VC - Earnings call transcript Q3 2021

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Kristopher Doyle

Good morning. I’m Kris Doyle, Vice President, Investor Relations and Treasurer. Welcome to our Earnings Call for the Third Quarter of 2021. Please note, this call is being recorded and all lines have been placed on listen-only mode to prevent background noise.

Before we begin this morning’s call, I would like to remind you this presentation contains Forward-Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995.

to guarantees to results uncertainties various cause actual not rather conditions that are those our subject from are factors, results statements of these and future but could expressed Forward-looking in materially statements. differ risks and the to Information Forward-Looking entitled for page details. refer Please additional Investors materials Presentation the today’s website Visteon’s were call of for this on posted section morning. the not already Please have visit done you investors.visteon.com material if to download so.

and Rouquet, Chief Lawande, President Officer. and Executive Senior today Vice us Jerome President are Sachin Joining Financial Officer; Chief and

We after have you for thank and call your one hour, the lines question and open Again, scheduled the Jerome’s for limit we joining for Sachin’s Please one follow-up. will your remarks. us. to questions questions one and

Now I the Sachin. will turn call over to

Sachin Lawande

morning, third and joining summarizes Good for third two Page everyone, quarter call. results you our for our the quarter. thank Thank you, earnings Chris.

XX% disruptions of billion the for product the the launch growth infotainment. launches sales products continued semiconductor wins products year-to-date our android-based well new was digital expectations. core or the XX was positions sales, a the use prior in full These very clusters, significantly controllers environment, XX decrease with production XXX as first million, sales mainly X.X% million the supply have Our a XX quarters on of in beyond compared growth excluding working year, of which semiconductor down production in capital. automotive XX currency. million are down year-over-year EBITDA quarter was business shortages, persisted challenging of launched Global result in track the of in for Despite to increase XX products Adjusted in year-over-year, semiconductor did Adjusted new SmartCore and resulted and an to for was free future. We due volume. to as cash the a X.X well million supply flow company third and three lower digital of initial domain year. approximately

previously On targets. progress pleased we our with environmental announced the on made front, the ESG are we have

Going for no ended reporting forward, XXX position of maturities The emissions of the XXXX. debt the cash third remained committed cash we and of quarter with use and for until material million reduction setting company. with XXX target targets representing initiative have million strong, of the to company’s and a of we science-based million, debt XX liquidity the net

the chips recovery Turning semiconductor has investment recent expectations in three. second throughout the wafer Supply been chain Consumer technologies. in third fabs of XXX-millimeter wafers high-performance of into chips, earlier base significantly are stations. electronics wafers servers industry Most on Page uses to supply chips the going television Wi-Fi, from semiconductors cameras, going of and I against variable digital was constrained the for used Bluetooth, these using and devices. smartphones, for quarter, also quarter. that Automotive mature for uses PCs, built XXX-millimeter XXX-millimeter process

an towards (Ph) [winter XXXX, quarter demand exceed to recovered shortages. devices. work proliferation the in for significantly during COVID-related back demand test the in shutdown. capacity pandemic. going and Asia throughout are quarter. end changed in half, be the the due late In for a were XXX-millimeter anticipated impacted not time, storm supply. from lasted a as post wafers XXX-millimeter or unlike the a a first semiconductor for approximately million X.X supply lost of The in fabs newer impacted second, of Demand wafer XXXX operation little all same the industry been wafers quarter, stage assembly Southeast connected the of chips industry wafer has In dropped consumer to demand quarter, as the assembly production industry by at for as semiconductor XXXX Texas impacted facilities these further Virtually second and had and than of high-performance significant to at fabs, in in suppliers semiconductor remained of concentrated for early The suppliers end but lost the sub resulting quarter. the chips. In is faster the into investment in than sharply not of first million Automotive At second Japan COVID challenging several the impact constraint. However, XXX-millimeter and X.X semiconductor processing the XXXX. setting and widespread in the test outbreaks and wafer interruption back-end longer the half to Asia quarter, expected impacted. perform vehicles electronics Automotive third The facilities the used fire there increased and supplier the the of facilities. meters additional to result in due supply second of to supply were ] industry vehicles home The heavily first due automotive that caused the full negatively

quarter of operation, result. million are in vehicles not X.X the as but third the in Another Asia all were operating pre-COVID remain at are across chips facilities Most Supply COVID-impacted now quarter of uneven complete will fourth levels. different lost a will quarter in back in in like production ability expect be Therefore, than the the IHS and the similarly the we lower products. limiting build be suppliers, to industry’s current third impacted forecast. likely the to automotive

QX Visteon performance to to customer Page page production vehicle sales This global shows volumes. relative Visteon’s and Turning four.

