Joao Paulo talked about, we are in a better position than most suppliers to be able to move the production to whichever place has a favorable cost structure, including duties. And one of the benefits we have is because of the deliberate approach that we've had to have all of the capabilities in all regions, we are able to move that production relatively easily. And we've had to do that in the shortage era where we had to change a lot of things dynamically. So I think we have developed some capabilities that allows us some flexibility.

Okay. We have a number of questions related to Ford and GM from a number of coverage analysts. I'll just pick up one of them. What's taking place with the North America customers, Ford and GM out to 2029. Revenue gets cut in half over the next 3 years. Is this a function of cluster and infotainment business going to a competitor for their next-gen domain centralized architectures? Or is it something else? Does it also hit on the industry shifting to the competitive landscape to active safety and infotainment converging?

So as you probably know, most of our business with Ford and GM in electronics has been clusters. And it is true that some of our large cluster programs have been ramping down. And it's also public. So I don't think I'm sharing anything new that these OEMs are also looking at in-sourcing some of their next-generation CDCs, if you will. So we are in the process of transitioning to displays as an alternative product. We don't have the CDC business with them, but we hope to get some share of the displays.

We have made some progress already, which is offsetting some of the ramp down. And our opinion is that OEMs as large as they are, generally will continue to need help even if they make this one step with CDCs, we have never seen this work out where we have many, many examples, whether it's VW, Renault and other companies that have tried to in-source, but then had to still go back to the supply base for help. We do believe something like this is possible, and we continue to stay engaged and hope to get some portion of the electronics business in the future with them. Anything you would like to add, Francis?

I think you answered it well. We're staying relevant with both customers pretty proactively. So we will continue inquiring for further opportunities related to the specialties we have and especially with our experience that we are building in those highlighted programs in China that we explained to you today, the AI-based high-performance compute systems. I'm pretty confident that in the near-term future, we'll be getting opportunities or getting a lot of inquiries, what kind of products and technologies we actually have in-house that can aid their necessary areas of support as well.

You're rolling out AI globally in your own facilities. What's the time line and how much annual savings? Is this a product that would be part of your IoT business?

Yes, I can take that one. So AOI, so over time, for the past few years, we have been implementing several strategies and techniques with a full deployment of lean manufacturing in our facilities. AI, what it brings now, it brings an additional dimension of improvement that we can obtain by deploying it globally. In Visteon, we -- I mean, a couple of years ago, we've created globally a Lean Academy to train people to develop ideas and strategies. And late last year, we've developed -- expanded it to AI Academy.

So now we have pretty much a global strategy and mechanism to generate ideas, which will continue for the future to come. In terms of timing plan, we will have the first 5 big strategies of AI implemented towards the end of this year in all plants. And we are expanding fully with more AI technologies and mechanisms and tools throughout 2027.

And maybe if I can comment a little bit on the cost savings. So there are substantial, and they are embedded in our forecast, obviously, we need these kind of cost savings to be able to offset not only pricing we give to customers, but also some of the inflation that we have. If you step back and look at our incrementals that we have for the next 3 years, 20%, yet with pretty significant memory cost increases, some of it being obviously recovered from customers, but we still need a lot of actions from manufacturing, from vertical integration, from engineering as well to be able to offset some of these costs, and that's where AI helps us. So it's embedded in our plan. And again, it is a great help to offset some of these costs and be still at 14% by 2029.

And is this the product that you guys have in your own manufacturing facilities that are actually going to be what you're selling externally? I guess.

Yes, maybe I can take that. So the inspiration was certainly what we were doing within our own plants, right? You don't want to offer a product to customers that hasn't really been proven. So the asset that we found ourselves with when we started to think about where do we take the AI competence and the IP that we were developing for automotive, where do we deploy that, right? It became pretty evident that the best opportunity for us was kind of eat our own dog food first and then build a product based off of that, right?

And so this dogfooding concept is very popular in other parts, automotive doesn't necessarily use it. But always when you think about AI, think about the data. Without data, AI has its limits. It's general purpose, yes, it's intelligence. But for business applications, you need data. And we have 14 plants that are collecting data every day. And that's the asset that we have that we can tune and optimize those AI models to make sure that they deliver value and then we can offer it to the rest of the world. So absolutely, yes.

A number of questions, not just on GM and Ford, but also some of the other OEMs that we highlighted. But I guess I'll just talk about the question related to your growth coming from China and India primarily. Are those coming in at lower margins? And what is the margin profile of the let's there. Are these coming at lower margins? And what is the margin profile on a customer type basis?

Yes. I'll take that. Generally, our margin tends to be pretty uniform across the board. They vary a little bit by customer from time to time. China is pretty much in the ballpark, I would say, in terms of margins. We are not -- think about it this way. We're not competing with the -- in the low end of the market where you have 10%, 20% price reduction that is requested every year. We are competing at the high end of the market. We are -- as it's been said today, we are a partner in the development of a product.

So definitely, in this case, we have, I would say, better prices than what we would have at the low end of the market. So the answer is no, we are getting this business at very decent margins. And what we always do anyhow, not just for China, but as well for all our businesses is that we keep on looking at how we can improve profitability either through vertical integration, VAD and other mechanisms. So it's a constant evolution, and that's how we've been able to improve margins substantially over the last few years. So it's just the process we go through.

And is there anything that we see in the nonautomotive customers, be it 2-wheelers, CVs and even now IoT that might differ from that story?

From a margin standpoint?

That's right.

Yes, these businesses tend to be a little bit more margin accretive than your automotive. So we like them because they are, as we said, countercyclical to the automotive business, and they tend to be a little bit more margin accretive. We see that definitely in 2-wheelers and CV. IoT, we expect as well better margins, although it's quite new. So we've been, I would say, conservative in our margin profile.

Okay. I wanted to give you a break, but the next question would be, how do you plan to take that $250 million of cash off the balance sheet in the near term? Can the $850 million, I guess, $800 million share authorization that what we have left over from our existing share authorization, can that cadence be more balanced? Or is it more weighted towards the near term or the full forecast period?

Yes, definitely. So we'll -- so our goal is ultimately to be much closer to our targeted net cash level that we've established at $150 million. So with this $250 million kind of excess cash that we have on the balance sheet, we'll be able to deploy that reasonably fast. I won't give any specifics, but it's true that it will probably help us doing a little bit more in 2026 and 2027. And then as we generate more cash, as you saw in '28 and '29, then we'll use that generation of cash to be able to do share repurchases. So it's really going to be first deploying the $250. And then in the second stage, the cash flow that we're generating. Timing is this year and maybe the first part of next year.

And then just to follow up on that, how much of your cash balance goes to M&A? And how much do you need to hold on your balance sheet?

Yes. So in the slide that I presented, there was nothing that was related to M&A. And maybe let me step back a little bit on the original $300 million that we had earmarked for M&A at the beginning of the year. We were working on very specific targets, and some of them did not come through. One came through the Vehiclevo that Sachin talked about earlier on this morning. But that is a pretty small acquisition from a size standpoint. So the other ones which were larger didn't come through.

We went through a lengthy process, which I won't go into the detail and decided that it was not the right move for us. So therefore, we -- our strategy is now to deploy the cash that we have on the balance sheet on a go-forward basis. We'll still continue to be selective and look at bolt-on M&A, small acquisitions. And if one comes along the way, we'll definitely address it from a financing standpoint. Depending on the size, we may lever a little bit the balance sheet. It will -- again, it will depend on the dynamics. So at this point, the cash flow that we're generating goes to -- mostly to shareholders, and we'll be addressing M&A as we go.

Mark Delaney from Goldman is asking, how booked is Visteon for its 2029 outlook? And how does that compare to what was booked on the 2026 target given at 2023 Investor Day?

Yes. It has improved. We are -- if I remember well, I think in 2027, we are at 95% fully booked. I think it goes down to 85% for '28, and it's in the 75% plus for '29, which is better than what we had at the time in 2023. I think the most important point is the diversification of our growth drivers compared to what we had before. We've got a lot of growth drivers being, again, Toyota, some of the other targeted Asian OEs being HPC, obviously, in China, being 2-wheelers being CV business. So there's a lot of being IoT as well. So there's a lot of resilience in our growth model as we go forward, and we feel quite comfortable with it.

I think we're talking about very different environments as well, right? So if you go back to '23, when we talked about our outlook, I'll remind everyone that our leading customer for BMS at the time had a 1 million unit target for 2025, right? We're talking about 2 years from 2023. That million units turned out to be less than 200,000. We all know the reasons why, but that's one of the big reasons why in hindsight, it looked like, right, what were we missing. And by the way, we had been more conservative in our estimate than what we were being given by the customer by quite a bit, right? And it still came much lower than that.

Now when you reflect that experience on to this outlook that we shared today, fundamentally, we don't have those types of dynamics in this outlook in terms of the risk profile that we carried back then just because it was very new. So I would say that in 2026, as we stand here, the new elements, if you will, obviously, you recognize HPC, but we have a different dynamic there in terms of AI, the importance of AI and more importantly, importance of AI to the Chinese OEMs for them to be able to compete. So we believe that it's a much, I would say, robust estimate as compared to perhaps.

And just using that as an example, so BMS at the time, we were planning on a $600 million growth over 3 years. HPC, we're talking about $400 million split between 3 customers. BMS was just 1 customer at the time. So it's a much more diversified business model. I think another important point as well, there was a frenzy of new car launches back in 2023. And the number of programs that were out there was very high compared to what we see today.

And therefore, a lot of these were canceled -- and that's one of the reasons why a lot of suppliers like us have been able to get some recoveries from customers. But at the core, it's because a lot of the programs that were out there at some point were canceled. So we have a much more normalized level of programs as we go forward. And we feel that the industry has kind of rightsized these number of programs, which feels much better.

What would you define as the 2 to 3 areas of biggest risks and conservatism in the guidance? Could AI HPC surprise from broader adoption? Or is it just a share -- higher share in China?

So if you look at HPC, I think that's probably the one area that has the biggest upside. What we have assumed in our outlook is just the vehicles that we have been sourced on and on the customers that we are on. We haven't assumed anything in terms of winning a fourth customer. Obviously, it's not something that we wouldn't want. We are pursuing that as we speak. But we haven't made any of those assumptions in our outlook.

The second thing is additional vehicles coming online with the customers that we already have. So those 2 dynamics are probably things that could drive a higher value for HPC beyond what we have assumed. Again, going back to what we just discussed, we didn't want to put a very high number and repeat the experience that we had with EVs. We would rather take it a little more conservatively and see how it develops and then update you as we go along.

Most of your peers carry a modest amount of net leverage in excess of cash. What is the rationale for continuing to operate with a positive net cash balance?

Yes. So we've got a leverage today, which is 0.6 in terms of gross leverage. And we've been operating like that for some time. We are maybe one of the smaller supplier in the industry. It has given us -- this level of leverage has given us a lot of flexibility in the past, especially during COVID, during the supply chain challenges that we've seen, and we would like to keep it this way. So our goal is to keep on generating cash and returning cash through share repurchase and dividends to shareholders. That's really the objective that we have, and that's it in summary.

Okay. Visteon targets about $400 million in growth from domestic Chinese OEMs like Geely, Chery and SAIC by 2029. Given that these specific OEMs are aggressively shifting their premium high-tech vehicle lines and SDV architectures to the European market, how much of this $400 million expansion is expected to be captured via their international or European export platforms?

Yes. So I would say that what we have in the outlook is all primarily market in China. It is not -- just to be clear, not the potential of -- or hasn't been included in our outlook, the potential for exports to Europe. Having said that, we all know, as Francis mentioned, these are all companies that have strong export ambitions. -- and they're on their flagship vehicles. The flagship vehicles are extremely important for these OEMs because that sets the brand image in their markets, right? So you fully expect that to also be exported. We haven't included anything because they haven't provided us with any specific data that we can use in our financials. As and when they do so, we will update it.

I think also just to add a bit more, our experience interacting with our customers in China is they do not do long-term planning like 3, 5 years ahead. They claim that the market itself is changing so dynamic. So the planning is more fourth 1, 2 years looking ahead. So when it comes to export, it does not mean that they do not aspire to export more premium cars. I think they will test the product and the car itself in China to meet the customers' demands. They talk to us a lot about the European customers' demands and also the expectations.

So I do believe -- if you look at Chery, for instance, they export 50% of their global sales to outside of the market, Middle East, Europe, Southeast South America and so on. So -- and then Europe, as we all know, which is public investing in Barcelona in Spain, have approximately about 140,000 cars production capacity this year, which means that they will have that aspire to be more aggressive in export markets. I do see -- and I do expect that we will be obtaining further opportunities.

Within each of your growth drivers, Toyota, China and non-autos, can you talk about the cadence of when you expect these to roll on in your outlook?

Yes. Toyota, who else?

It was Toyota, China and non-autos, but just growth drivers in general.

Yes. So in terms of the cadence, that's right. So I think you showed the cadence for Toyota on the slide, so you will be able to refer to the ramp-up of the '22 specific models that we have from here?

So we have 22 models -- 22 launches that we have kind of projected and presented to you today through 2026 to 2029 in kind of like, let's say, well balanced throughout the years ahead. I think if we can put it in this way, Toyota has around -- Toyota Group, let's say, Toyota and Lexus has more than 110 car models that they have. So if you frame that 110 models, so out of that, we're launching approximately 22 launches throughout the next 3 years. 7, 8 and 9, so 4 years. That's our launch cadence.

And on HPC, just to maybe answer that part of the question, our launches are happening by middle of next year, right? So between now through middle of next year, all of the vehicles that we will be on are going to be launched.

And I'll complement maybe the answer with 2-wheelers. So stepping back, China, India 2-wheelers tend to be pretty fast in terms of the way they operate. And therefore, launches are going to be essentially, as Sachin said, between this year and next year. The more traditional products that we have with Toyota being clusters and display will kind of launch over time. So think about it this way, India, China, 2-wheelers fairly fast and short cycles, whereas the more traditional, including the Europeans, in fact, will launch essentially over time.

Just back on the China piece. So what is the probability of additional HPC wins this year? And if they can come from Chinese OEMs that would begin impacting revenues in 2027? And then what is defensible about your HPC business that won't be disintermediated or vertically integrated?

Yes. So let me start, and Francis, feel free to add more. So if you look at the dynamic that got us in the situation where we now have 3 customers, we started with one win, right? And that one win, nothing in China stays secret, as you know, that quickly deferred through the industry and the other 2 OEMs that were in sort of strong pursuit of the first OEMs market position on board. Now with the 3 that we have puts us in a very strong position because most of the work is mostly done. It is now derisked to a large extent.

So as Francis mentioned, our opportunity is with the large OEMs that are moving up the value chain in that market in pursuing the so-called tech-first OEMs, right? So the tech-first OEMs, you know who these guys are, they are being now -- the competition is now emerging from these larger OEMs, Geely, Zeekr and others with their own premium brands. And that model is now being applied across the industry by the larger carmakers. So we expect certainly more opportunities as their plans firm up and as they see and understand what this product and capabilities can do. Not all of these OEMs, by the way, are the same level of their own maturity in terms of AI.

That's the other piece. But it's not lost on any one of them that AI is a key differentiator. When I go to China and meet with these OEMs, there are really just 2 things that I hear every time that I go. AI in the cockpit and self-driving, autonomous driving, also AI-based. And that's where all their investments are going. So now the interesting thing is, as you may have tried Tesla self-driving, once you have it, the focus then returns back to what can you do in the cockpit. That's where the differentiation will be, and that's where the velocity of new innovations will be. Once the self-driving is there, it is there.

You only notice it when it doesn't work, right? But in the cockpit, it's something that you experience every day. So we really think we are in a really strong position with these OEMs, especially with what we are working on. And once it launches, the momentum will only, I think, accelerate from there.

On one of the slides, we emphasized proactive cost offsets to mitigate EBITDA impact under current headwinds. We've also seen some volatility in China sales with it dropping from initial targets that we had back in a few years ago. Structurally speaking, is Visteon cutting or freezing its commercial headcount globally across the board? Or are we actively reallocating investment globally?

Yes. Maybe, I'll start, and Jerome, feel free to add. So you saw our business going through a portfolio change, right? The older products are ramping down and the newer products are ramping up. As you go through that, you don't necessarily need the same type of people in the same numbers as we go forward. So we are certainly going through a human resources portfolio change as well along with our business portfolio change and more investments going into AI and AI-based products and less into the traditional products. So that's an active work that is happening.

We are also investing where the markets are growing. As we discussed quite a bit today, not all markets have the same velocity of growth, right? We have pockets of growth where the underlying vehicle production is itself going to grow. But then we have opportunities in non-auto like commercial vehicles in Europe, 2-wheelers in other parts of the world, where we're actively investing in terms of our go-to-market and being able to reach more customers. And when it comes to North America, we see opportunities in IoT and also beyond the traditional customers in Detroit, the emerging customers, right, the EV start-ups, okay?

And I wouldn't go into any specifics because we are at sensitive stages in many discussions with those OEMs. But we do believe that as our capabilities grow and those OEMs also become larger players with higher volumes, we will have opportunities to work with them in North America as well.

Exact perfect timing, actually, just as we finish that. So that will conclude our Investor Day for 2026. I'd like to thank everybody for joining us today. I'd like to thank the executive team for speaking today. I'd also like to thank my team who can finally sleep after a long few weeks finalizing all the preparation. We have lunch off to the left here, boxed lunch, and then we also have all of our demos that we encourage you to walk around, see the product, feel the product, see some of the new things that we're introducing and then meet with some of the members of the team. So thank you all. Appreciate you coming.

Good morning. I'm Kris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for the first quarter of 2026. 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 Statements 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. 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 1 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.

Thank you, Kris, and good morning, everyone. Visteon delivered a solid start to the year with first quarter sales coming ahead of our expectations. Net sales were $954 million, up 2% year-over-year despite lower industry and customer vehicle production. New product launches and customer recoveries more than offset the anticipated headwinds from lower DMS volumes and vehicle discontinuations at Ford. Growth over market in the quarter was 3%. Adjusted EBITDA was $104 million, broadly in line with our expectations.

During the quarter, we saw elevated semiconductor costs, while the associated recoveries from customers are expected to be weighted more to the later part of the year. Adjusted free cash flow was negative $23 million, primarily driven by normal seasonality and higher inventory levels. We continue to maintain a strong balance sheet with net cash of $385 million, providing ample flexibility to execute our capital allocation strategy.

New business wins were just over $1 billion, led by cockpit domain controllers and digital clusters. A key highlight was our high-performance compute win with SAIC in China, a third customer for AI-based smart cockpit systems, reinforcing our first-mover advantage in this emerging technology, similar to our early leadership with SmartCore. Q1 was a busy quarter for operations with 20 launches across 11 automakers, including on several high-profile vehicles, underscoring our continued execution excellence in a dynamic supply chain environment. Finally, we continue to return capital to shareholders. During the quarter, we returned $40 million through share repurchases and dividends. Overall, the quarter reflects a good start to the year with strong execution across all parts of our business and continued progress on our strategic priorities.

Turning to Page 3. This page shows our Q1 sales performance by region, representing a solid start to the year with balanced global customer demand. In the Americas, demand for optic electronics was strong, driven by ramp-up of recently launched products, including new display programs with Nissan and GM. We also benefited from onetime customer recoveries related to prior EV volume declines. Offsetting these were the anticipated headwinds from vehicle discontinuations at Ford and lower BMS volumes due to changes in EV policies and incentives.