main problem shortages. bottleneck an the the sales three end down of were were The processing the Asia than production the vehicle global half, in sequentially the to of customers costs compared Japan suppliers was third market in semiconductor was by made down production. but there was quarter. Europe the the quarter. down XX% virtually quarter, in in are were most QX. first supply quarter to and in up The semiconductor on more COVID critical year Visteon to vehicle the in greater about the were when second or of first down from currency the more with in the XX% the also prior industry compared did from the in and semiconductor sequentially impacted of in in Unlike prior mentioned Visteon’s great XX% suppliers of excluding year outbreak two all I and recovering impacted year, experiencing QX, chips third addition quarter. for the were supply. year-over-year short back As the in was semiconductor wafer impact the extraordinary second in at Visteon job beginning by of from customers anticipated industry In page, reduction customers team the not quarter the third than outcome previous half shortages a

for As a this the headwind Jerome more result, was details on net quarter. in a a pricing of which positive will part section. our performance provide is usually his later

production driven general new outperformed by of strong by clusters, our products, vehicle shortage experienced X sales sales of infotainment customers’ percentage SmartCore digital despite digital Android-based growth chips. the and points, Our double-digit

clusters all shortages was summary, the infotainment down impacted market semiconductor-related report costs. significantly of and Visteon than displays hand, the about chip more anticipated vehicle On by chip hybrid particularly to Despite able most extraordinary that quarter. the suppliers. was XX% products support the environment, I’m grow recover by represent which our of that to the as third In were across customers’ affected together in quarter and production pleased shortages other these revenues were rippled over the challenging our semiconductor and

to production products. digital new relative a outperformance our to cockpit of testament customer Our portfolio, strength product vehicle is the especially our

is page. in This the This new Page is with on products Ford the five. XX all our Ford, our in offered is on additional company launched future. We there highlighted infotainment planned are all-new trim which compact third of pickup lines in first X-inch X-inch launched this truck. The three. and and display vehicle Maverick are three to the left an launches Turning of X standard display quarter, display on the

The second foundation Opel this under the platform are the platform brands. Stellantis. product The XX-inch the cluster compact page, minivans highlighted Citroen, canine on is the sold at for and is Peugeot, KX launched digital a on that

is digital Stellantis as electric For diesel to and these all battery new of models addition versions in cluster these models, come standard. and XX-inch our XXXX, offering vehicles gasoline with

South our first these system offers compact Auto, America. features. XX-inch supports are There for a display CarPlay, more This follow Bluetooth in that also and vehicles in new on two a addition Brazil. for Android be launched models SUV launch. vehicle system also We And will Stellantis to connectivity first USP offered infotainment India multimedia and this will

very and quarters. for two SmartCore standard business these comes Our we electric our of products our in launch XX take digital product continues Gili. seen and to in infotainment in rates as are domestic vehicles. cluster Dongfeng Motors Year-to-date, versions. business past vehicle transitioning have cockpit well highlighted controllers. perform building and new in in is The well including will Dongfeng as an final China with have company perform customers very products with domain market, The our digital be launched we continue such high OEMs to clusters all-new on that XX to as digital new all the offered few the system the XX-inch that and gasoline China these

products We have than a with busy slated quarter launch. for XX new fourth more

levels. production We XX current strong position with rebounds will are which vehicle Visteon expecting approximately very when be launched, the another products new XXXX low to year well from

in business quarter, Page over at semiconductor the won run delayed third wins, year. to same Turning decisions We sourcing XXX lower the compared Nonetheless, billion, X.X billion our shortages, million disruption year-to-date new in business as QX at time normal new last totaled rate X.X to six. caused by the than carmakers.

key is wins well for XX-inch OLED premium compute next There display system an interest displays integrated need power needs this The software display, for Visteon’s drives over-the-air demands that Some address infotainment. to microZone a This us and up in in cockpit is highlighted the vehicles. towards high-quality and smartphone-like software to on meet cluster features. digital SmartCore the SmartCore win OLED the which increasing controllers. and silicon as win the quarter together or page for with integrates of large, domain to of is displays new evolving industry positions the new the technologies. as the to luxury the six our high well carmakers. updates first The for infotainment this cockpit a include accelerating is latest luxury for leveraging technology is in shift experience deliver by in business

latest for XXX-degree view OEM a version Visteon addition, on this SoCs display. be two of get is a information uses to new this China. target mid-cycle billion the fourth to operating full analog data the system. for upgrade provider several a for in from the on chips keep processes around strong sourced opportunities. promising center will of the Android in the marketplace. for the win all able the system cluster It business high-power extend silicon hybrid quarter a an pipeline is In digital rendering it process with cameras of looks We digital on information model This XX-inch planned. The current page with highlighted for of the this as life last competitive for year, vehicle of cluster reach vehicle The six upgrade assuming of most and customer. should the the as it or our business outlook

its beginning Page the and semiconductor at forecast year. seven. at gradually response outlook latest production its has forecast throughout IHS and units. with the shows presented the this This Visteon’s year to million the it from forecast XX.X shortages in to is compares for now Turning page reduced vehicle XXXX IHS of