In Europe, we benefited from strong ramp-ups on several successful vehicle programs. Key contributors included a curved and ceramic display referred to as a digital stage, combining a 12-inch digital cluster and a slightly larger center information display on the Audi Q3 digital clusters and displays on the Renault 4 and 5 EVs and digital clusters on the new Nissan, [indiscernible]. These programs supported Q1 sales growth despite a weak vehicle production environment.

The Engineering Services acquisition from last year also contributed modestly to our sales in Europe. In rest of Asia, India was a strong market for Visteon with ramp-ups of a new SmartCore system for Mahindra and a digital cluster for TVS, a leading 2-wheeler OEM. We also launched new digital cluster programs with Nissan and Mitsubishi for Japan and ASEAN markets, offsetting a Mazda program roll-off. In China, policy reset and demand pull forward late last year led to lower Q1 vehicle production, particularly in the price-sensitive segments.

Our sales were in line with expectations, supported by greater exposure to higher-value segments that are less affected by policy changes. We also benefited from several recently launched programs, including a new cockpit domain controller with Zeekr, an upgraded digital cluster on the Toyota Corolla and a new digital cluster on the Toyota Frontlander. The year-over-year decline in our sales has reduced significantly versus prior quarters and is now tracking more in line with customer production volumes.

Looking ahead, we have multiple launches in the second half that are expected to drive modest growth in China this year, followed by a more meaningful step-up in 2027. In summary, we started the year very well with stable global demand for cockpit electronics and new product launches offsetting the expected headwinds primarily from lower BMS volumes.

Turning to Page 4. Q1 was a busy launch quarter with 20 new products launched with 11 carmakers and on some strategically important vehicles for our customers. This page highlights a few key programs. We marked a significant milestone with our first launch for Toyota's Lexus brand on the fully redesigned Lexus ES, a flagship model leading the next-generation electrified lineup for Lexus.

Our driver display is standard on all trends globally, reinforcing Visteon's role in advancing premium in-cabin experiences with Toyota and contributing to our growth with this customer. We also launched a digital cluster on the first-ever InfinityQX65, a midsized luxury SUV from Nissan for U.S. and Middle East markets. This new vehicle is a key part of Nissan's turnaround strategy in the U.S., and our 12-inch digital cluster comes standard in all trim lines of this vehicle.

In China, we launched a driver display for the new electric Ford Bronco developed specifically for that market. The automotive market in China is evolving beyond electrification to highly specialized segments with focus on technology and lifestyle applications. And the electric [indiscernible] is significant for Ford in China designed to compete directly with local EV manufacturers. India is one of the fastest-growing auto markets. And in Q1, we launched multiple products, including a digital cluster with Hyundai, infotainment with Tata and the center information display with Renault.

Hyundai and Tata are already well positioned in India as #2 and #3 players, and Renault has recently made India a cornerstone of its strategy. India today represents nearly 10% of our total sales, and these launches position us to grow alongside our customers in what will be a key growth market going forward. In summary, we had a solid start in Q1 with new launches that laid the foundation for growth in the coming quarters and underscore Visteon's role in automakers' go-to-market strategies worldwide.

Turning to Page 5. We secured approximately $1 billion in new business during the quarter. As expected, customer sourcing in Q1 was somewhat lighter following a strong finish to last year and some display opportunities were shifted into the second quarter. Our product portfolio remains well aligned with key industry trends and our new business opportunity pipeline is strong for the rest of the year.

Based on current visibility, we remain on track to achieve our full year target of $6 billion. I would like to highlight a few of the key first quarter wins on this page. In China, we secured our third customer for an AI-capable cockpit system with SAIC Motor for its IM brand. SAIC Motor is one of the largest carmakers in China, and IM is the new brand targeting the premium car segment. Automakers in China are rapidly adopting aggentic AI to enhance in-cabin experiences, driving demand for high-performance cockpit systems capable of running LLMs and video language models or VLMs using the latest silicon such as Qualcomm's fifth-generation Snapdragon chips. These high-performance systems also enable greater ECU integration, accelerating the shift towards centralized domain architectures.

Importantly, Visteon has established an early mover advantage with 3 OEM wins in this space, more than any other Tier 1 supplier, positioning us very well to take advantage of this emerging trend. Mainstream vehicles will continue to use conventional cockpit domain controllers for affordability reasons with premium vehicles transitioning to AI-based cockpits. In India, we secured a SmartCore cockpit domain controller win with a European OEM for their vehicles for India and other emerging markets, our first SmartCore win with this customer.

The system will power 3 cockpit displays and support advanced infotainment and entertainment features similar to recent SmartCore launches in China and India. Beyond strong product market fit of SmartCore, speed was a key competitive differentiator and the main reason for this win as the start of production of the vehicle is under 12 months. We also expanded our commercial vehicle business by adding a new customer for digital clusters with a U.S. manufacturer of purpose-built vehicles for defense, delivery and fire and emergency markets.

The 12-inch cluster will feature on the next-generation delivery vehicles with production starting in early 2028. reflecting the growing adoption of digital cockpits in all kinds of commercial vehicles and not just for heavy-duty trucks. In 2-wheelers, we expanded our digital cluster program with Honda to additional models, representing an incremental $100 million of lifetime sales, further strengthening our engagement with the world's largest 2-wheeler OEM.

In summary, our Q1 performance was highlighted by strategic wins in key markets, reinforcing our technology leadership and supporting a strong pipeline that keeps us on track for our $6 billion full year target. Turning to Page 6. China, the world's largest auto market, is also the most competitive with intense pricing pressure in budget and mainstream segments, which Visteon has strategically avoided to protect profitability. Above mainstream, the market is now evolving beyond electrification into more specialized segments centered on intelligence, luxury and lifestyle. A key area of growth is the emerging premium tech segment as traditional OEMs compete with tech-first players such as Tesla, [indiscernible] and [indiscernible] with vehicles that combine luxury with advanced technology.

OEMs such as Geely, Chery and SAIC, who are amongst the largest in China are defining their premium brands around the convergence of premium design, immersive digital experiences and most importantly, artificial intelligence. The cockpit is at the center of differentiation with agentic AI enabling a new level of in-cabin intelligence. Unlike traditional command-based systems, AI-powered smart cabins can understand user intent, reason through complex tasks and act proactively on behalf of the user.

For example, instead of manually entering a destination, the system can anticipate and suggest it based on context or what it hears from conversation. It can also translate incoming messages in real time, draft responses with minimal input and answer open-ended questions about surroundings, what the driver may be seeing outside the window, for example, delivering a far more intuitive and personalized in-cabin experience. This level of intelligence requires a step change in computing power to run AI workloads far beyond what current cockpit domain controllers can provide. Visteon was the first Tier 1 supplier to develop a high-performance version of SmartCore using the newest fifth-generation chip from Qualcomm.

We also developed the first cockpit-specific Agentic AI software framework, Cognito AI to enable the development of use cases like I just mentioned. Our early investments in AI helped establish Visteon as a preferred partner for carmakers in China for their AI-enabled cockpit systems. These next-generation systems carry significantly higher content value and the business booked with the 3 OEMs thus far is already over $1 billion in value.

We expect more vehicles to be added to the programs after the initial launches, which are happening this year. While China is leading adoption of AI, we see this as a global inflection point. AI will also become a competitive must-have in other parts of the world, accelerated by the international expansion of Chinese OEMs and drive the next phase of growth for Visteon.

Turning to Page 7. Before wrapping up, let me briefly discuss our outlook for the remainder of the year. Since issuing our guidance, S&P has lowered its global light vehicle production forecast for our customers by approximately 1.5 percentage points, with most of the impact in the second half of the year. The main reason being the Middle East conflict and there could be further downside if the hostilities persist for longer than anticipated. Production for our key customers is now expected to decline in the mid-single digits year-over-year.

On the supply side, memory remains constrained as strong demand from AI and data centers limits availability for automotive. Automotive continues to rely on older memory technologies that suppliers are phasing out in favor of newer nodes, creating a structural supply-demand imbalance and driving pricing pressure and tightness in supply. We expect this environment to persist through 2027 before easing as new capacity starts to come online. In this environment, we are proactively managing supply by working closely with existing suppliers and qualifying additional sources. We were able to secure sufficient supply in Q1 through proactive actions, ensuring no impact on our customers.

We expect supply to remain tight throughout the rest of the year with incremental supply from new sources starting to become more meaningful in the second half of the year. On the positive side, customer demand has remained resilient with Q1 coming in ahead of expectations and Q2 schedules indicating continued strength. Importantly, our key launches remain on track.

Taking all this into account and based on current data, we are reaffirming our full year sales guidance despite incremental headwinds in the broader market. We will continue to closely monitor macro and supply conditions and provide updates as the year progresses. Now I will hand it over to Jerome to discuss financials in more detail.

Thank you, Sachin, and good morning, everyone. We delivered in Q1 a balanced set of financial results in what continues to be a dynamic operating environment. For the quarter, sales were $954 million, a 2% increase from the prior year. We continue to see strong growth with new product launches and benefit from solid commercial execution, partially offset by lower customer production and expected headwinds, including lower BMS sales with GM and the discontinuation of several car lines at Ford. Growth over market was 3%, in line with our full year expectations of low single-digit outperformance.

Adjusted EBITDA was $104 million, representing a margin of 10.9%. As we indicated on the prior call, we expected Q1 to be the low point for EBITDA with improvement throughout the year as we make progress on customer recovery agreements and cost initiatives. In the quarter, we were impacted by elevated semiconductor costs and the timing mismatch of customer recoveries.

Adjusted free cash flow was negative in the quarter, primarily driven by an increase in working capital, particularly inventory and the 2025 incentive compensation, which was paid in Q1. We continue to execute on our balanced capital allocation strategy, returning $40 million to shareholders with $30 million in share repurchases and $10 million in dividends. We ended the quarter with a strong balance sheet and net cash of $385 million, providing flexibility to deploy capital while navigating the current market environment.

Turning to Page 10. Sales for the quarter were $954 million, an increase of $20 million year-over-year. Customer production volumes were down 4%, while growth of the market was 3% when excluding pricing and currency. Compared to our internal expectations a couple of months ago, we benefited from higher customer volumes, better pricing dynamics and additional benefits from EV program commercial settlements.

As Sachin already provided details on customer volumes in the quarter, let me provide some additional color on pricing and EV commercial settlements and how they impacted both sales and EBITDA. First, pricing was a headwind of $5 million in the quarter, which was lower than what we typically see.

As a reminder, pricing in this environment is influenced by several moving pieces. This includes annual and discrete price changes with customers, the unwinding or maintaining of surcharges put in place during the prior semiconductor shortage and more recently, customer recoveries related to memory cost increases. During the first quarter, we were able to mitigate a portion of the elevated semiconductor costs through short-term commercial pricing agreements, while we continue to work towards longer-term recovery arrangements.

We're making good progress on these longer-term agreements, and we expect that incremental costs will be offset by more permanent recoveries as we move throughout 2026, consistent with the assumptions embedded in our guidance. From an EBITDA perspective, the lower pricing we achieved with customers in the first quarter, combined with supplier cost reductions and value engineering activities allowed us to partially mitigate the elevated costs from memory and resourcing actions. The net impact of these commercial activities was a headwind of just over $15 million. Second, the additional benefit to sales from onetime settlements, primarily related to EV programs was approximately $20 million, while the EBITDA was approximately $10 million as we closed out supplier settlements as well. As a reminder, our full year guidance included $10 million of expected one-timers from program settlements, which was achieved in Q1.

With this context, let me provide more color on our year-over-year Q1 EBITDA bridge. First, let me remind everyone that prior year results included approximately $15 million of onetime items, which impacts the year-over-year comparison. Second, as just mentioned, the negative impact from all commercial activities, including customer and supplier pricing was a headwind of $15 million. This was partially offset by the benefit of EV settlements that I also highlighted. The remaining year-over-year decline in EBITDA of approximately $5 million was driven by lower volume, unfavorable FX and slightly higher freight and logistics, partially offset by ongoing cost initiatives, including vertical integration and engineering productivity.

Turning to Page 11. Adjusted free cash flow for the quarter was negative $23 million, reflecting the typical seasonality of our business with Q1 generally being one of the lower quarters for cash flow. In 2026, this dynamic was more pronounced for a few reasons. First, EBITDA in the quarter was at the low point for the year as expected. Second, we increased inventory levels during the quarter due to normal seasonality, inflation and as a deliberate action to manage supply chain risk and market volatility. And third, the annual incentive compensation payout is in Q1, reflective of the strong performance last year and is reported in the line other changes.

As it relates to the remainder of cash flow items, cash taxes were slightly lower year-over-year, primarily due to lower profitability in the quarter and timing of payments last year. Interest income continued to offset interest expense. Capital expenditures were in line with the prior year and continue to support new program launches.

Turning to capital allocation. We deployed $40 million in the quarter through share repurchases and dividends. We ended the quarter with $385 million of net cash and expect to continue deploying capital in a disciplined and balanced manner.

Turning to Page 12. Turning to our outlook. We are reaffirming our full year guidance across all key financial metrics as the strong start of the year will help us offset a softer-than-expected market setup in the second half of the year.

Starting with sales, we continue to expect revenue in the range of $3.625 billion to $3.825 billion, which represents a low single-digit growth over market. This reflects the strength of our product portfolio, strong customer demand in the first half of the year and the continued ramp of recent launches despite the softer-than-anticipated second half production environment Sachin outlined. Moving to profitability. We continue to expect adjusted EBITDA in the range of $455 million to $495 million, which corresponds to a margin of approximately 12.8% at the midpoint. Compared to the first quarter, we expect margins to improve as the year progresses. This is primarily driven by higher customer recoveries as well as the continued impact of our cost initiatives, including product costing actions, vertical integration, engineering productivity as well as resource rebalancing across our global footprint.

On free cash flow, we continue to expect adjusted free cash flow in the range of $170 million to $210 million. That said, we are currently trending towards the lower end of this range. This reflects our plan to maintain higher levels of inventory as we proactively manage supply constraints, especially around certain semiconductor and memory components. Importantly, our strong balance sheet provides us with significant flexibility to navigate these dynamics.

Maintaining financial strength continues to be a core pillar of our capital allocation philosophy, enabling us to invest in the business and return cash to shareholders while managing near-term volatility. We plan to provide a more comprehensive update on our longer-term capital allocation priorities at our upcoming Investor Day.

Turning to Page 13. Visteon continues to be a compelling long-term investment opportunity. We have spent the last couple of years rebuilding our growth algorithm while executing operationally and commercially throughout a dynamic environment. We remain confident in our long-term opportunity, and we look forward to sharing more with you at our upcoming Investor Day on June 25 in New York City. Thank you for your time today. I would like now to open the call for your questions.

[Operator Instructions] Your first question comes from Mark Delaney with Goldman Sachs.

I was hoping to start with a question on the demand and production environment. The company spoke in its prepared remarks about S&P lowering its forecast for 2026, driven by the Middle East conflict. And you said that at least for the first half, customer schedules have actually been solid, if not even a bit better than expected. Could you speak a bit more on what Visteon is seeing with respect to LVP? And as you look into the second half, are you seeing any softening in your own customer conversations? And maybe clarify what you're trying to bake into the guidance for the year and the 1H to 2H trajectory?

Yes. Thanks, Mark. It's Jerome. Let me answer that question. So we are -- as you've heard, we're maintaining our full year guidance for sales. and as well for EBITDA. Let me give you a little bit of color by quarter. So Q1 came in a little stronger than what we had anticipated. We were also positively impacted by some EV settlements, about $20 million. So it's important to make sure that we don't annualize that $20 million. Q2, even with the Middle East conflict, we do have a pretty strong setup for Q2. We have good visibility on our orders. And I would say that Q2 looks similar to what we had in Q1 from an order standpoint. So pretty robust first half of the year. As far as the second half is concerned, we are using SMP and SAP revised our numbers recently and dropped the second half of the year for us by approximately 2%. So a softer setup as we go into the second half. But we do have strong launches that are supposed to come in line in Q3 and Q4, mostly around Toyota as well as the HPC launches. So overall, a strong H1 with a little bit of a softer H2 than anticipated allows us to stay on guidance for the full year. I would say as well that we still have got a fairly large range this year on sales for the guidance, $100 million each way. So it allows us to have some leeway as well up and down versus the midpoint.

That's helpful. I mean just to clarify, when you talk about the softening in 2H and basing it off of what S&P has projected, it doesn't sound like you've actually seen a change in your own customers' schedules. Is that correct?

That is correct for Q2, indeed, yes. And we have normally visibility for the next 3 months.

Okay. And then my other question is just on memory. The company's guidance had assumed you'd substantially recover the increasing costs in your full year guidance. You spoke a bit around the progress you're making there in the first quarter, but maybe talk about how far along you are in securing those recoveries? And are you still expecting to substantially recover all of the higher semiconductor memory costs for this year.

That's a good point. Let me -- maybe before we even talk about recovery, we should probably talk about supply because with -- if supply is an issue, recoveries may be an issue, which is not our case. But let me hand over to Sachin, and then I'll talk again about recoveries.

Thanks, Jerome. So I think this is a point that we probably need to make sure that we express clearly the situation so we can understand what's happening with supply, which obviously has implications on our ability to recover as well. So as you probably are aware, there are 2 factors that are really driving the supply situation, right? One is the higher-than-expected demand for memory, I should say, driven by AI for data centers, for smartphones, et cetera. But very importantly, many of our traditional large memory suppliers are shifting away from the older tech nodes that have been used by automotive to newer tech nodes, which also reduces capacity for auto. And this is what's created this imbalance between supply and demand, which has lowered availability of memory for industries like auto and others as well, by the way. So I think the impression all of us should have is that there's no segment of the industry that's going to get enough memory in the short term. And obviously, that has resulted in higher prices. Now as the smaller suppliers look at this environment, they see this as an opportunity to enter the market for auto, so smaller fabs in particular. And we are working with some of them to bring them into our supply base and in fact, have managed to secure some supply already for this year, about 10% of our total full year demand this year for the first time will be met by some of these emerging suppliers. One more point that I would like to add is that unlike in the prior semiconductor crisis where the lead times for new capacity to come online was fairly long, 2-plus years. In this case, with memories, it's shorter. If there's clean room space available, new capacity can come online in about a year. So that's helpful. And so we believe with more suppliers coming in, this situation that we have right now will probably last perhaps into middle of next year, maybe towards the end of next year and start to get better from there. And that will also help in terms of drawing the prices down as more supply comes into the market. So that's the situation we are dealing with. We have done as a team, a very good job of ensuring that none of our customers are impacted in terms of their production for Q1, and we anticipate with all of the measures that we have in place, working closely with our current suppliers and the new ones that we'll be able to mitigate the situation. And although it's going to be tight, we should be in a position to meet the customer demand.

And then on the recovery. So maybe first on cost. Cost came in, in line with expectation in Q1, slightly higher than $20 million as we had indicated during our last call. In terms of progressing with customers in terms of negotiations, we've done pretty well so far. And let me give you a little bit more color then on the overall impact that all this had in Q1. So in Q1, we've reported an outflow of $15 million on what we call our commercial items. So it's the net between our supplier savings and what we give to our customers. Overall, we had anticipated we would have some level of leakage in Q1 as we were obviously working on long-term contracts. So what we did just for Q1 was executing very short-term commercial agreements with some of our customers, and that helped us mitigate some of these additional costs that we got plus $20 million, as I just said. So overall progression is going on well with negotiations, and we're expecting most of the negotiation to be closed by end of Q2. So we'll see as a result of that, some level of catch-up in the second quarter. And we are expecting our commercial business equation to be neutral in the second quarter as some of the improvement that we have with our regular suppliers come online. But overall, for the full year, we're maintaining our guidance in terms of recovery, and we are still expecting to have some level of leakage largely because of the timing issues that we'll have for the full year.

Your next question comes from Colin Langan with Wells Fargo.

Just to follow up on this issue. So you have over $20 million in costs, but you have $15 million of recoveries. You got something close to 75% recoveries already and then you expect to have that caught up in Q2. Does that mean we get a little additional boost already in Q2 from recovery timing?

Yes, Colin, that's Jerome. Correct. So we've had this $15 million leakage. And we like to combine essentially what we're giving to customers versus what we're getting from suppliers, in some cases, increases, obviously. So we look at this holistically with negotiating, I would say, with customers the full pricing package with them. So that includes not only the annual price reduction, it includes as well the legacy recoveries from prior chip shortages as well as now the new memory cost increases that we are passing on to customers. So we are expecting this leakage of $15 million to be neutral in the second half of the year and then slightly improve as we go in Q3 and Q4 so that we have a minimal leakage for the full year, as I indicated and per our guidance.

Okay. And I think I actually had that wrong. So it's -- you have like about 1/3 is recovered in the quarter, but you expect -- does that all jump back? Does that $15 million become a positive in Q2? Sorry?

It does. Yes, it does, absolutely. So it does become positive in Q2, and it will improve even slightly better. It will improve slightly in Q3 and Q4 for a slight negative for the full year.

Got it. And then the guide for the year is low single-digit growth over market. You made it abundantly clear that the first half was going to be really tough with roll-offs and the BMS, but you still did 3% in Q1. Why not -- is mid-single now more likely as we go through the year, given you have highlighted pretty strong second half launches?

Yes. I would say Q1 came in pretty close to our expectations. We had not given guidance per quarter. So 3% was generally in line with the mid -- the low single digit for the full year. We're expecting to hold that performance pretty much throughout the year. And we're expecting all regions to perform pretty well, maybe with the exception of the Americas largely because of the BMS situation. But overall, a pretty consistent growth of market throughout the year.

Your next question comes from Emmanuel Rosner with Wolfe Research.

I appreciate all the color on the memory supply and discussion and trying to derisk the outlook. Just curious, as we sort of like start looking into next year and you speak to OEMs about trying to mitigate the risk of disruptions, are there any conversations around potential sort of like decontenting or using essentially less memory or solutions that are -- that use less of it? And I'm also curious on the -- on the pricing side or the recovery side, the nature of the longer-term agreements that you're working on with the OEMs, would those essentially allow ongoing pass-through even into next year if the DRAM costs keep rising?

Yes. So let me take that, Emmanuel. So on the first topic, we are not actually seeing any interest in decontenting. And the discussions have been mostly around how do we secure enough supply for 2027. Now as you can imagine, most of the time thus far has been going into securing supply for this year, and there's still a lot of activity as I just mentioned on my previous comment. But as we start to think about 2027, we are working with all of our suppliers, the ones traditional suppliers plus the new ones that we are bringing online. And as I mentioned, I think the supply next year will largely depend on our ability to secure enough quantity of parts from these newer suppliers that are emerging, largely because of the fact that many of the existing larger suppliers to automotive are shifting their technologies to newer technologies. So that dynamic has to be managed first and foremost, and that's what we are focused on. We expect that over the course of this year and maybe towards Q3, we should be in a position to have supply secured for next year. In terms of pricing negotiations that we are currently having, I think they are kind of different by different customers. Some of them are signing up for a multiyear pricing agreement. So it's going into the piece price essentially. And some are preferring to have annual pricing negotiations. So it will depend on each customer in terms of how they address it.

Understood. And then can you talk a little bit more about the expected ramp-up in launches in the second half? I know you just spoke about the growth of the market holding on. But how should we think about this in relation to your comments about, I guess, S&P's outlook but weaker volume. Do you have a good sense that this should not really affect ramp curve?

Yes. Yes. I think so because -- and this was also evident in Q1, a lot of our performance was driven by new launches, not so much the underlying vehicle production environment of the carmakers. And a lot of our launches this year are the high-value ones are in the second half. And in fact, they're ramping up in Q4. So in terms of the total number of launches, this year looks a lot like last year. I would say even a few more launches this year than last year. But there are some that are very consequential, especially the ones with Toyota and the HPC launches that we spent quite a bit of time on in our prepared remarks. those are pretty high value, although their real ramp-up begins in Q4. So contribution this year is still relatively small, but meaningful, and this is all -- is what is helping us offset what we have seen thus far as the reduction in vehicle production. I do believe if the environment hopefully stabilizes, especially in the Middle East, that if we go forward from here, there may be a potential benefit to us if the underlying vehicle production holds up. At this point in time, we are just too early to say whether this growth over market will improve from here, but it's been a really good start to the year. Q2 looks pretty strong. And so the second half, considering where we're at, at the beginning of the year, we'll have to wait and see as we proceed here, how that develops.

Your next question comes from the line of Winnie Dong with Deutsche Bank.

My first one is on the new business win of $1 billion for the quarter. For context, would you mind giving us some, I guess, color on whether this is a typical seasonality or whether you're seeing any sort of push out or decisions in terms of wins? And then secondly, in terms of the growth drivers in 2027 and beyond, perhaps you can tease your Investor Day in June a little bit and outline some big buckets of drivers there that we can look forward to?

So the first quarter was expected to be a little lighter given that we had a very strong finish to last year. And we also had, as I mentioned, a few display opportunities that got pushed out into Q2, about $300 million to $400 million worth. So I would say even with that, it might be considered a little light, but pretty, I would say, normal for first quarter in terms of seasonality of new business wins. Now if you look at the pipeline for the remainder of the year, I would say, again, much like new business wins, even in terms of -- much like the new product launches, new business wins also look very similar to 2025 in aggregate. But the mix is different. the product mix and the regional mix are both different. 2025, we had, I would say, even number of and value of wins for displays and cockpit electronics. This year, we are seeing more opportunities for cockpit electronics and also more in Asia. And the display opportunities this year are more evenly spread between Europe as well as Americas. So overall, we are pretty pleased with what we see as new business opportunities in this environment, and we expect this year to look similar to last year in total in terms of the value of new business wins.

To your second question, we do want to leave something for our Investor Day to share with you. But I think that the main drivers that you are referring to there are going to be the new products that we have won and that we are launching that we have been discussing quite a bit in our earnings calls over the last few quarters. So displays, obviously, will have a very big role to play in our growth given the high wins that we have had in the last few quarters, which will be coming into production here very soon. HPCs, simply because of the very high content value will also have a very meaningful impact. And then the other growth drivers that we have talked about, Toyota, targeted customers and then 2-wheelers and commercial vehicles.

What's interesting about our growth profile here is that we are not relying on just 1 or 2 things for us to be able to make our numbers. We have a number of things that are in play that are all growing. So we have a lot more confidence that we will be able to achieve that given the diversification that we have.

Your next question comes from Joe Spak with UBS.

Sachin, sorry to go back to memory, but just one more point on this. Like my understanding is some of that additional supply that's coming online is from China. So I just want to make sure your customers are okay with that. And I thought I heard you mention that you already secured about 10% of this year's supply from these new sources. So why would it not be at least at that level or if not better for next year?

Yes. To answer your second question first, absolutely. We don't see that it should not be better than that. We absolutely expect it to be better. And the question is by how much and to what extent. So we -- to give you some sense of the number of different memory chips that we buy, we buy about, I would say, about 60 different types of chips that go into the DRAM category. And there are also NAND flash, eMMC and UFS as well as NOR. Not to confuse you, but just the point is that there are many different types of memories in different densities that we need. And typically, very few of these suppliers are able to offer you all of the parts that you need. So we have to have a mix of suppliers that tend to have their strengths in specific categories. And that's the sort of process that we have been going through identifying these suppliers building relationships and starting supply so that we can test their parts, qualify them and then introduce them in our customers' production. So that's the current situation with supply. And I believe that going back to your first part of the question, do you mind repeating your first part?

Just if customers are okay with some of the new sources coming online in China.

Yes, yes. So in this environment, where there is shortage of parts, there's absolutely no problem with that. And so the first thing is to make sure that we have the production secured. Obviously, they would like it to be non-China based if there is availability. But in this environment, we do not see that as a problem.

Okay. I guess the second question, Jerome, just on capital allocation. I know you said more details on the long-term plan at the Analyst Day. You did buy back $30 million this quarter. I think that means you've got like $45 million left under authorization. I know you said last quarter, you could do about $100 million. You also earmarked about $300 million for M&A. So I guess I'm just wondering if there's any sort of change to that thinking with some of the comments you made about free cash flow or the pipeline or even really the current share price? And could we expect an increase in authorization because it does seem like you're coming to the end there?

Right. So generally, no, nothing has changed. And we had highlighted that it was up to $300 million for M&A, up to $150 million for share repurchases. With the cash balance that we have at the end of Q1, even with potentially tracking towards the low end of the range for adjusted free cash flow for this year, we could still do everything. So we're still very focused on M&A and we'll continue as well to return in an opportunistic manner cash to shareholders with share repurchases as well as continue on our dividend. But overall, nothing has fundamentally changed in terms of our philosophy.

Your next question is from Dan Levy with Barclays.

I wanted to just first double-click on the growth dynamics. And we saw negative growth in China in the first quarter. Maybe you could just unpack some of the mix dynamics where I would have assumed that with the lower end of the market underperforming, the higher end outperforming, that would help you. And then is the view that you can still get that positive growth for the full year with the launches in 2H enough to sort of bring you up to positive growth?

Yes. So let me take that. So if you see what has happened in China, as you mentioned, lower growth in vehicle production in the more price-sensitive segments and I would say, better performance, but not necessarily a lot of growth in the upper end of the market. That is certainly more helpful to us. I do want to also mention at the same time, there is the headwind of the market share loss of the global OEMs that is still ongoing. So this is not all good news necessarily. So the new launches so far have been largely offsetting what we saw as declines with our traditional global OEMs. And therefore, for Q1, it was kind of even in terms of our performance in vehicle production. As we go forward, especially with the HPC launches, I believe we will start to see growth relative to production in China. and that will continue and have more of a step function next year as those launches get into that production ramp-up.

Okay. Great. And then as a follow-up, sorry, I know we keep on getting questions on the DRAM here. But on a longer-term basis, is there any ability for you to transition your products to be using DDR5 to address some of the supply issues? Or is your point that these newer Chinese suppliers are going to be more than enough to offset some of the large suppliers that are eventually phasing out DDR4 and so longer term, this issue will be addressed by these other smaller suppliers.

No, that's a great question. And let me just also take a step back. So when you look at a technology like DDR4 versus DDR5, the 5 is not backwards compatible with core. And these memories typically are interfaced to a micro or an SoC or a system on a chip. And that micro or SoC needs to have the capability to be able to be interfaced to a DDR5 for us to move to DDR5. Now the majority of the micros used in the industry for the cockpit are not capable of being interface to DDR5. So that's one point, right? So that transition has to happen. The evolution of the micros and SoCs that are used for cockpit, which come from suppliers such as Qualcomm or NXP and others, they have to be able to provide the SoCs. There has to be then other changes because they're not going to just introduce a single change like moving from DDR4 to DDR5. So it's a bigger change and a bigger change typically requires longer time for automotive. So that's one dynamic. Now what we are seeing though is the higher-end CDCs and HPCs already use DDR5. So what this might do is to push the industry faster towards DCs, upper-end CDCs and HPCs simply because of the shift in the underlying technologies. Now DDR5 will come at a density that is fundamentally a step higher than DDR4. So we'll be able to do more with this processing power and the memory that's going to be available, which I think will accelerate the trend towards more integrated cockpit domain controllers and eventually central domain controllers like the HPC. So we believe that this trend in some ways is going to push the industry to adopt more content simply because it will be cheaper to do it that way than to stay with older technologies with more function-specific, feature-specific implementations.

Your next question is from Luke Junk with Baird.

First question, Sachin, just curious to get your -- some perspective on what you mentioned as the early mover advantage in HPC. I think you said your 3 wins are more than any other Tier 1 supplier. Just hoping we could double-click maybe on the competitive landscape on a relative basis. And then given the award this morning that you announced that's launching within a year or so, I think you said within 12 months, just the near-term pipeline for maybe adding additional awards, including maybe additional vehicles with your current customers.

Yes. No. Thanks, Luke. So we have 3 customers that are launching this year, as I mentioned, and they're all launching initially on the flagship vehicles. But at the same time, lining up vehicles following that initial launch that we are in discussions with them on, which will extend this business. So that has been one of the sort of new learnings for us as well. When we were first discussing AI and HPC, let's say, about a year ago, I thought was that it was more limited in application to perhaps just the very top end, the flagship vehicles. But the competitive dynamics now in the China market with what's happening, especially with the emerging premium tech segment that I discussed, that's really driving more volume to adopt AI as one of the key foundational capabilities of the cockpit of those vehicles. So we actually see that market grow quite rapidly starting in China. And because of exports, we expect that technology to start to make impact in other regions, probably starting with Europe initially before it comes to other parts of the world.

Helpful. And then, Jerome, maybe just hoping to make sure we're calibrating the launch cadence right in the back half of the year. I guess 2 specific things in that. First would be in terms of the high compute launches, any initial demand indications? I know there's a level of variability just on the demand for the vehicles themselves. And then you also made the comment about the 14 inflexion. Was that mainly a Toyota-related comment? Or is there some China color that we need to understand there as well?

I was about to say the -- we are using IHS for the HPC launches. And these have been holding pretty well compared to what we had initially guided to. So no major changes. Sachin, do you want to take the second one?

Yes. In general, on the cadence itself, what I would say is that there has been no change on the launch plans and in terms of the volumes as well. We have been very focused on ensuring that we have supply of components because the lead times, as you can imagine, especially with this third win has been extremely short. So I would say, for now, look, the focus is on ensuring that we can launch and achieve the ramp of volume that we have for this year, which has remained pretty steady. There's been no change. And if anything, depending upon availability of supply, that there may be the ability to increase it. But given where we stand with lead times and so on, I would think that would be a fairly big challenge for us.

Our next question is from Tom [indiscernible] with RBC.

Just 2 quick follow-ups. The first one on the $300 million M&A. I know in the past, you said this is likely tuck-ins. But just curious, is there a reason why this is being prioritized now? Is it because you're seeing deals kind of at attractive pricing? Is it something that you see that works well with what you're trying to achieve now versus later? And then I have a follow-up.

Yes. So yes, in some parts, but it's really more driven by how we see the trends emerge in the industry. There's a very big trend towards a software-driven, more integrated domain controller approach for these vehicles. And that requires that you have all of the software capabilities to implement those features. And that's the primary driver of trying to secure those capabilities that would allow us to offer more and more integrated domain controllers. Eventually, we see a certain level of ADAS also getting integrated with cockpit as features like AEV become mandated in all jurisdictions, but it's already a mandate in Europe. In 2028 and '29, China and U.S. will follow. And as standard requirements, OEMs will not be able to price for them. They will be essentially part of the standard equipment. So we expect more and more features to get standardized or de facto acquired and therefore, integrated and the cost is going to be a prime driver, and that will drive greater levels of integration. So that's one thing. The second thing that's driving our M&A strategy is the fact that with all of these technologies that are emerging very rapidly coming from mainstream tech industries and impacting automotive at a pace that's been faster than ever before, we see opportunity for offering services, outsourced R&D services, expert services to help OEMs define how to use those technologies in their vehicles. And what we're finding now your question, we are finding these opportunities, these companies that have a lot of depth of expertise, but they don't necessarily have the scale. And we believe that we can provide the scaling ability to these companies, help the OEMs and in turn, that helps us make our platform more future-proof. And so it's got that virtuous cycle where us engaging in advanced technology activities with OEMs helps us understand how to keep our platforms competitive and in time for the market introduction. So that's the second. And the third driver of M&A has always been vertical integration. And we have been very successful with that so far, and we want to continue to take it forward as we see opportunities to bring more of the manufacturing value content into our plants rather than to rely on an extended supply chain, which eventually also helps us counter this request that we get from customers to be less dependent on China and other parts of the world where we are today perhaps more exposed than we should be.

Got it. very robust. And then, Jerome, just to clarify, the guidance being maintained despite the S&P cutting. And was it that the Q1 coming in ahead of your expectations? Was that the main driver of being able to do that?

Correct, yes, along as well with some good visibility and robust orders that we see for the second quarter. But you're absolutely correct.

Thank you. This concludes our earnings call for the first quarter of 2026. Thank you for participating in today's call and your ongoing interest in Visteon.

This concludes Visteon's First Quarter 2026 Results Earnings Call. You may now disconnect.

Good morning. I'm Kris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for the fourth 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 Lawande, President and Chief Executive Officer; and Jerome Rouquet, 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.

Thank you, Kris, and good morning, everyone. Overall, we delivered a strong performance in 2025 despite several industry challenges. Net sales for the year were $3.768 billion, coming in largely as we expected at the beginning of the year. From a product perspective, displays were a stand out with sales growing approximately 20% year-over-year, reflecting strong customer demand for larger and advanced displays as well as our execution capabilities.

Growth over market was muted in 2025 because of 2 well-understood factors we've discussed throughout the year. First, battery management systems continued to be a headwind as EV demand in the U.S. was softer than originally anticipated. And second, in China, our results were impacted by ongoing shift in market dynamics, including the continued loss of share by global OEMs. These 2 factors negatively impacted GOM by about 7 percentage points.

From a profitability standpoint, 2025 was a record year. Adjusted EBITDA reached $492 million or 13.1% of sales, representing the highest level in the company's history. We also generated very strong adjusted free cash flow, reflecting disciplined execution and continued focus on cost and capital efficiency.

New business activity was another highlight of the year. We delivered a record $7.4 billion of new business wins, surpassing our prior peak. Finally, a strong balance sheet and cash generation continue to provide significant flexibility. During the year, we deployed more than $120 million towards M&A and shareholder returns while maintaining a strong net cash position.

Turning to Page 3. Before I go deeper into our 2025 results, I want to take a step back and briefly update you on the strategic work underway to build Visteon's next phase of growth. While the majority of the benefits will come later, some of these initiatives are expected to show results in 2026.

We are diversifying our customer base by expanding our presence with specification automakers that have historically been underrepresented at Visteon. In 2025, we secured another $500 million of new business with Toyota, building on the momentum from prior year, and launched new products with Toyota, Mahindra, Tata and Maruti Suzuki. We expect revenue from these OEMs to begin growing in 2026 and to ramp steadily over the next several years, making them an important driver of our future growth.

At the same time, software-defined vehicles are now extending into other parts of the broader mobility ecosystem, particularly commercial vehicles and 2-wheelers. While we have served these adjacent markets in the past, the changes driven by these trends are making them significantly more attractive growth opportunities, while also helping us diversify our exposure.

In 2025, nearly 15% of our new business wins came from 2-wheeler and commercial vehicle manufacturers compared to about 4% of our sales today. A particularly important milestone was winning the largest digital cluster program in the 2-wheeler industry, approximately $400 million in lifetime revenue with Honda. Launches for this program are scheduled to begin in 2027.

Our manufacturing footprint and cost structure have long been a competitive advantage for Visteon. To further strengthen this advantage, we have increased vertical integration in manufacturing to simplify the supply chain and capture incremental value. In 2025, we accelerated the in-sourcing of the molding of metal brackets used for large displays using an advanced lightweight fixer molding process. We are the only Tier 1 supplier that has this capability in-house in the industry. We have also increased our optical bonding capacity in various plants. Finally, we began manufacturing automotive cameras to complement our in-house surround vision software, enabling a complete end-to-end solution.

More broadly, investing in the business remains our top capital allocation priority. In 2025, we deployed approximately $180 million across CapEx and M&A to support new program launches, technology development and vertical integration initiatives. Advancing our technology portfolio and aligning it closely with market trends is a key element of our strategic priorities. Today, I would like to highlight 2 emerging product trends, in particular: advanced displays based on OLED technology and AI in the cockpit.

In 2025, nearly 50% of our new business wins were for displays, surpassing 2024 record levels, and positioning this product for sustainable revenue growth. Importantly, we secured significant OLED display wins with luxury OEMs and establishing Visteon's leadership in this segment of the auto market. While TFT displays will represent the bulk of the automotive market for displays, OLED displays will have greater share in the luxury vehicles.

AI technology is advancing at an extraordinary pace. Newer AI models deliver significantly higher intelligence with far fewer parameters, enabling AI to move from the cloud to device-based architectures, an essential shift for automotive applications. We are addressing this opportunity through 2 complementary offerings.

First is our high-performance compute hardware, which provides the processing headroom and architectural flexibility required to run AI workloads in the vehicle. Early in 2025, we secured a win with Chery in China, and more recently, follow-on business with Geely, as they expand this architecture into the Lynk & Co brand, building on our Zeekr win in 2024. These are the most advanced cockpit systems in the industry and are scheduled to launch in the second half of 2026, reflecting both the pace of innovation and our ability to execute alongside our customers.

Second is cognitoAI, our in-house AI-based smart assistant for the cockpit. Over the past year, we expanded cognitoAI to support multimodal AI, combining large language models with vision models, allowing the system to interpret visual information such as road signs and symbols, alongside voice interaction to deliver more contextual and intelligent driver experiences. Following CES, we have seen growing customer interest and deeper technical collaboration. Together, our high-performance compute systems in cognitoAI positions Visteon at the forefront of bringing AI into the automotive cockpit.

Turning to Page 4. This slide provides more color on our regional sales performance for the year. In the Americas, our sales were impacted by lower customer vehicle production and by the steep drop in production of EVs at GM and Stellantis. BMS sales took a further step down in Q4 after the expiration of the EV tax credit, and resulted in a full year headwind of about 8% to our 2025 Americas sales. Offsetting these headwinds were a strong growth in digital clusters, displays and infotainment programs at Ford, VW, Toyota and Nissan, on vehicles such as the Bronco, Tera, Camry and the Murano. With a strong performance in cockpit electronics, we were able to deliver a 5% growth of our market in this region despite the significant reduction in BMS sales.

Europe was a standout market for us despite lower customer vehicle production and the cybersecurity-related disruption at JLR, one of our larger customers in the region. Our strong performance was driven by the ramp-up of newly launched products, mostly large displays and digital clusters, with Audi, Ford and Renault, delivering an outstanding 11% growth over market in this region. We also benefited from our recently acquired engineering services businesses, which is an important strategic capability we are building starting in Europe.

In rest of Asia, our sales were essentially flat as our growth in India and Southeast Asia were offset by declines with some customers in Japan. Our market outperformance in the region was driven by 2-wheeler programs with Honda, Royal Enfield and TVS. We also benefited from a recently launched digital cluster program with Mitsubishi that's going on multiple car lines.

Finally, as expected, sales in China declined year-over-year, resulting in a significant headwind to our overall growth over market performance. The underperformance in China was largely driven by continued market share losses among global OEMs, and to a lesser extent, by vehicle mix and our product transition at Geely. Encouragingly, we delivered sequential sales growth in the fourth quarter, supported by new product launches, including a new cockpit domain controller with Geely.

Overall, we delivered 2% growth over market globally despite EV headwinds in the U.S. and the ongoing challenges in China. This performance reflects the strength and diversification of our product and customer portfolio which has enhanced our ability to navigate market volatility. The strategic initiatives outlined earlier are expected to further strengthen the resilience of the business.

Turning to Page 5. Our 2025 operational performance reflected strong execution and global reach, with new products launched on 86 vehicle models across 19 vehicle manufacturers. These launches were well distributed geographically, underscoring balanced growth across all major regions.

From a product perspective, approximately 1/3 of the launches were for large displays and SmartCore programs, aligned with the industry's accelerating shift towards software-defined vehicles. The launch mix also showed increasing momentum in hybrid vehicles, which performed particularly well in 2025, as well as in commercial vehicles and 2-wheelers.

Several key fourth quarter launches are highlighted on this page. In China, we launched a new digital cluster on the refreshed Toyota Corolla and Corolla Cross models. The Corolla has been a long-standing success for Toyota in the Chinese market, and the updated versions offered with both ICE and hybrid powertrains introduce enhanced smart features designed to reinforce Toyota's position in this highly competitive segment.

We also launched a center information display on the Mazda CX-5 SUV, a key element of Mazda's return to growth plan for 2026. This launch supports both ICE and hybrid variants of the vehicle in the China market. In addition, we introduced a SmartCore system with Zeekr, further strengthening our position with Chinese OEMs adopting more advanced corporate architectures.

In India, we introduced a fully integrated SmartCore-based corporate system on Mahindra's XUV 7XO, featuring 3 12-inch displays. The centralized compute system offers state-of-the-art SDV capabilities, including surround view, telematics, streaming media, OTA and ADAS visualization, besides advanced infotainment capabilities. Other fourth quarter launches included instrument clusters with Ford in North America and Tata in India.

In summary, we delivered strong operational performance in 2025, launching a high number of new products aligned with key industry growth drivers, including the shift to software-defined vehicles, increasing adoption of large displays and rising demand for hybrid vehicles that sets us up for continued growth.

Turning to Page 6. We delivered a record $7.4 billion of new business wins in 2025, 20% higher than 2024. This performance is particularly impressive, given the slower OEM quote activity during the year, especially in Europe and the U.S., as automakers adjusted to shifting market dynamics around electrification and increased competition from Chinese OEMs. Displays and SmartCore performed exceptionally well, reflecting the continued acceleration of the software-defined vehicle trend across the industry. Together, they accounted for approximately 3/4 of our total wins.

We also continued to build momentum in high-performance compute system for the cockpit, securing a second customer, Chery in China. We also secured significant wins in large format digital clusters to support the growth of ADAS and the increasing need to present safety critical information directly in the driver's line of sight.

Turning now to the fourth quarter. We secured approximately $1.7 billion of new business wins and finishing the year on a strong note. A key highlight was the center information display program for a large full-size ICE pickup in North America, serving both commercial and retail customers. This is a flagship high-volume platform and underscores how OEMs continue to prioritize the cockpit as a critical area of differentiation even in pickups and trucks.

We also won an integrated display and infotainment system on a high-volume global SUV and truck platform for a Japanese OEM, where we displaced an incumbent supplier. This win highlights our ability to deliver integrated cockpit systems at scale and compete effectively on both technology and cost.

In China, we secured a driver display program for an entry-level sedan with Toyota, and expanded our high-performance compute system on the Lynk & Co vehicle at Geely.

Overall, the breadth of our cockpit product portfolio continues to create meaningful growth opportunities for the company. The product and regional diversity of our new business wins positions us well to navigate industry challenges and drive continued growth.

Turning to Page 7. Let me close with a look at how we are thinking about 2026 and how it sets the path for our next stage of growth. For 2026, we expect sales to be in the range of $3.625 billion to $3.825 billion.

Starting on the left-hand side of the slide, there are 2 specific headwinds we anticipate to impact 2026, both of which we expect will be largely behind us as we move into 2027. First, U.S. EV production is expected to be lower following the reset in demand. As a result, we are assuming that BMS volume in the Americas will decline by nearly 50% year-over-year. Second, Ford discontinued several vehicle models in 2025, where we had content, and there are no successor programs for those vehicles. In addition, we expect net pricing, foreign exchange and other commercial items to represent roughly a 2% headwind, which is broadly in line with normal pricing dynamics. Jerome will walk through these items in more detail.

Offsetting these pressures, the right side of the slide highlights the building blocks of our next stage of growth, which begin to take shape in 2026. In China, we expect sales to grow modestly despite lower customer vehicle production. We have 2 high-performance compute SmartCore programs launching with domestic Chinese OEMs, along with cockpit domain controller and display programs with German OEMs launching in the second half of the year. While we have been conservative in our estimates, there is potential upside if the upper segment of the vehicle market performs well as indicated by January market trends.

Our strategic initiatives also begin to contribute in 2026. We have multiple program launches during the year, including several with Toyota, continued growth in India and further expansion in 2-wheeler and commercial vehicles. These launches reflect the strategic work we discussed earlier, and help set the foundation for sustainable growth.

The final bar on the slide represents the net impact of program activity across the remainder of our customer portfolio. This includes new program launches and production ramps across a broader customer base such as the panoramic display and cluster with Audi, digital clusters on multiple Renault vehicles and new displays with Nissan and Mercedes that more than offset normal program roll-offs. It should be noted that it excludes the specific headwinds and the strategic growth drivers we have already discussed.

Separately, the supply of memory chips is tight throughout the industry, and we are working closely with suppliers to mitigate the gaps and develop alternative drop-in replacements. While the situation is still evolving, we expect that we will be able to cover customer demand applying similar playbook as with prior semiconductor shortages.

Overall, 2026 represents an important year. While sales are impacted by temporary headwinds, the second half of the year begins to reflect the progress we have made in executing our growth strategy. That positions us for a return to top line growth as we move into 2027 and 2028.

With that, I'll turn the call over to Jerome.

Thank you, Sachin. Before getting into the details of the quarter and our outlook, I want to briefly step back and look at our financial performance over the past few years as it provides important context for how we have managed the business through a dynamic environment.

Over this period, we have grown sales by more than $800 million or 28% despite our customer production declining by 13%. We have more than doubled adjusted EBITDA and expanded margins by over 500 basis points. Importantly, this margin progression has been steady and consistent, reflecting disciplined execution across pricing, cost structure and operational performance. We have also generated strong cash flows. Adjusted free cash flow totaled $1 billion over this period, with an average conversion rate of approximately 42%, driven by EBITDA growth and a sustained focus on working capital discipline and capital efficiency.

While not shown on this slide, our return on invested capital remains in the high teens, well above our cost of capital and above our peer group, reflecting the quality of returns we are generating from our investments in the business. Taken together, these results demonstrate our ability to expand margins and generate cash even as volumes, mix and regional dynamics have shifted.

Turning to Page 10. Sales for the fourth quarter were $948 million, coming in above our expectations, primarily driven by customer recoveries related to program shortfalls. In the quarter, sales benefited by $30 million related to a customer claim on an EV program in the U.S., of which a portion was used to settle supplier obligations.

From a product perspective, displays continued to be the main growth driver year-over-year, while battery management systems were down following the expiration of the EV tax credit in the U.S.

We also experienced several discrete headwinds in the quarter, including the Novelis fire impacting Ford and the cyberattack at JLR, both of which were known headwinds going into the quarter. There was no impact on volumes related to the potential Nexperia supply risk we referenced on the last call.

Adjusted EBITDA for the quarter was $110 million, representing a margin of 11.6%, and came in slightly above the midpoint of our guidance. Onetime items in the quarter represented a modest headwind as elevated warranty expense and some costs associated with resourcing away from Nexperia more than offset the EBITDA benefit from the customer claim I mentioned previously. When excluding these onetime items, adjusted EBITDA margins were approximately 12.5% on a normalized basis, reflecting continued commercial discipline and underlying cost performance. Adjusted free cash flow was strong, coming in at $77 million, supported by robust EBITDA levels and continued discipline in working capital management and capital efficiency.

During the quarter, we returned capital to shareholders through $50 million of share repurchases and $7 million through our quarterly dividend, which we initiated in the third quarter. Our net cash position was $472 million at the end of the quarter.

Turning to Page 11. For the full year, sales were $3.768 billion, down $98 million or 3% year-over-year. Customer production was down 1% for the year, while currency was neutral. Pricing was a headwind of 4%. This includes our normal annual price reductions of 2%, which are consistent with historical levels as well as lower customer recoveries. The reduction in recoveries reflects the unwind of prior year semiconductor inflation. As these costs have decreased, the associated recoveries have declined as well. Excluding the impact of FX and pricing, we delivered 2% growth over market. This reflects strength from new launches, including Ford, Audi and Renault launches, growth with Toyota and higher engineering services revenue, offsetting headwinds from lower BMS volumes, lower sales in China and normal program roll-offs.

In 2025, we delivered another record year for both adjusted EBITDA dollars and margins. Pricing and lower customer recoveries were offset through disciplined cost execution. We delivered end-to-end product cost improvements, including supplier cost reductions and vertical integration initiatives and drove productivity gains across engineering and SG&A.

Throughout the year, we actively managed our cost structure in line with market conditions, enabling us to improve margins while continuing to invest in strategic growth initiatives. For the full year, the net impact from favorable one-timers, including elevated onetime commercial recoveries, was just under $30 million. Excluding these items, normalized adjusted EBITDA margins are in the mid-12% range for the full year.

Before moving on to cash flow, I want to highlight our voluntary decision to change the methodology used to calculate our valuation allowance on U.S. deferred tax assets. While there are 2 methodologies available that are acceptable under U.S. GAAP, the methodology we will be using going forward enhances transparency and reduces complexity while also aligning with industry norms. We have reflected this accounting change in our U.S. GAAP tax expense for the past 3 years in the 10-K. This change impacts the presentation of U.S. GAAP taxes, but does not affect cash taxes or underlying economics of the business. Additional details are included in the 10-K.

Turning to Page 12. In 2025, we generated $292 million of adjusted free cash flow, reflecting continued strength in the underlying earnings profile of the business. Trade working capital was a source of cash for the year, driven by lower sales and inventory reductions. Cash taxes increased year-over-year due to increased profitability, the timing of tax payments and some level of discrete items. Interest was a net positive as income generated on our cash balances more than offset interest payments on debt. Other changes primarily reflect ongoing pension contributions and timing of cash flows.

Capital expenditures were $133 million for the year or 3.5% of sales, illustrating the capital discipline of the company. This included continued investments in vertical integration as well as the purchase of land in India in the fourth quarter to support growth in this market. Taken together, our conversion ratio from EBITDA to adjusted free cash flow was nearly 60%. In total, we deployed approximately $275 million of capital, which included both organic and inorganic investments, a return of approximately $72 million of cash to shareholders through share repurchases and the initiation of a quarterly dividend.

During the fourth quarter, we completed a $100 million pension derisking by transferring pension-related assets and liabilities to an insurance company. This transaction had a noncash impact to net income of negative $7 million. Also in the fourth quarter, S&P upgraded Visteon to Ba1, reflecting expanded margins, strong free cash flow generation, a conservative financial policy and sustainable demand for advanced cockpit technologies.

Turning to Page 13. Turning to our 2026 outlook. Starting with sales, we expect revenue in the range of $3.625 billion to $3.825 billion. As Sachin discussed, we begin to see the benefits of our strategic growth initiatives in 2026, with more meaningful acceleration into 2027 and beyond, laying the foundation for sustainable annual top line growth beginning in 2027. At the same time, 2026 includes several discrete headwinds, including lower BMS sales and the discontinuation of certain programs at Ford, with both items largely behind us as we go into 2027.

Our outlook is primarily based on the January S&P forecast. Customer-weighted production is expected to be down in the low single digits. Against this backdrop, we expect Visteon's growth over market to be in the low single digits. This is below our long-term expectations due to the discrete headwinds in 2026, but positions us for stronger growth going forward as those headwinds roll off and our strategic initiatives accelerate.

Before moving to EBITDA, let me provide some additional perspective on the commercial dynamics embedded in our outlook, recognizing that this remains a dynamic area. There are several items that reduced sales year-over-year, including normal annual pricing to customers, lower customer recoveries related to semiconductor and supply chain disruptions from prior years as well as the nonrecurrence of certain commercial recoveries recognized in 2025. Partially offsetting these declines, we expect recoveries related to more recent semiconductor dynamics, including memory related costs. We also anticipate a modest tailwind from currency. On a net basis, we expect these various items to represent approximately a 2% headwind to sales year-over-year.

Adjusted EBITDA is expected to be between $455 million to $495 million. At the midpoint of guidance, margins are 12.8%. As we have highlighted previously, our 2025 results included a net benefit of just under $30 million above our normal run rate. Of that amount, we expect about only $10 million to repeat in 2026, resulting in a $20 million year-over-year headwind. Excluding this factor, we expect adjusted EBITDA dollars to be roughly flat year-over-year despite lower sales, reflecting the underlying strength of the business and our continued operational focus.

Compared to normalized margins of 12.5% in 2025, our guidance incorporates a 30 basis point improvement. Included in our guidance are ongoing benefits from cost discipline, emerging savings from vertical integration and product costing initiatives. These are offset by increased investments in the business to support product development, including in AI and vertical integration. This outlook also incorporates an increase in memory cost, with a year-over-year cost increase representing approximately 2% of sales. We're in active discussions with our customers to pass along these costs, and we have incorporated in our guidance a modest amount of potential timing mismatch between cost incurred and customer recoveries. These discussions are ongoing. And given their sensitive nature, we will not be providing additional details at this time.

Turning to cash flow. We expect adjusted free cash flow of approximately $170 million to $210 million, representing a conversion rate of approximately 40% at the midpoint. We currently anticipate working capital will be a slight use of cash as we increase inventory levels. Capital expenditures are expected to be approximately $150 million or about 4% of sales. This includes the build-out of a second manufacturing facility in India as well as support of upcoming program launches and continued investments in vertical integration.

Overall, our '26 guidance reflects a business executing with discipline, maintaining margin expansion on a normalized basis, generating strong cash flow and continuing to invest in the growth initiatives that support the next phase of our top line growth. As usual, we're not providing formal quarterly guidance, but I did want to share some directional insight before moving on. We expect first quarter sales to be the lowest of the year, reflecting the industry production profile for 2026, continued depressed BMS volumes and launches that are weighted towards the back half of the year. From a profitability standpoint, Q1 EBITDA will be negatively impacted by lower volumes as well as higher memory costs, recognizing that not all customer recoveries agreements will be finalized by the end of the first quarter.

Turning to Page 14. In 2026, we expect to have more than $0.5 billion of cash available to deploy. This amount represents a combination of cash on hand and cash that we expect to generate during the year. We will continue to be guided by the same disciplined capital allocation framework, prioritizing investment in the business while returning excess capital to shareholders.

Starting with investments in the business, this remains our top priority. As discussed earlier, we expect to allocate approximately $150 million to capital expenditures in 2026, positioning the business for future growth and supporting vertical integration initiatives. In addition to CapEx, we continue to see meaningful opportunities for M&A. Our focus remains on expanding capabilities through engineering services, while also selectively evaluating opportunities to enhance our technology portfolio. While the ultimate level of investment will depend on how the transactions progress during the year, M&A deployment could be up to 2x our annual CapEx investment levels. As always, we will remain disciplined and prioritize strategic fit and financial returns.

Even after funding these growth investments, we expect to maintain significant capacity to return capital to shareholders. First, we are increasing our quarterly dividend to $0.375 per share, representing an increase of 36%. This reflects our confidence in the durability of our cash flow and equates to approximately $40 million on an annual basis. In addition, we intend to remain active in share repurchases. At a minimum, we will offset dilution with the intent to be more opportunistic, depending on market conditions and the pace of M&A activity.

At the end of 2025, we had $75 million remaining under our existing authorization, and we expect to revisit this level as the year progresses. To round out the cash flow picture, we have a modest amortization requirement on our debt facility, representing $18 million of cash outflow in 2026. Taken together, our capital allocation plan for 2026 reflects a balanced and flexible approach, continuing to invest in growth, returning capital to shareholders and maintaining balance sheet strength as the business continues to transition and scale.

Turning to Page 15. Before we conclude, I want to highlight our upcoming Investor Day, which will be held on June 25 in New York City. We look forward to sharing more detail on our long-term outlook, including how the strategic initiatives we discussed today translate into growth and value creation over the coming years. We hope many of you will be able to join us.

Thank you for your time today. I would like now to open the call for your questions.

[Operator Instructions] Your first question is from the line of Luke Junk with Baird.

Maybe just to start with -- Sachin, hoping you could just dig into the DRAM exposure a little bit more relative to the product portfolio? And maybe just to scale that 2% impact to guidance, both across the portfolio and then kind of what that represents from a cost standpoint? And then maybe qualitatively, if you could also just speak to the supplier side of this and your ability to get in front of this? And I'm just curious, from a timing standpoint, were you working on this relatively earlier versus when this became more known in financial markets?

Sure, sure. So in terms of the use of memory, Luke, as you can imagine, we use memory chips in virtually all of our products. And we use different types of memories. They have DRAM for sure, but different types of DRAMs, but also flash memory.

Now the memory supply and that landscape looks different than the logic chips that we have had issues with in the past. As you probably know, almost 90-plus percent of the market is made up of essentially 3 suppliers between Samsung, Hynix and Micron. And we work with all of them, and we have a long-standing relationship with these suppliers and a very strategic one. We started to work with them towards the end of last year.

As you might know, the memory industry typically plans for about a 10% growth in demand each year. But towards the second half, I would say, more in the third quarter of last year, the demand signals from the rest of the industry, not automotive, but consumer electronics, our data centers, et cetera, indicated that the demand in 2026 was going to be closer to about 50% and not the traditional 10% or so thereabouts that the industry was accustomed to. So the main fallout of all of that is that the supplies will be tight for everybody in all the industries, right? And automotive will also have the same situation.

So what we are doing in response to that, and we started on this journey last year itself, and I believe earlier than many in the industry. We started to work with our suppliers to secure the capacity for the full year. So that's something that we have already made a lot of progress with. And we should be, I would say, in a better position than most to be able to get those capacity reservations secured.

Now even with that, where we see gaps, we are developing alternate pin-to-pin compatible drop-in replacements, similar to what we did with the logic chip shortages. And also evaluating new suppliers. There are some new suppliers, not many, but some that are emerging, mostly in China. And we started engaging with them late last year and have already secured some supply from these emerging suppliers. So net-net, if I look at our full year demand for this year, we should largely be able to cover customer demand. There may be some timing impacts that we have to manage. Even that, I think as we work with our suppliers, we should be able to largely mitigate.

Now on the cost side, as Jerome mentioned, we have an increase in cost in this memory chips on account of our historical relationship with the suppliers and the early engagement that we have. I believe we will be in a good position to have a good cost despite the increase, which we will expect to recover from our customers similar to the last semiconductor crisis.

So now to answer your other question about specifically how much is it? We would rather not provide any breakdown of our bill of materials, mainly for competitive reasons. The increase, as Jerome mentioned, represents about 2% of our sales. That's probably as much as we can share for now.

Got it. I really appreciate the color there, Sachin. For my follow-up, I just want to dig into the kind of the weighting of revenue this year. So I very much appreciate the comment about first quarter sales and the impacts there. Just want to think about weighting in the first half versus the second half this year as well, given the impacts from Ford and BMS which seem pretty immediate stepping into the year versus your launch cadence picking up into the back half. And then maybe if you could just walk at a high level into 2027 as well as some of these transient headwinds seems like they should drop out and that launch cadence maybe should more fully read through.

Luke, I'll start, and then I'll hand over to Sachin for '27. So for '26, we have -- as we had anticipated, we have a second half, which is going to be slightly better than the first half of the year. And that's really due to the launches that we have that are more backloaded towards the end of the year. And we've got that in China. We've got that with our key strategic initiatives, including Toyota that will really ramp up in Q3 and in some cases, for Toyota in Q4. So overall, we've got about a 3% improvement in the second half versus the first half when IHS was, I think, close to 2%. So we're doing slightly better than the market in the second half versus the first half.

Related to Q1, we do think that Q1 will be the lowest quarter of the year on the back of 2 things. The first one is the fact that IHS as well is guiding towards a decline year-over-year of about 3% to 4%. So we'll have this reflected, obviously, in our sales. And we do see as well at this point, pretty low level of BMS sales as we are going into the first quarter. So that will obviously impact our Q1 sales, which will be, as I said, the lowest of the year.

Thanks, Jerome. Before I get into the 2027 topic, I would like to just briefly touch upon our performance in 2025 and our outlook for '26 because I think the dynamics there have a significant bearing on how we think about 2027.

So if you think about 2025, we had 2 major headwinds, one was China and the other was BMS. Combined, represented about 7 percentage points of headwinds. And we were able to offset that through new product launches, mainly in North America and Europe in '25. And if you were to exclude those headwinds and the one-timers, that represents about 7 percentage points of growth over market.

Now when you look at 2026, especially in the walk that we have provided for our sales, we have BMS again as a headwind. Perhaps we might be a little more conservative than, for sure, S&P Poor's outlook. But nonetheless, we have BMS and we have the discontinued vehicles at Ford that we mentioned earlier, but China is no longer a headwind. Now offsetting these, there are also new product launches, mainly in Europe and in Asia, particularly in China. However, most of the high-value launches are in the second half of this year, as we have discussed. And that's what is muting our growth over market in 2026 to about 5 percentage points.

Now as we go into 2027, although we won't provide specific financial targets on this call here today, by the way, we will do that in much fulsome treatment in our Investor Day in June. What I can say is that we expect a top line sales growth since the headwinds, both China and BMS, would largely be behind us as well as this discontinued vehicles topic. And the growth that we will have from the new product launches, especially high-performance compute systems in China as well as displays and other products, and the progress we are making in the adjacent markets and our strategic initiatives, should bring us back to our mid- to high single-digit growth over market in 2027 and drive top line growth. So I hope that gives a much sort of broader context on our current performance as well as what we're expecting in 2027.

Your next question is from the line of Shreyas Patil with Wolfe Capital.

Maybe just a quick clarification on your commentary around memory. So is your memory exposure equivalent to 2% of revenues? Or are you expecting an increase in memory cost that is equal to 2% of sales?

Yes. What we have mentioned, that 2% is specifically regarding the increase in the cost that we anticipate this year.

Okay. And then maybe looking at the bridge, the revenue bridge that you provided earlier, you're pointing to your traditional customers driving about 2 points of top line growth, that's about $75 million. Just curious what you're seeing in terms of launch activity broadly this year amongst those OEMs. From some of the other suppliers that have reported, it does seem like '26 is a somewhat lighter year for launch activity, particularly in North America and Europe. Is that similar to what you're seeing? And would that be a contributing positive if you're thinking about 2027?

Yes. So Shreyas, I think we are seeing a little bit of a different perspective than some of our other peers perhaps. We have a significant amount of launch activity in Europe related to displays. As you might remember, we have won a high level of displays business. A lot of it has come from Europe in the past couple of years, and that's turning into revenue, especially in the second half of this year.

We are also seeing, I would say, roughly about 20 launches in China. And so what has happened in China is after sort of a reset with many of our international OEMs, not just the domestic OEMs, they have been launching new vehicles to compete in that highly competitive market. And this seems to be the year, again, second half, this seems to be the year that they're introducing new vehicles. And I think the timing also might actually work out very well.

If you have seen even the early numbers from January in China, the market seems to be tilting in favor of more higher-priced vehicles with all of the changes with respect to policies and pricing, et cetera, that have happened in that market. And we think that might actually help our global customers, but also our domestic customers like Geely, they have some high-performance compute launches that we discussed earlier with domestic OEMs, and they go into the more premium flagship vehicle models. So we do see a very healthy launch activity this year. And we -- that really signals again this SDV trend now complemented by this AI trend starting to really drive some momentum.

Okay. Great. And maybe just one last one on the M&A pipeline, you mentioned, I think it's about $300 million or so. Maybe you could just unpack how -- what's kind of in that pipeline or the size of the companies that you're looking at? And maybe the -- how should we think about the time line for when you could execute on those deals?

Yes. Let me start, and I'll hand over to Sachin as well. So we've not really given a number. The chart may indicate that it could be as much as twice the amount of CapEx that we have for '26, but we'll see how it goes. We are quite ambitious in 2026, given the pipeline that we have. And the criteria that we've got in mind for M&A remain the same as the ones that we've talked about in the past.

The first one is that we want to have M&A that are bolt-on by design. And that -- by that we mean we want to look at fairly small acquisitions so that we can tuck them in our existing business pretty quickly. The second criteria is that we want to have technology/capability accretive to what we're doing today, augmenting essentially the platform that we have from a software standpoint. And that includes as well engineering services. And as you know, we've already done 2 acquisitions, and we are considering as well further. And then the third criteria that we've always considered as well is the fact that we want to have, as much as possible, these businesses being margin accretive from day 1. So that we don't get a return that is going to be in 5 or even 10 years. So kind of these 3 criteria that we've selected in the past and that we are still continuing to apply as we look at this pipeline of acquisition for 2026.

And maybe just to add to what Jerome has said, without necessarily getting into any specifics about the sizes of the companies, et cetera, that we are looking at. One thing to keep in mind, Shreyas, is if you look at our journey of integrating more and more of the ECUs, we have gone from integrating the cluster and the IBI into CDC. Now the HPC integrates even more ECUs, including body control gateways plus additional rear-seat entertainment, passenger side entertainment as well. And now with the regulations in ADAS, in particular in Europe, which is also expected to follow in China, we see that ADAS is going to be more of a table stakes almost features and something that we can look forward to in integration in one of our future products.

So we continue to look for opportunities where we can bring in those technology elements in-house and allow us to take cost out and integrate more of the content in our systems. So that should give you some sense of the kind of companies we're looking at, none of which are the big transactions. As Jerome mentioned, we prefer to focus on technology capabilities so that we can then integrate it in a better manner within our systems.

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

Great. Just a first question, just going back to the Slide 7 and the revenue bridge. On the 2% headwind from discontinued vehicles, I'm curious whether you have content in some of the competing vehicles to the vehicles that are being discontinued? And whether there's an assumption for some pickup of revenue there? Or are you kind of more assuming that, that headwind does not get recovered or recoup by other competing vehicles that you might have content on?

Yes. I think -- yes, the answer is yes. We have content in a sort of a very broad cross-section of vehicles at that OEM. But at least as yet, we are not necessarily seeing the benefit. Now that doesn't mean it may not happen, it could. Still early in the year, and we don't have full visibility into the OEM's plans. Given the fairly significant volume of vehicles that those represented, we do expect that they would try to fill that hole with some other vehicles, which, if that were to happen, then we would, I guess, benefit from it. Since we have -- we are not seeing that as yet, we have not included that in our outlook. And if it does happen, then it might provide some tailwind.

And I would add, Sachin, that we've used broadly IHS, in fact, for this discontinued vehicle, but as well just for overall forward volume going into '26.

Got it. It's very helpful. And just as a second question. Strong bookings in 2025, that's great to see. Sachin, I was hoping if you had a target to share for bookings in 2026. And then if you kind of look at the last few years' average booking, it does seem to support maybe a mid- to high single-digit revenue growth algorithm for the company in the medium term? I think I heard you say, Sachin, to an earlier question, that you may even get to that level as early as next year. Just hoping you can kind of talk a little bit about the implications of bookings of the company's growth in the medium term.

Yes. Very good question. And if you think about the 2025 performance in particular, the 2 things I would like to highlight. One, our displays, which we did really well. And across the board, if you look at our displacements, they were spread over Europe, North America and also Asia. And those programs typically have a shorter lead time in terms of development and launch than the corporate electronics programs because fundamentally, with more software, it takes longer to launch those systems. So that's one factor. The other thing is that about 15% of our wins were on 2-wheelers and commercial vehicles. And 2-wheelers, in particular, also have a fairly short time to market. So that's really the reason why we feel that the inflection of these wins turning into revenue and contributing to our growth over market will be fairly earlier than traditional or historical sort of averages in terms of time.

And in terms of just the outlook for this year, in particular for new business wins, the pipeline of new opportunities is pretty robust. I'm very happy to see that given this environment where a lot of the customers that we have, especially outside of China, are still in some sort of form or the other in terms of trying to get their portfolio adjusted, we still see a very robust pipeline, again, led by displays, but also more for few domain controllers and a emerging opportunity, which is very exciting, is this AI dedicated ECUs for AI to bring AI into cockpits without necessarily rearchitecting the whole vehicle. This is starting in China, and we are very excited and optimistic about it, and has the potential to come across into other regions fairly quickly.

Your next question is from the line of Tom Narayan with RBC Capital Markets.

This is [indiscernible] on for Tom. On the last call, I think you guys mentioned a roughly 20% volume reduction for BMS in 2026. And it looks like that number has since jumped up to 50%. So it sounds like you guys are still anticipating BMS to show some recovery in 2027. But is there anything you can give us on your longer-term planning around BMS? And where you think it could get to maybe as a percentage of revenue?

Yes, absolutely. So let me give you this -- the way we think about BMS. So especially in the U.S., first of all, I will start by saying that it's very difficult to forecast what EVs will do this year, in particular, first full year without the incentives, but we can look at Q4 as one data point, not necessarily sufficient, but at least that's what we have in front of us.

So even with the pull ahead that occurred due to the expiry of the incentive, we saw a market penetration of about just over 5% of EVs in the U.S. in Q4. Now as we think about 2026, we do believe it will start very soft, in the sense that Q1 is probably going to be the low point of EV sales in the U.S. for continuing from the effects of the pull ahead in last year. And then Q2 onwards, slowly recover.

Now the question is to what level? Now what we have assumed in our outlook is a very conservative number. We have assumed a roughly 3% penetration of EVs with our customers. I mentioned Q4 was over 5%; for the full year, it was over 7%. So it feels like our 3% is fairly conservative. S&P has a 30% lower 2026 than 2025. And if you look at our numbers, it's closer to 50% drop year-over-year. So there could be some upside if we are found to be too conservative here, but given everything, we felt it would be prudent to be a bit more on the conservative side.

Now if you think about 2027 and going forward, with the improvements that we see in the cost of EVs and continuing our focus on those by or customers, in particular, GM, we believe that the market should recover modestly from the lows of 2026. We'll wait for a little longer to understand exactly what that would look like, but we believe it will be a very modest improvement and a steady growth from there.

Okay. Got you. I guess on a slightly higher level, it looks like you guys have a pretty strong growth over market in Europe in 2025. I was wondering if you could give us a sense of whether you see any opportunities to capture additional business wins, especially from the Chinese domestic exporting to Europe?

Yes. And we do see a lot of positives from the Chinese OEMs activity in Europe, not just with them directly, but also with European OEMs who are responding to the competitive threat by essentially uplifting the capabilities in the pockets. Now we also have been able to win business in Europe, the Chinese OEMs, and we expect to be able to do more of that as we go forward.

So to us, Europe represents an interesting data point where the growth of the Chinese OEMs sales actually helps the business in terms of driving more content in the cockpit. So we expect to see that dynamic not just limited to Europe, but in other regions, where you see higher activity of the China OEMs. And to your point, we do anticipate Europe to also contribute more in terms of new business opportunities this year as well.

Your next question is from Joe Spak with UBS.

I guess I wanted to go back to better understand some of the memory commentary. And I know you're going to be -- you're talking about being limited here in what you're going to say. But in the overall bridge, you're talking about recoveries, pricing FX being a 2% year-over-year headwind. Now you have the old recoveries, right, that is probably lower year-over-year as you sort of indicated from the original semiconductor challenges. Price is sort of minus 2. FX looks like it's probably a positive. So I guess, to get to that overall minus 2, and if I take in the context your -- the increase is about 2% of sales, it looks like you're assuming very little in terms of actual recoveries on memory, is that about right? And maybe just a comment on sourcing here? Because it sounds like you're doing a lot of work. I know a lot of the automakers are doing work as well, and there's some directed buys. So who's really responsible for what?

Yes. Let me take the first question, Joe. So the buckets that you described are the right ones. We've got -- in this 2% annual pricing, we've got what I would call the legacy or the reduction in recoveries related to the prior chip shortage that are coming down. And then we've got, on the positive side, recoveries for the new memory tensions that are going on as well as some modest FX.

Maybe just to be very clear on the memory, we are -- we've baked in our assumptions that we will be recovering the majority of these costs. And when I said the majority is that we are fully intending to recover everything, but there will be some level of timing that we've accounted for between the cost incurred and the customer recoveries and we'll, as I mentioned, we'll see that in Q1, and it's probably going to be as well a sharing effect all the way to 'till the end of the year on that topic. But these are the full buckets, and we are absolutely intending to recover the memory cost increases through our customers.

And to your other question, Joe, the OEMs activities are more related to understanding the situation and engaging with the suppliers. I do not believe that they have direct sourcing, at least not with us. So in our case, we do [ virtually ] all of the sourcing of memories directly ourselves.

Okay. But I guess if the guidance also sort of assumes that you are recovering it all just with some timing mismatches, then I mean it's also rough numbers. Is that fair to sort of say that's like a 20 to 30 basis point hit to your margins this year?

We've not given any specifics. It's embedded in this 2%. So I would take that 2% as kind of the essential piece of the work. As I said -- in fact, if you decompose maybe these buckets, if you think about it, annual pricing as well as, let's say, legacy semiconductor recoveries will be fully offset by the efficiencies that we are generating in the business, will be offsetting the memory cost increases to the majority. We'll have some level of leakage, but nothing major. And then you have in that bucket as well, as I said, the FX, which is a pretty similar number.

Overall, when we look at our business, and that's pretty valid, in fact, for the last 2 years, and it will be still valid as well for '26, the dilution of recoveries has an impact of about 0.5 percentage point on recoveries, so -- on EBITDA, sorry. So that's kind of the dilution that you see over the years coming from that bucket.

Okay. Maybe just one quick one, just to follow up on the capital deployment and the M&A. And I know those are [ gradiated ] bars, and you said the M&A could be twice the CapEx or $300 million. But if I look at M&A to buyback, that's like a 2:1 ratio. And if you add up CapEx, the dividend, the debt, like it looks like there's about $300 million total left there. So I guess I'm just wondering like if -- and I know there's ranges here, but if the M&A outlay goes up to that $300 million, does that mean there's little left for buyback?

Yes, the slide shows, in fact, that buyback would be in the $100-plus million. Our priority is going to be really focusing on obviously investing in the business with the CapEx as well as focusing on these acquisitions. Obviously, the excess is going to go to dividend and as well as share buybacks, but we do want to remain opportunistic in terms of the buyback. So that's really the key point as well. And we'll update you as we go throughout the year.

This concludes our earnings call for the fourth quarter and full year of 2025. Thank you for participating in today's call and your ongoing interest in Visteon. Thank you.

This concludes Visteon's Fourth Quarter 2025 results Conference Call. You may now disconnect.

Kick it off. Good morning. Thanks for joining us. My name is Luke Junk. I cover Vehicle Tech & Mobility for Baird. My pleasure to introduce you today to Visteon, as you probably know, is a technology leader in cockpit electronics for the automotive industry. We're happy to have Jerome Rouquet with us, CFO of the company for a discussion. Before we jump into Q&A, Jerome, you want to start with some comments.

Thanks for having me, Luke. Thanks for joining today. I'll give a quick introduction on Visteon for those who do not know the story. So, as most of you know, the automotive industry is going through a lot of transformation these days. It's impacting the powertrain, which is fragmenting as well as the cockpit. And the cockpit is becoming more digital, more connected and a key way to differentiate OEMs between themselves. So that's where Visteon is playing. We're playing in the cockpit today and the cockpit of the future.

So if I look at what we are doing, we are a cockpit electronic supplier and we are essentially designing, manufacturing, instrument cluster -- digital instrument clusters, infotainment systems, CDC, which are cockpit domain controllers.

We serve most of the OEMs globally. We employ 10,000 people, including 4,000 engineers, which show the dedication that we have to technology. Despite the challenges that we've seen in the auto industry recently, mostly related to EV volatility, China, changes in mix as well as some of the tariffs that have impacted some of us since the beginning of the year.

We've been pretty resilient as a company. We have been able to increase margins year-over-year and had as well very strong cash flow generation throughout the year. We also have very strong bookings, which will be a great way going forward to resume growth in some areas. Mostly with new customers like Toyota, but as well in China, where we've won recently -- and I'll talk more about that high compute CDC system that is enabling AI. And we are also diversifying our sales into 2-wheelers as well as CV. So a lot of things going on at Visteon from a growth potential standpoint.

From a balance sheet standpoint, we are -- we've got a strong balance sheet, and we have had a disciplined balance capital allocation investing in the business, mostly in technology as well as pursuing some bolt-on acquisitions and returning capital to shareholders.

So that's a quick summary of who we are and what we're doing.

Okay. That's great. Why don't we start with the growth drivers. I want to talk about some of the product categories. Display certainly has been one of the great stories about 2025. Can you just talk about the line of sight to Display growth in 2026 and beyond? Again, the fastest product category this year. Should we expect that to sustain into the future?

Yes, absolutely. Display has been a fantastic story. And it comes down to the decision that we've made a few years ago to invest and double down on displays as some of our peers were, in fact, exiting that space. If you look at display, they are getting -- they are a great way to differentiate the cockpit for OEs and they've grown as a result of that for us, 25% year-over-year. Today, it's 13% product line out of our total sales. We have won a lot of business recently, close to $5 billion in the last 2 years and which represents close to 45% of our total business wins. We have 21 launches that have occurred between '24 and '25. And as a result of that, we'll see pretty nice growth in the years to come.

We have high-profile launches like the OD panoramic display, the Renault Clio multi-display or the Ford Puma center display. So a great product line for us. Vertically integrating as well keeps us competitive in that space. And that's, again, another reason for us being successful in displays.

Yes. And it seems like CDC, that domain controller is going to be a bigger opportunity for the company into the future. Can we talk about some of the key launches and maybe just how meaningful the growth driver it could be into the next couple of years?

Yes. Absolutely. It's -- after display, I would say CDC is our next product line, which is poised to grow quite substantially in the next coming years. And if you step back, we do have today a fairly diversified portfolio from a CDC standpoint. CDC represent about 11% of our total sales. We have customers like Mercedes in Europe, Geely in China, Mahindra in India as well as 2-wheeler and CV customers like Harley-Davidson and Triton. So a very balanced portfolio. As we look into 2026 and forward, we have very high profile launches coming up with 2 HPC CDC, high-performance compute CDC that we won recently in China. We are launching them in the second half of 2026 with Geely and with Chery.

And we won this -- Geely was won last year. Chery was won this quarter or this past quarter. And we are launching in the second half of next year. So that will give us a fantastic growth trajectory, especially in China. And we'll see some further ramp-up in '27 and '28.

We also have 3 other launches that are coming up in '27, 2 European customers as well as 1 CV customer in '27, and therefore, the growth will accelerate in '28, '29.

So display, the growth will start in '26 and then accelerate '27, '28. For CDC, it will be more end of '26 accelerating in '27, '28.

I think people are pretty familiar with kind of what has been the story in terms of cluster and with the transition to the digital cluster, there was a content lift there. Should we think that there's a similar opportunity with CDC. You mentioned that some of these high compute awards, especially are fairly rich in content?

They are. In fact, the 2 systems that we won recently, which we call high performance compute CDC systems are AI-enabled. So with this kind of system, you have the latest processing chips, you also have a pretty complex system. So in terms of ASP, we're talking about 3 to 5x the price of a normal CDC, so you're well over $1,000 in content in the car. So that is definitely an area that will allow us to improve and increase the content as we go forward. And I would say generally AI as well outside of China will ultimately be a content improvement absolutely.

We -- so you mentioned the relationship with Toyota. Can we just double-click on that. Certainly, display is an important part of that story. I think you've given us some figures on the path to the higher mix in a few years. Maybe if you could just double-click on the launch cadence there specifically?

Yes. So we started our relationship with Toyota early -- in early 2020. And it's been -- this relationship has been expanding since then. We've launched 2 programs this year, and we have another 5 programs that will be launching in '26 and then another 7 in '27. So you will see an acceleration of that growth with Toyota. We are planning to have Toyota representing a top 3 customer going forward in '28, probably representing something like close to 10% of our total sales. And if you look at the opportunity that we still have with Toyota, the way to think about it is to look at Ford. Ford for us is a major customer, 25% of our sales.

And yet Ford represents only 1/3 of the Toyota volumes. So there is definitely tremendous opportunity to grow within Toyota. We have today or let's say, the businesses that we won with Toyota are mostly indexed on clusters. And the businesses that we won with Lexus are mostly indexed on display. So you have still tremendous opportunities to have further product line expansion within each brand. We also do not have some of the high-volume programs with Toyota like the RAV4, which would be a fantastic program to get. So Toyota has been a good story. It's growing and will be growing quite substantially throughout '28, and we do think there is further potential to expand with this customer.

We'll stay tuned there. I wonder if we can maybe talk about Asia more broadly as a region as well. I mean it seems like there ought to be supply chain benefits building up that scale position with Toyota. How can you leverage that with other folks in Asia? And maybe if we could look at India as a specific opportunity?

Absolutely. Asia generally has been a great opportunity for us, and it will be a great opportunity for us to grow going forward. Beyond Toyota, we are focusing on customers like Maruti Suzuki, which represents about 40%, 45% of the India market. We are focusing on Hyundai, Kia as well as on Honda. So these 4 customers represent today about 25% of the total car production in the world, and our sales with them are today less than 5%. So tremendous amount of growth in Asia as a result of this focus. 2-wheeler as well, and that's mostly India, but as well Japan will be a good growth opportunity for us as we are tapping more into that market, which is becoming similar to the car, very much digitalized, connected. And I'm not sure about AI yet on the 2-wheelers, but that's definitely a market that is growing for us. So Asia, with these customers, these segments will grow going forward. And it's going to be largely us resuming growth in China as well as continuing growing in India.

Speaking of China, I mean, certainly, that's been one of the challenges for the industry broadly, the customer mix change in China and for Visteon as well. How confident are you that China is at a bottom right now? How do you think about sort of the risks and opportunities into next year? And do you feel differently today about China than you did even, say, 6 or 12 months ago?

Yes. It's -- we think we have turned the corner with China, and we've had headwinds in the last 3 years, similar to what other peers have seen largely because of the mix change. For us, China today represents about 8% of our sales. We have between now and the end of Q4 as well as the end of '26, close to 20 launches that will happen in China. The 2 highest profile ones are the ones I talked about, which are Geely and Chery with HPC CDC systems that are enabling AI in the car. And they'll be launching in the second half of 2026, growing into '27 and '28. Beyond that, we also have some launches with international OEs, mostly the Germans and the Japanese. And we have a few product launches like CDCs, displays and clusters that will help us as well in '26 and '27 to grow in China.

What is interesting as well is that a lot of our growth in China is going to be on the D and DE segment, which is a segment where -- that is expected to grow per industry expectations into next year and like the lower-level segments where we are less indexed. So we see a good dynamic as well from that standpoint. Overall, China will grow. There will be some seasonality. As you know, Q1 tends to be a little depressed versus Q4 in general. But overall, we are confident that -- we've done the corner in China. So a very different picture.

What about what you can control internally in terms of attacking the China market, certainly moving China speed is something that I think the investment community has gotten a lot more familiar with. As I think about Visteon, it's really 2-pronged proposition. It's the hardware side and it's the software side. Can you kind of speak to where we are right now on most of them?

Speed is a critical factor as you win. But -- not only this, you need to have the right technology in China and the right cost structure. So the fact that we've won these 2 HPC CDC system in the last few quarters is for me a testament of our capabilities. And if you think about it, these capabilities on CDC started with our platform approach a few years ago, and we've been able to leverage that. We're able to compete in China. We are recognized as a very serious competitor. And it's largely due to that platform approach that allows us to be very well -- into very well positioned from a technology standpoint as well as having the right cost structure as well as the right quality. So that's the reason -- these are the reasons why we were able to win these 2 systems.

If you look as well at Visteon and our CDC story, generally, we were -- if you remember, we were the first ones to offer CDC back in 2018 with Mercedes, we'll be the first one now to launch 2 CDC systems that are HPC with AI-enabled. So again, we are at the forefront of innovation when it relates to CDC's.

What about working with local OEMs outside of China? It's something that's been sort of discretionary in the industry the last couple of years. It feels like it's maybe becoming more real. What are your thoughts?

It is. We had our first win in Q1 with Chery. In fact, Chery was not even a customer in China, and we were able to offer them a competitive offer in terms of technology, price and quality in Europe. So we see us being very well positioned to offer the right structure for Chinese OEMs to go into Europe, go into as well South and Central America. We offer a very regional footprint. Most of our plants have got pretty high technology levels with vertical integration as well. So we are able to offer them, if I can say, the full package, still at the Chinese speed, which is important, given that the launch is -- cadence are pretty short in most of the cases.

Let's switch to your investment posture. I guess you mentioned some of the investments in displays that you've made. But how should we think about where you're looking to incrementally press the advantage in cockpit electronics over the next couple of years?

Yes, display, as we've discussed, has been a great story, and we see a path forward to continue to grow in this area. CDC has been really the area we've been focused on in the last few quarters, in the last few years. I think the major change in the CDC space is going to be the fact that AI will come in. And we see that already as a reality in China, where we have, again, these 2 launches that are coming up next year. Visteon has invested heavily in the last few quarters on AI technology. We've presented at CES, our cognitoAI system, which essentially facilitates the interaction that the car driver or the passengers will have in the car as opposed to have a reactive car, you'll have an interactive car, an interactive cockpit going forward. So that's where we see a lot of development going forward. It's happening in China next year with these 2 first systems. And we've been in contact with OEMs in Europe and the Americas, and it's going slower, but we are hopeful that there will be some movement at some time in the future.

What about competition for RFQs. As you mentioned, the awards have been really strong this year. I mean, there's been certainly some turbulence at some of your competitors. Do you think that's playing a role just in terms of relative investment capabilities across the industry?

We had a very strong year-to-date September. We are on track to have more than $7 billion in new business wins. It's been mostly thanks to displays. I must say, 50% of our wins have been with displays. And I think what's happening with some of the OEs, they are taking time to rethink their architecture. But at the same time, don't have the luxury to wait on the cockpit side. So that gives us a tremendous advantage, especially on display, where we can differentiate their offering with specific size, specific shapes. And again, the fact that we have invested heavily on display has played to our advantage.

So again, differentiating is the key for OEs. And as much as some content has been a little bit deemphasized in some of the areas of the car, we think that the cockpit remains very content-driven and we'll probably see further increases as we go forward.

So if we pull that together, I mean, award strength, like you said, not only has it been strong this year, but that trend has been growing if we look at cockpit electronics specifically over the last 5 years or so. We've talked through some of these launch cadences through 2028. If we put a marker out kind of 3 to 5 years from now, either in dollar terms or sort of guardrails for outgrowth. What would you suggest folks should be thinking about as a reasonable target?

So we'll give more detail, obviously, at our Q4 earnings call, we'll give guidance going forward. But what I can say at this point is that we are expecting to have growth over market. That's one of the key indicators that we are following in the mid-single digits as we go forward with potential acceleration as we go towards the end decade. So as we've talked about during our Q3 earnings call, there's a lot of things to like about '27, but I think there's even more about '27 and '28. So we'll see some acceleration as we go forward. Thanks to these wins, which are, I would say, if I summarize, growing again in China, growing with underrepresented customers today, for example Maruti Suzuki, Honda, Hyundai, Kia as well as expanding in areas like CV and 2-wheelers. We are also mostly through acquisition, but we are planning to organically grow going forward on the engineering service side.

Let's shift to the macro supply chain, certainly an area of impact in 3Q reporting, whether it be JLR, [indiscernible] Ford, as we know a major customer Nexperia as well. Maybe if you could just update us quickly on each of those things.

So we talked about a $30 million to $40 million impact going into the second half related for us to JLR and the Ford supply issue -- aluminum supply issue. JLR is about $25 million of a headwind for us, 50% in Q3, 50% in Q4. We saw obviously no production in September and JLR has resumed production in mid-October. It looks like it's on track. So not much to add on this side. On the Ford aluminum issue, we highlighted during our earnings call that Ford would impact us to the tune of $5 million to $15 million, and that was predicated at the time on about 20,000 to 50,000 cars being impacted at the Ford level. Since then, Ford has come up with official numbers, and they talked about 90,000 to 100,000 in terms of production impact. And therefore, our impact is going to be probably another $10 million higher versus what we had talked about during our earnings call.

In terms of Nexperia, I think everybody is following very closely the news. It looks reasonably positive. There's been some favorable development on that side. So we are hopeful that things will get resolved. We still see this as a risk as supply chain has been challenged in the last few weeks. And therefore, there still may be some disruptions. We've heard a few OEs like Honda, for example, being severely impacted. So we need to stay tuned on that topic.

We'll stay tuned there. As you think -- obviously, we'll wait for the 4Q report in terms of specific guidance, but 2025 year, just from a industry backdrop, I think the trend has been less bad, generally speaking. As you look into next year, what do you see as sort of the glass half full, glass half empty elements? And do you care that much about vehicle mix into next year?

We do. And in fact, we are still waiting to see how S&P will revise their numbers given some of the disruptions that we are seeing in Q4. So it's a little too early probably to give some numbers for the global production as we go into next year. Today, S&P is planning a 3% to 4% vehicle -- negative vehicle production for Visteon. But as I said, we'll have to see how that evolves. We are more focused, I would say, in the near term on growth of the market, and that's where we'll be focusing our efforts.

I want to talk about the margin story. I mean, certainly, it's been one of the really important components of the Visteon story, not just this year, but over the past several years. One of the pieces there has been operating costs and product costs. It seems like there's an evolution where there's maybe some product cost opportunities in the next few years. Just how should we size that opportunity? And one of the things that you're really focused on incrementally?

Yes. So we've -- my view is that there are no silver bullets. And -- but it's true that in the early days, after '19, we started to focus very much so on our fixed cost structure. So by that, I mean SG&A engineering costs as well as manufacturing cost. And that has given fantastic results. We were able to grow our margins from '19 to 2025, from 7.9% to almost 13%, 12.5% if you normalize with one-timer. So that cost structure rationalization has been very good -- a very good thing for us. We've been in the last few years, maybe in the last 2 years, increasing our focus on product costing. And that is what has sparkled our initiatives on vertical integration. As a way to bring more value in-house as well as control the technology that we are playing in.

So there's more to come on this side. We are still in the early stages of vertical integration. We are talking about more bonding on the display side. We are looking at backlight unit integration as well. We are looking at more magnesium injection, which are the frames that are being used to be able to hold the displays, which are getting larger and larger. So therefore, having magnesium is critical. So a lot of initiatives are going on in this field as well as purchasing initiatives. So we still think there are margin points to gain as we go forward.

You mentioned the margin this year, excluding those onetime customary recoveries. They've been, I guess, I term them recurring, nonrecurring recoveries in the sense that we've seen them, I think, every quarter this year. Maybe not so much on the recoveries themselves, but I'd be curious if you could speak to sort of the organizational structure that's giving rise to this because I think it maybe speaks to the finance organization that you've built.

Yes. So I think it's been a cross-team effort, I would say, on the front line, the sales team is definitely the one that has done a fantastic job on this side. We have been able to get new business wins as well as recover from customers. So it's a fine balance. Obviously, that's got to be managed, but it's one of the key strengths, I think, of Visteon, we are very disciplined commercially as well as operationally and that pays off.

What about AI? Are you using AI internally at all? Or could that be a future opportunity?

Absolutely, yes. So it's obviously top of mind in our products, but as an organization as well, AI is everywhere now as we go forward. One very important area we are focusing on is engineering. Cost structure was one key driver for improving our engineering structure, cost structure. We've spent a lot of time on platform and now are moving more into productivity with automation and AI, making sure that codes are supported by AI. It helps defect Triage, for example, and can help us being more efficient. So still early days on that topic, but we are making good progress, and we think that will be a fantastic opportunity as well.

Yes. Lastly, capital allocation, I think you mentioned this. I just want to put a finer point on it. You've done a few of these, I guess you call them engineering services, acquisitions. Like should we expect any more of those? Or is now the focus is going to shift to more of an organic focus?

Right. We are -- we've done 2 acquisitions, 1 last year, 1 this year, and they've been quite successful. They are engineering services companies, and we are planning to grow them organically from there. They have, in most cases, 2 or 3 customers. And if we can expand their customer base with our relationships, we should be able to grow. At the same time, we're continuing to look for further acquisitions, not only in the engineering service field, but as well in any other area that could be accretive from a technology standpoint in the cockpit.

Last question, just share repurchase. I think you've got a $300 million program that you're executing right now?

We have -- we've hinted in Q3 that we would be buying between 20 million and 30 million worth of shares in Q4, and we're on track for this quarter. So we'll keep on this side.

Okay. Well, we're out of time, unfortunately. So we'll leave it there. Jerome, really appreciate the presentation.

Thank you. Thank you very much, Luke. Thank you.

Good morning. I'm Kris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for the third 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 Lawande, President and Chief Executive Officer; and Jerome Rouquet, Senior Vice President and Chief Financial Officer. We scheduled the call for 1 hour, and we'll open the lines for questions after Sachin's and Jerome's prepared remarks. [Operator Instructions] Thank you again for joining us.

Now I'll turn the call over to Sachin.

Thank you, Kris, and good morning, everyone. Thank you for joining our third quarter 2025 earnings call. Visteon delivered another quarter of strong operating and financial performance, demonstrating the strength of our business while continuing to execute on our long-term strategy. Sales for the third quarter were $917 million, coming in slightly below our expectations, primarily due to the impact of the unplanned production shutdown at JLR.

Excluding this impact, sales were broadly in line with our forecast. We had good visibility into customer production schedules going into the quarter, and while there were some minor puts and takes across programs, they largely offset each other. Year-over-year, we continue to see strong momentum in our cockpit electronics business with solid growth in Europe and in the Americas. This was offset by lower sales in China and for BMS in the U.S. due to the anticipated headwinds from the challenging macro environment for global OEMs in China and for electric vehicles in the U.S.

Adjusted EBITDA was $119 million, representing a margin of 13%, and adjusted free cash flow for the quarter was $110 million. We are maintaining our full year guidance, which Jerome will walk you through in more detail shortly. On the sales side, we're trending below the midpoint of guidance as a result of several temporary industry headwinds. Importantly, despite these headwinds, our adjusted EBITDA and free cash flow are forecasted to remain strong, supported by continued operating discipline, commercial execution and the impact of our cost reduction initiatives.

From an operational viewpoint, the team delivered very well. We launched 28 new products, improved our profit margin through productivity measures and secured $1.8 billion in new business during the quarter. We continued to build momentum with our product portfolio, winning multiple large display programs and adding another high-performance SmartCore customer in China, strengthening our position in the emerging AI-based cockpit systems trend in the industry.

We also resumed capital returns to shareholders with the payment of our newly initiated quarterly dividend with more capital returns planned in the fourth quarter.

Turning to Page 3. Our Q3 sales came largely in line with our expectations, excluding the temporary production shutdown at 1 customer in Europe. In North America, cockpit electronics continued to perform well and came in ahead of expectations. The impact of tariffs on customer demand remained minimal, and we benefited from the ramp-up of several recently launched programs with OEMs, including Ford.

BMS sales were down significantly year-over-year with GM and Stellantis, reflecting the very different environment for EVs in 2025 compared to 2024. Our retail EV demand surged ahead of the expiration of the $7,500 tax credit. Production levels remained steady as OEMs work through the elevated dealer inventory. Sequentially, BMS sales came in modestly higher. Overall, in the Americas, strength in cockpit electronics helped partially offset the year-over-year decline in BMS sales. In Europe, our sales were flat year-over-year.

We saw solid gains in cockpit electronics and ICE hybrid as well as battery electric vehicles across multiple customers, including Mercedes EQ and Renault R4 and R5 EVs, the Puma Transit and transporter vehicles from Ford and the Peugeot 208 and 2008 vehicle models that offer a choice of powertrains.

Our sales in Europe also benefited from our recent engineering services acquisition, partially offsetting some of this strength was the production downtime at JLR, where operations were halted for the entire month of September, due to a cyberattack impacting our Q3 sales by approximately $12 million. In the rest of Asia, excluding China, we continue to make progress on our strategic initiatives to diversify our customer base and expand into the 2-wheeler market.

In Q3, sales benefited from ongoing traction in the 2-wheeler market and from the recent launch of our digital cluster program across multiple car lines with Mitsubishi. Offsetting these were declines in vehicle production at a few of our customers in the region.

In China, third quarter sales declined year-over-year as expected, primarily driven by negative vehicle mix with Geely and the ongoing market share loss of global OEMs, partially offset by new product launches. On a sequential basis, however, sales remained stable, supported by key programs, including the new Buick GL8 with GM, Toyota Corolla, and the cockpit domain controller with Geely. We believe this performance represents a baseline level for our China business, from which we expect to return to growth in the coming years.

Turning to Page 4. We launched 28 new products across 10 different OEMs in the third quarter, underscoring the market fit of our product and technology portfolio as well as our program execution capabilities. These launches spanned a broad range of vehicle segments and geographies and were featured on several flagship vehicle models, reinforcing the trust our customers place in our ability to execute and deliver these complex systems.

Some key highlights include an audio infotainment system on the Ford Super Duty and a multi-display system for the Chevy Corvette at GM. Large displays are becoming key requirements in all regions. We launched a new dual display system on the Renault Boreal, which is a C-segment SUV based on the Dacia Bixter for markets outside of Europe with first launch in Brazil.

In 2-wheelers, we launched digital clusters across 3 models with TVS in India, our first with this OEM. TVS is the third largest 2-wheeler manufacturer in India, with annual sales of about 3 million vehicles. This is also the first introduction of an all-digital cluster by this OEM, highlighting the growing trend of digitalization in the 2-wheeler market.

In Commercial Vehicles, we introduced a SmartCore-based cockpit system for off-road construction equipment with Volvo that enables advanced features, such as dig assist for excavators and load assist for wheel loaders that delivers high excavation accuracy in a fraction of the time compared to conventional methods. These systems use multiple sensors and highly accurate GPS technology to run sophisticated software algorithms on our proven SmartCore platform.

Lastly, we launched an upgraded SmartCore cockpit domain controller on the refresh Zeekr 001 luxury electric vehicle. The 001 has been a successful vehicle for Geely with over 300,000 sold since its introduction in 2021, and the latest version will be offered in 6 countries in Europe besides China.

New product launches with customers such as Geely and Cherry remain central to our strategy for returning to growth in China. Our Q3 launches illustrate the fit of our products for not only the passenger car market, but also 2-wheeler and commercial vehicle markets. Year-to-date, we have now introduced 65 new products, reflecting our continued focus on innovation, and disciplined program execution.

Turning to Page 5. Q3 was another strong quarter for new business wins, and we now expect to close the year at greater than $7 billion, higher than our initial target of $6 billion. Year-to-date, we have secured $5.7 billion in new business awards, which is up from $4.9 billion in the same period last year, with wins across 21 unique OEM customers.

The product mix is led by displays, which represent more than half of our total awards so far this year, as carmakers seek to refresh and differentiate the cockpit experience, even on existing vehicle platforms. Importantly, we also secured $2.3 billion in new SmartCore digital cluster and infotainment programs despite a relatively slow quoting environment, as carmakers adjust to rapidly changing market dynamics.

The strong performance reflects the strength of our product and technology portfolio, which continues to lead the auto industry and help us in expanding into two-wheeler and commercial vehicle markets.

On the right side of the slide, you can see a few examples of notable wins this quarter. We won a panoramic display with a European OEM covering both hybrid and battery-electric models launching in mid-2028. This is our first win with this brand and the display will initially debut in the European market with later expansion into other major markets.

Another significant win is for a large dual driver and passenger display for a premium luxury brand. Our product integrates to OLED panels under a single cover glass, featuring switchable privacy for their display. Our competitiveness on technology and cost supported by our in-house design and manufacturing capabilities were critical factors in securing this business.

In Asia, we continue to expand with the world's largest OEM, winning a digital cluster program for an affordable performance model, another step in deepening our relationship with this key customer. And in China, we secured a SmartCore high-performance computer program with Cherry, which will enable AI capabilities to enhance the cockpit user experience. Cherry is one of China's leading domestic OEMs and also a leading exporter of vehicles. The product will initially launch in their plug-in hybrid SUV models, followed by the next generation of battery electric vehicles. This represents our second HPC win in China, the first was with Zeekr. And when these 2 programs launched in the second half of 2026, they will be the most advanced systems globally, setting a new benchmark for next-generation cockpit products.

Turning to Page 6. Just a few years ago, electric vehicles and China were seen as the 2 most significant growth drivers for the industry. However, that has changed quite rapidly over the past couple of years, and the industry reality is very different today. EV adoption outside of China has progressed more gradually than many had anticipated, and recent policy changes in the U.S. present additional challenges.

In China, the large number of car brands operating in that market has triggered a fierce price war that has raised on for the past couple of years and resulted in notable changes in OEM market share. On the technology front, artificial intelligence has overtaken SDV as the most exciting technology trend with Chinese OEMs leading the industry in early adoption of this technology.

In response, we have taken deliberate steps to broaden our strategic initiatives to address the air pockets in our growth trajectory created by these industry dynamics. I would like to take a few minutes to share how we are thinking about these evolving industry trends and the progress we are making on our broader growth initiatives.

Carmakers outside of China are launching new vehicle models that offer a choice of powertrain, ICE, hybrid and battery electric and with larger displays and advanced cockpit electronics. This is especially the case in Europe as carmakers prepared to compete against Chinese imports.

We are seeing strong interest in our large displays and latest SmartCore technology for these new vehicles. In the third quarter alone, we launched 5 new cockpit electronics programs for OEMs in Europe and China and have 5 additional SmartCore systems under active development with OEMs in Europe and Asia, with launches starting in Q4 of 2025.

We are also making progress with Cherry, where we will launch our first display program in early 2026 for the European market. This initial program served as a strategic entry point, enabling us to expand our relationship with Cherry during the third quarter in the China market with another new business win. Artificial intelligence has the potential to significantly enhance the user experience delivered by cockpit systems. AI-enabled cockpit is an emerging technology trend, and Visteon has positioned itself well with the introduction of the high-performance version of SmartCore and cognitoAI framework, the first of its kind in the industry.

In Q3, we secured our second high-performance compute win, this time with Cherry, joining Zeekr as key initial customers for this exciting new technology. We have discussed previously our initiatives to broaden our opportunities by focusing on underrepresented car OEMs in Asia, while expanding into adjacent transportation markets of 2-wheelers and commercial vehicle OEMs.

We are also expanding our product portfolio with new in-house developed products, such as the App Store and cameras for ADAS applications. In the third quarter, we made solid progress. We launched an app store with Maruti Suzuki in India, our first launch of this product, which now supports over 100 apps that are available for download. We are also working with 2 additional OEMs for the launch of this app store in their vehicles in 2026. We also launched multiple products in the 2-wheeler and commercial vehicle markets, which have already highlighted earlier in the call.

Year-to-date, roughly 25% of our new business wins are tied to our strategic growth initiatives, a key reason we now expect to exceed our original new business win target by at least $1 billion. Overall, we remain confident in the long-term prospects for the business. In addition to our top line opportunities, we continue to expand margins, generate strong cash flow and deliver best-in-class returns on invested capital.

With that, I'll hand it over to Jerome, who will walk you through the financials in more detail. Jerome?

Thank you, Sachin, and good morning, everyone. Consistent with recent quarters, we again delivered a strong operational and cost performance as well as a robust cash generation despite sales being slightly lower than originally expected. For the quarter, sales were $917 million, a 6% decline from the prior year. We continue to see strong growth in cockpit electronics across the Americas and Europe, along with higher engineering services revenue on a year-over-year basis. As expected, this was more than offset by lower battery management system sales in the Americas and reduced sales in China.

However, what we did not expect was the negative impact of JLR unplanned shutdown for the entire month of September, which represented a little over a point of sales. Adjusted EBITDA for the quarter came in at $119 million underscoring our continued focus on operational execution and disciplined cost control.

Adjusted EBITDA margin was 13%, benefited from our ongoing efforts in product costing and productivity. We did have net positive nonrecurring items this quarter, which contributed approximately 0.5 point to the margin. Adjusted free cash flow was $110 million, driven by a robust EBITDA performance as well as favorable timing of cash flows.

During the quarter, we paid our first quarterly dividend, marking an important step in continuing to return capital to shareholders and reinforcing our commitment to a balanced capital allocation strategy. We closed the quarter with $459 million in net cash, giving us the flexibility to continue investing in the business, pursuing technology accretive acquisitions while delivering shareholder returns.

Turning to Page 9. Sales for the quarter were $917 million, down $63 million year-over-year. Customer production volumes remained essentially flat, while growth versus market was negative 5% for the period. Growth over market came in below our expectations this quarter, driven by a combination of factors. First, production mix was a headwind. Several of our key customers, including Geely and others saw increases in overall production volumes, but not on a specific vehicle lines where we have content. This diluted our growth over market performance.

Second, as we have discussed, JLR was another headwind. Sales with JLR were on track to outpace the customer's production before the shutdown, which impacted the contribution to growth over market. Customer recoveries, primarily tied to prior semiconductor cost increases, reduced sales by approximately 2% year-over-year, as those input costs continue to decline. Normal annual price reductions to customers were around 1%, consistent with our historical average. FX provided a modest benefit in the quarter.

Adjusted EBITDA for the quarter was $119 million, flat compared to the prior year. However, adjusted EBITDA margin improved by 90 basis points, reflecting strong performance in product costing and productivity, the benefit of onetime items as well as contribution from M&A. These gains were offset by the flow-through impact of lower sales. Net engineering as a percentage of sales was 6.3% for the quarter and includes the recent engineering services acquisitions we have made over the last 12 months.

Excluding the acquisitions, our net engineering expense remains in the 5% range, slightly lower than our original expectations for the quarter. We continue to leverage our platform approach and best cost footprint while advancing multiple initiatives to improve engineering productivity. At the same time, we are investing in strategic engineering capabilities, including AI applications to support our upcoming high-performance compute launches in China and the development of cognitoAI. Adjusted SG&A was 4.9% of sales, reflecting a healthy balance between ongoing cost controls and targeted investment in key teams and technologies to support future growth.

Our normalized margins remained in the mid-12% range, and Q3 provides another data point illustrating the run rate of the business. The sustainable margin performance continues to be driven by the cost initiatives we have undertaken, including product costing, engineering productivity, platform-based product development, and AI-driven process improvements while continuing to invest in the business.

Turning to Page 10. Visteon generated $215 million of adjusted free cash flow through the first 3 quarters of the year. We continue to benefit from a robust level of adjusted EBITDA, converting EBITDA to cash at a 56% rate, still above our 40% target when excluding the working capital inflow. Trade working capital was a net inflow, reflecting lower sales and strong collections, partially offset by higher inventory levels associated with the unplanned shutdown at JLR. Cash taxes were higher compared to last year, driven by continued improvement in profitability across most jurisdictions as well as the timing of cash payments.

Net interest remained a positive contributor as interest income earned on our cash exceeded the interest expense paid on our debt. We also had an outflow this year related to our 2024 annual incentive program, which was paid in 2025 and at higher levels than the prior year, reflecting the strong financial and operational performance in 2024. In addition to this payout in the first quarter, other changes this year, including U.S. pension contributions and the timing of various other cash flows.

Capital expenditures were $88 million, representing 3.1% of sales and were slightly below our full year expected run rate. In the first 3 quarters of the year, in addition to ongoing investments supporting customer programs, we continue to invest in several vertical integration initiatives, as I have mentioned on previous calls. These initiatives allow us not only to improve our product costs, but as well to derisk our supply chain while controlling more of the technology that goes into our products.

In the quarter, we paid our first quarterly dividend approximately $8 million. We ended the quarter with $765 million of cash and a net cash balance of $459 million. In the fourth quarter, we plan to increase our capital allocation to shareholders. In addition to our recurring quarterly dividend of $0.275 per share, we will return additional capital through share repurchases. We currently have approximately $125 million of authorization remaining under our existing program and anticipate retiring between $20 million and $30 million of shares during the quarter.

We may go beyond that range on an opportunistic basis, depending on market conditions. This puts us on track to complete the program by the end of next year, consistent with the plan we laid out during our 2023 Investor Day.

Turning to Page 11. Our current outlook remains within the range of our previous guidance. On sales, we are now tracking below the midpoint of the range, closer to approximately $3.75 billion, reflecting the latest customer schedules. First, we are incorporating a reduction in battery management system sales following the elimination of the 7,500 EV tax credits in the U.S. We expect this headwind to persist into 2026.

Second, we have incorporated some continued level of production disruptions at JLR throughout mid-November. Under normal conditions, JLR contributes approximately $10 million to $13 million in monthly sales. Finally, we are also adjusting our outlook for our largest customer, Ford, due to some scheduled downtime resulting from their aluminum supplier plant fire.

We believe the JLR shutdown and scheduled downtime at Ford with an estimated impact of $30 million to $40 million are temporary in nature and do not reflect the underlying run rate of our business. Focusing on Q4, we anticipate a modest sequential increase compared to Q3. We expect to benefit from new program launches and higher customer production volumes, which we believe should more than offset the incremental headwinds from the aluminum supply disruption and lower BMS sales.

The impact from JLR is expected to be similar in both quarters. For growth of the market, we anticipate improvement in the fourth quarter compared to Q3 despite some of the near-term headwinds. For the full year, we currently estimate growth of the market will land in the low single digits. This is below our previous expectations, largely due to the factors I've outlined already, namely production mix where customer volumes have increased, but not necessarily on the platforms we support, a decline in battery management system volumes in Q4 and temporary headwinds from JLR and the disruption caused by the aluminum supplier fire.

Our adjusted EBITDA is trending towards the high end of the guidance range. We anticipate Q4 EBITDA margins to be in the mid-12% range, consistent with the run rate we have delivered for the last 3 quarters. Adjusted free cash flow is also trending towards the high end of our range, if not slightly higher. CapEx is trending closer to $140 million, slightly lower than originally anticipated, despite our ongoing investment in the business in sourcing activities and the expected purchase of land for a second manufacturing location in India to support our growing business there.

We continue to actively pursue vertical integration opportunities, and our CapEx includes investments this year in several areas, including magnesium injections, display manufacturing and camera assembly. Our outlook illustrates the operational and commercial discipline we continue to deliver on with adjusted EBITDA and adjusted free cash flow, well above our expectations coming into the year despite more modest sales performance than expected.

The work we've been doing to win new businesses, expand margins, vertically integrate and generate more cash provides a great foundation for the long term. Finally, I would like to flag a developing risk for both Visteon and the entire automotive industry related to recent trade restrictions imposed by the Chinese government on Nexperia, a supplier of transistors, diodes and other discrete semiconductors to Visteon and the entire automotive industry.

The trade restrictions prohibits Nexperia from exporting components outside of China is limiting sales within China and could disrupt production similar to what we experienced in 2021. We understand that Nexperia is currently working to obtain an export license, which has historically taken approximately 45 business days, although details remain uncertain. We hold approximately 30 days of inventory for most affected parts and are actively working to mitigate direct risk to Visteon by qualifying and procuring compatible parts through brokers and distributors.

The indirect exposure is hard to estimate as Nexperia components are widely used across the industry and could materially impact customer production schedules. At this stage, it is uncertain whether this risk will materialize or what the impact would be, and accordingly, this risk is not factored into our guidance for all 3 metrics.

Turning to Page 12. Visteon remains a compelling long-term investment opportunity. 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 Instructions] Your first question comes from the line of Luke Junk of Baird..

Sachin, maybe to start with the forward-looking question. You mentioned in the script, your expectation of returning to a cadence of growth in China. I'm just wondering, how should we think about that into '26, especially through the year and especially thinking about the materiality of the CDC wins into the back half of 2026.

Yes, Luke. So if you think about our business in China, right, it has, as we discussed, stabilized in Q3, and we expect that to continue into Q4, and there are launches in China in starting Q4, but also more into 2026. I think we have about 20 new model launches happening next year, but it is predominantly back half loaded, especially with those 2 high-performance compute SmartCore launches, which have also very high value. We expect to be able to outperform customer vehicle production in China next year.

Now today, as we stand, I think S&P Global is forecasting customer production volume in China to be lower next year, but I believe it's still too early to call that. And I think there will be some changes. I'll no more be in China next month, and we'll have much better visibility into it. But overall, our expectations are that we would be returning to a growth over market performance back in China next year.

Got it. And then for my follow-up, just circling back to Nexperia, Jerome, I appreciate your comments on the direct impacts. What about the indirect and just latest intel on what your customers are telling you what their production-related risk might be?

Yes. Luke, I'll take this and maybe just provide some more context. Jerome already discussed a bit in his prepared remarks, but I think this is a question that might be on everyone's mind. So let me just take this opportunity and give you more context. So Nexperia is NXP standard parts division, right? It used to be part of NXP. And, therefore, in automotive, was widely used given how NXP was prevalent in automotive, got sold to Chinese investors in 2017 and then eventually, this company, Fintech Semi, acquired it in 2019. And I would say about 60% of their business is in auto, and they make very, I would say, inconsequential, but very needed components, things like transistors, MOSFETs, diodes, right?

And virtually, every single automotive electronics component has one or more of these parts in use. So that's the usage situation. Now what happened was on account of this issue between Nexperia, the Chinese owners and the Dutch government and the actions that were taken on September 30 by the Dutch government, that has kind of resulted into this escalation between the governments now it's become a little more of a diplomatic role. The short of it is from October 4 onwards, supply from Nexperia China essentially stopped. And that's going into all of these automotive components that I mentioned.

Now as Jerome mentioned, they've taken this -- or applied for an export permit, but I think this will require more of a government level intervention and resolution, which could happen any moment. I know that -- and this is also, I think, public information that the Commerce ministers of both sides are in talks to try to find a solution.

So we're hopeful that this is imminent and gets resolved. Now specifically about the impact of most suppliers tend to hold anywhere between 2 to 3 weeks of parts inventory on hand and maybe another week in transit and at the OEMs. So we're already into the third week now. And therefore, the criticality of this with every passing day will become higher.

Now Visteon has had, since the last semiconductor crisis, a higher level of semiconductor parts inventory, just learning from our experience. And I would say that we probably have a little more cushion than our peers in the industry. At the same time, we are looking for alternate parts and also redesigning some of our products to be able to accept parts that are not strictly pin-to-pin compatible. However, all those things do take some time and that cannot be turned very quickly like what we might be required to do, if within the next week or 10 days, the supply does not resume.

So we are hopeful that this thing will be resolved in that time frame, and we will not be required to impact our customers' production. But I believe, regardless that Visteon is probably not going to be the first 1 to impact our customers, given where we stand with our inventory and our ability to find alternate parts. Hopefully, it just gives you a little more context. And this is a developing story. So we will have to just watch this space very closely.

Your next question comes from the line of Itay Michaeli with TD Cowen.

Just curious if you can comment on just how some of the shifts in revenue and some maybe slipping into 2026, others maybe being more kind of onetime in nature is maybe influencing your thinking on the 5% CAGR target through 2027 as well, how we should think about BMS directionally into 2026.

Yes. Let me take this first, And then I'll invite Jerome to add anything that I might have missed. But when we think about 2026, although it is too early to really be specific, let me share some of the puts and takes as we see right now. First of all, S&P Global is forecasting vehicle production at our customers to be down next year, 3% to 4%, mainly in North America and China, but I do expect that to be revised as many of our customers that have been impacted by all of these things that we have discussed on the call will likely try to recover that cost production next year.

So we will have to, again, wait and watch how this develops, but my expectation is that it won't be as negative as S&P Global has the outlook today. Now when it comes to the 2 main headwinds we have faced this year, namely China and BMS, they will play out differently as we go forward. So first, China, as we discussed also in our prepared remarks, we'll start to come back to growth, based on the launches that we discussed, including the high-performance compute launches. And this growth will continue going forward into 2027, as we have additional launches coming in on top of the ones that I just mentioned.

Now with BMS, we will have to still wait and see how this develops, but at least in 2026, our expectation is that given the headwinds that EVs faced, especially in the U.S., I expect our BMS revenue to continue to see some decline next year. and then maybe stabilize from that point. And we will have, at that point, also better comps as we go into 2027, and we expect that to be on the path for modest growth, and later in 2028, we also have our first power electronics products that launch.

So our strategy for BMS and our electrification in general is to track with the market. We expect the market to increasingly outside of China, take a multi-energy approach when it comes to vehicle powertrains. And yes, the growth expectations have been calibrated significantly lower compared to where we were a couple of years ago. We still do believe that after this lapping that the locker hopefully by 2027, we expect electrification to also continue on a modest growth trajectory.

Now as we think about '26 and '27, the other big factor, the 1 that we have discussed previously is our launches with Toyota, and we have several launches more than a dozen launches that are sort of split between 2026 and 2027. And therefore, the full year impact will be most felt in 2027. And that's where we see that step growth occur in our revenue as we go forward. We'll be talking a lot more about this on our fourth quarter call as we usually do, but I thought I would share with you some of the things that we see as we stand today.

No, that's super helpful. As a quick follow-up, congrats on the new business booking momentum this year. Is $7 billion sustainable, Sachin, next year and beyond? Or maybe there's some onetime [ ones ] in there this year?

No. So let me first explain how -- what's the reason behind it so that there's a better appreciation for what we are seeing and how and why we think that higher levels would be sustained. So the main driver of our wins, even last year, and certainly this year, has been our success with displays, and the investments that we've been making since 2018 have continued to put us in a very strong position when it comes to more complex, larger displays for automotive.

Now this has helped us win new business, especially in U.S. and Europe, at a time when coating activity has been lower than normal, especially for electronics. And the reason for that is that the OEMs in these regions have been adjusting or have been forced to adjust their new vehicle launch plans in response to the sudden in their outlook of EVs. Now in Asia, the OEMs there don't have this situation. And therefore, we are seeing opportunity for our full suite of products, including the cockpit electronics products. And therefore, we are winning SmartCore and SmartCore HPC are currently in Asia.

Now I expect these OEMs in Europe and U.S. to resume sourcing activity for the electronics are very soon as well, because otherwise, they will be noncompetitive, especially against the Chinese counterparts. So -- and that's what's reflected in our wins this year. If you look at Q3 year-to-date, about 40% of the wins were Europe or 25% in the Americas and then Asia made 33%.

And on top of that, and this is really what is the reason why I think this is going to be sustainable, our initiatives with commercial vehicles and 2-wheelers have also contributed to a higher new business win growth. In fact, this year, I think we have more than doubled our new business wins in absolute dollar value over last year. And prior to that, it was a very small portion of our overall business. So all of these, I think, are sustainable. And as we have demonstrated this year in an environment that is pretty challenging, we seem to be able to win more than our fair share of the opportunities out there, it just speaks to the strength of our product portfolio and our cost competitiveness.

Your next question comes from the line of Dan Levy, Barclays.

Jerome, I wanted to start with a question on the margins. And maybe you could just talk about the one-timers. And when we just add up everything for the year, how much is it -- what's the right jumping off point when we're going to start to do our bridges into '26? And then the other thing that I think that's relevant here is we know there's been a number of EV programs that have been delayed, canceled, and there's going to be some OEM recovery payments to suppliers. Maybe what is the magnitude of potential recoveries down the road?

Yes. Thanks for your question. The margins, I would say, have been very strong throughout the year. We've pretty much always exceeded our -- or let's say, the consensus or our guidance from a margin percentage standpoint, Q3 was no different. We were at 13%, even when you normalize this, we were at 12.5%, so slightly above what we had indicated in previous quarters.

I think the strength of the margin is coming from all the initiatives that we've been working on for the last few quarters. And it is largely around product costing. We spent a lot of time making sure that our products are competitive in the market from a cost standpoint that includes 1 theme that we've talked a lot about, which is vertical integration.

We've also spent a lot of time on productivity in manufacturing, but as well in engineering, especially with AI, which has recently helped us as well to be pretty efficient on the engineering side. So if you step back and look at our margin, we'll be able to finish the year with margins that are slightly over the midpoint of our guidance. And in fact, we'll be close to $0.5 billion in EBITDA for the full year, that includes about $30 million of one-timers. We've had about 25 in the first half of the year and 5, so it was lower, 5 in this quarter.

These recoveries are generally related to, as you mentioned, lower program volumes that we've seen or various recoveries on, for example, inventories that we had in excess because of, again, a volume being lowered -- program being lower term volume. So that is kind of the main reason. So I would definitely back that out as we would go into 2026. Now equally, there's always some level of recoveries from -- in that nature as we go into any year.

Yes. Maybe I can help also provide more context because our exposure and to EVs is very different than many of our peers because we are essentially, for now at least, really focused on electronics. And the CapEx and other requirements for EMS is significantly different as compared to, say, a traction inverter or something that is very specific to NAV. So in the grand scheme of things, our investments and, therefore, recovery are much smaller as compared to what you might hear from some of our other competitors or peers.

Great. As a follow-up, I wanted to ask about your Toyota exposure. And I know this is a question that's come up in past calls, and I think the number is something like 10% of revenue potentially in '27 or '28, whatever that maybe?

'28.

Yes. Maybe you could just talk about the launch cadence ahead and the line of sight and the confidence that this will ultimately start to become a dominant piece of the revenue that could offset maybe any continued mix headwinds, which may linger?

Yes. No, I'll take that one. So you're absolutely right. We've been obviously very successful with Toyota in terms of business wins recently. And we have a pretty gradual set of launches as we go into '27, and it's going to increase, obviously, numbers as well in dollar terms. So for '25, we'll launch 2 programs overall; in '26, 5; and then in '27, 7 programs. So that shows you a little bit the acceleration that we have as we go into '27. And that's the reason why we've been talking about 10% of our sales going into '28. So it's a fairly significant ramp based on what we've won recently. I think the good news as well with Toyota is that we keep on getting very good engagement with this customer, and there are still opportunities. So obviously, that would go beyond '28 and further, but it's been a very successful story for us.

I think we need to maybe just give you more context on the opportunities even beyond this. And having said that, with these launches, 2028, we expect as we said earlier, about 10% of revenue, but these are essentially 2 product lines that we currently are engaged on, right? It's the cluster and displays. And we have opportunities even within those 2 product lines to get on other vehicles. This is still less than 50% of their vehicle platforms and models. So there's still plenty of opportunity for growth. On top of that, we are engaged with them on discussions regarding electronics, right?

And given my prior comments about how we see the industry rapidly evolving to use of more and more advanced software-driven features, and AI becoming a very dominant theme or a trend, I think we are very well positioned to support this customer, this OEM in their ambitions with respect to addressing some of the gaps that they have in their portfolio. So for us, this represents much more than just the immediate the 2028 sort of horizon opportunity that we have discussed. So we will continue to explore more opportunities as we go forward.

Your next question comes from the line of Mark Delaney of Goldman Sachs.

Thanks for the comments on the various product opportunities and your thoughts on the market environment. I'm hoping you can help better contextualize what that all means for consolidated growth in the coming years as you consider share gains with certain Asia ex-OEMs, Axia ex-China OEMs. You were working through the backlog, given the booking strength you're seeing, executing on some of these AI opportunities, but then also some of these headwinds like in BMS and customer mix. And as you put that all together, how is the company tracking relative to the $4.15 billion revenue target you previously discussed for 2027?

Yes. Again, I think we will not necessarily specifically comment on '27. We will do that beginning of next year, primarily because we need to get a better handle on the underlying volume assumptions, as we discussed there's a lot of moving parts there. But having said that, we are making really good progress with all the initiatives that I have mentioned on this call and previously as well, starting with Toyota. As Jerome just mentioned, we have these launches. We really have to execute these launches well, which I have no reason to doubt that we would be doing anything otherwise. But the other 1 that I would like to highlight that also really contributes to our growth in 2027 is the launch in '26 with Honda. This is the 2-wheeler opportunity that we have previously mentioned fairly significant.

And then on commercial vehicles, we have there's opportunities that are with TRATON, which is the commercial vehicle group constitutes MAN, Scandia and the sub in the U.S. as well as Volvo trucks, which are launching in 2027. So we have, in '27, the situation where China starts to grow. We have this BMS headwind kind of just lapped at that point. So the comparison should be good. And then all these new launches that are kicking in. So we would expect to be in a good position, but we -- I do want to just caveat investing this volume expectations, we need to get a much better handle on, and that's what we will be focused on between now and end of the year.

Helpful context. And my second question was on BMS and thanks for all the commentary and discussion you already provided there. I did want to understand profit implications for Visteon in that product area over the next couple of years. And given what you articulated around volumes in relation to what customers are now planning for their EVs, how is Visteon operating that business? And is this something that can remain profitable even if BMS sales are at low levels in '26, and maybe in '27 as well?

Yes, I'll take that, Mark. BMS still represents about 5% of our sales. So it's still a significant contribution in terms of product line. Margins are similar to other product lines. So there's not a major difference. Obviously, the more volume we have, the better. But it's not going to be, let's say, a mix impact that we'll see as we go forward.

Your next question comes from the line of Joe Spak of UBS.

I just -- maybe just to quickly follow up off the last point because it was headed down a similar path. So that suggests BMS is like, again, you said, I think, 5%, so call it roughly $200 million. So just in terms -- so investors could get properly calibrated, like do we think like it's a couple of point headwind and is where sort of things bottom out for '26? And I know it's sort of highly fluid, but like what's your sort of preliminary thinking there? And then related to the -- another topic which came up, which is receiving payments for volume, should we expect that you receive some payments for these BMS shortfalls as well? Or have those already started?

Yes. So I think maybe answer the second question first. So for the BMS shortfall, we do anticipate recoveries that, that would be either part of the product piece price or as lump sum as we go forward. Some of that has been reflected in the price already, by the way. So we will continue to monitor the volume and adjust and go back as necessary. And so in terms of the volume itself, we're still looking at the latest information that's coming in from GM, and you have also seen what they have publicly stated. So we believe that it's probably somewhere between 10% to 15% or maybe even up to 20% down sequentially. So we'll have to see whether it recovers in the second half, but in the first half, we do expect to see a drop.

And then it will depend on how the underlying demand really holds, right? Because we will be in an environment where for the first time, there are no incentives to drive the behavior. I mean, at the same time, we all know that OEMs will continue to offer their own, but to what extent is yet to be seen. So our expectation in what we would tend to model would be somewhere around 20% to be a little conservative.

20% down in '26 versus '25.

Correct, correct.

Okay. And then, Sachin, the second question, a little bit bigger picture, but I recently saw you posted about, I think, what you called the intelligence era versus sort of the software era. And I'm just curious to get your thoughts about how your customers are thinking about AI, maybe by region and how Visteon is positioning themselves for that to benefit? And what type of time frame are we really talking about here? Because some of your customers have to put it bluntly, history been fairly slow to adopt some of these technology changes.

And you are starting to see this really kind of become more distinct when you look at China and then the rest. So the way we see, and we are already very deeply engaged with the Chinese is that AI is coming in, in 2 ways, right? So end-to-end ADAS are AI-driven. Today, most of the ADAS uses AI, but it's not end-to-end AI. So that's one big change. The second is AI as a smart assistant for the cockpit. That's the one that we are initially more focused on, and the two wins that we have talked about, one with Zeekr, the other is now with Cherry are for this SmartCore HPC that will bring this AI-based smart assistant for the cockpit.

And if you may remember, we talked about our cognitoAI. It was also featured in our CES earlier this year, is the first framework, software framework of its kind that enables you to run AI -- Gen AI models in the car, not in the cloud. And you see many references today to having whether it is Gemini, Google, Gemini AI or something else, but these are essentially cloud applications that limit how extensive that AI-driven functionality can be offered.

But in China, we see that already happening. In fact, the 2 launches that I mentioned earlier, next year will feature these AI models, probably from DeepSeek initially. And then on the -- with respect to the rest of the regions, we are seeing a lot of interest in Europe, as you can imagine. But for Europe, the difference that we're seeing is sort of redoing the whole cockpit system to be able to be built on top of AI, they're thinking of AI as an accelerator.

So imagine an ECU that you bring in with minimal changes to existing cockpit domain controllers, that would enable them to offer some level of AI-enabled features. So it's not as expensive as what the Chinese would be able to offer, but it is still better than nothing.

And that is seen as a stepping stone towards a full-blown AI-driven cockpit. So we are really focused on both those opportunities. One minor thing that is still very relevant that I would like to highlight, it's interesting to note that when you look at the entire cockpit and what the programs in China are doing, they tend to use Qualcomm silicon. But for the AI box as an accelerator that tends to be more NVIDIA. And so we are in the process of really developing solutions for both those architectures, which is kind of unique. I do not expect much activity in that regard from all competitors, especially outside of China, and that should position us well to take advantage of this emerging trend.

Your last question comes from the line of Colin Langan of Wells Fargo.

Just to follow up, trying to get all the puts and takes on the -- some of the commentary going forward. I mean if I think about you mentioned sort of battery management will be a drag into next year. It sounds like that could be about 1 point. I assume that there's good news from the reversal of maybe some of the volumes from JLR and the aluminum disruption, any way to frame maybe the 2-wheeler and commercial market help, and I guess the biggest factor as we look year-over-year, you commented that China will turn positive. Is that going to be the biggest sort of help to improving growth over market as that reverses? And any way to frame what kind of drag that was to this year's growth?

Yes. So the 2 big tailwinds we face next year; one is China, obviously; the other launches, by the way, in the rest of the markets, primarily commercial vehicles and 2-wheelers. So these are kind of net new programs that we will be introducing. So in terms of the growth of our market, we expect China to be positive, and we expect rest of the market to also be positive as a result.

And in terms of headwinds this year that will reverse into next year, largely because of JLR and nonetheless, we've assumed so far in this year, a revised outlook $30 million to $40 million of impact. So you would expect that to be a positive as we go into next year.

And how bad has the China drag been on this year's growth though?

We generally are estimating that it's about a 5 percentage point impact. So again, it highlights the fact that excluding China and I would say as well, excluding BMS, our cockpit business has been pretty strong in -- mostly in Europe and the Americas.

Got it. That's very helpful. And then as we think about margins into 2026, you did note that the $30 million of recoveries is high. What is the normal level that we should be thinking about? Is that -- is half of that normal? And then what other drivers outside of the higher volume? Or is it really margin expansion is going to be volume driven, or are there any other cost cutting that we should be thinking about into next year?

Yes. So in terms of the -- your first question, I would say half of that is probably a normal run rate. And it's generally balanced with potentially negative one-timers as well that we may have. But I would say 50% is probably a good ballpark number. In terms of margin drivers, so we've constantly improved margins as we move forward, even with volumes that were slightly down year-over-year.

So we'll continue to do so. I think some of my previous comments in terms of why we've achieved good margins in '25 will still be valid as we go into '26. So volume is definitely going to help, but it's our cost. It's our constant focus on productivity, being engineering, manufacturing as well as product costing. And we will start to see pretty significant positive as well as we go into '26, but as well '27 from vertical integration as we are accelerating these initiatives.

Thanks for participating in today's call. I'd like to quickly point your attention to Slide 24, in which we highlight several Investor Relations activities for the fourth quarter. If you are interested in learning more, please contact our Investor Relations team. Thank you.

This concludes Visteon's Third Quarter 2025 Results Earnings Call. You may now disconnect.