lower internal QX will in QX outlook as like we believe supply. look terms more is that semiconductor of Our

has to beyond, continuing IHS units from XXXX ahead Looking vehicle in to million and XX.X XXXX forecast recovering XXXX. and XX.X then to million production units the

fully XXXX was Our still lower created forecast. forecast than semiconductors XX was impact that IHS’ appreciated million of production at before latest the units, has

regulations customers to production. XXXX. yet sales more with models. the impact would suppliers strong On our demand regarding are in levels We and on supply semiconductor build cycle on Nevertheless, EV from demand I one and share discussions low like a and vehicle conclude consumers, the the to emissions imbalance thoughts regarding our demand its hand, the to need driving of is inventory industry underlying pipeline entering in based the and

XXXX investments sufficient mitigated. to in chips semiconductor capacity higher capacity demand supply On made imbalance towards the end the between supply the suppliers industry constrained The do chips automotive by take semiconductors will and as other effectively. remain longer more the hand, vehicle production capacity Until of increase only of yield in be will for current to and online, for will use and installed need to XXXX. foundries, the comes more will

outlook, demand their into visibility low couple of not provided often traditionally extending have makers Our a months. beyond

the resulted hand, manufacture longer. In required are vehicle. production of semiconductor and it short some excess this on other impact is months suppliers in inventory the planning semiconductor times even All chips industry. one or others. supply XXXX, to the critically of of On they’re while manufacturing inefficient lead have missing of X different takes entire by chip the parts,

We non-recurrence semiconductor combination the better existing result of in before of are an production will our XXXX we help working plan supply. COVID-related all the semiconductor for in comes with of more to XX-months the capacity later effectively. year unusual in get year. that XXXX to supply, turn disasters COVID-XX in which their with reduction utilization customers in online visibility should better natural of was semiconductor additional The suppliers planning, disasters impact. natural long-term impacting parts In the capacity

we focused gases. of Page reducing use eight. natural resources Visteon, reducing been on always greenhouse of to the and At emission Moving have

announced based of reduction energy These goals in and greenhouse X% and good emission are making set them. achieving and by by by are XXXX XXXX calls progress previously levels, we XX%. include X% gas water the Our against

strict the framework our the to most reduction considered target set emissions in to meet assess new of line in will In their performance. initiative and on climate have change, the is the also Paris the will with agreement SBTi SBTi to scientific be widely reliable of joined targets Visteon in requirement is addition, industry. recognized reporting and we assist targets setting science-based for and and reduction emissions setting criteria

emissions working continue our are pleased Paris to goals and the agreement. will reduce so of SBTi roughly or to to companies with X,XXX the are that achieve join We the

to to for of customers. market Turning costs challenging incremental In relative in over semiconductor from to most the a summary, able customers recover Page also delivered nine. growth company environment. We our supply X% chips the were

shortages to quarter. digital supply remain our as a level. challenging strong year-over-year Android-based digital third experienced as such products and semiconductor growth. vehicle industry And of fourth the production quarter the be expect Despite to We will in result, similar SmartCore clusters, semiconductors, infotainment

quarter, well financials. is trends in the X.X electrification. portfolio I With well connectivity, the continued now new business of hand it technology Jerome growth. wins third review Our the end over the aligned industry will digitalization billion company by positioned key for of the and to with to is

Jerome Rouquet

were the industry continued disruptions while Thank on and chain execution the morning, shortages. worldwide to negatively ongoing good Visteon by impacted Sachin, you, and the supply focus quarter, everyone. semiconductor throughout third production volumes

proactively Our ensuring future positioned variables and controlling focus continues recoveries negotiating to customers. be industry’s on for cost the our are well we can influence, the we including from rebound.

Third were the of quarter. a to and improved customers. prior compared sequentially, successful increased recovering million, sales in representing slight from were we mix XXX our increase a semiconductor portion quarter large costs Customer

flow X.X%. was million. year, negative, result, for is typically margin a cash the a first a European pricing, representing As the year-over-year annual some overall free of our XX% in quarter of production Adjusted than customers as which impacted and was XX EBITDA quarter. positive the volumes more negative were Through adjusted quarters while million, of was XX three the production down the customers’ Industry our XX% was industry. down Japanese were

run recent Excluding into sales quarters, in the have been trend that launches QX. recoveries. impact incremental in discussed and on the the performance were had costs This declined improved in the a quarter, representing from customer our second a the driven favorable quarter Semiconductor of ongoing in an last combined Visteon’s was the We robust customers’ We call performance in to versus the cost currency, incurred focus that recoveries number production by major solid our late XX% both XX%, recoveries with volumes. positive a recover quarter. able despite of continued rates. cost increase semiconductor industry

a for result, net debt XXX XX and debt cash incremental quarters inventory supply of position ratio. the changes impacted by the cash million XX a million million, quarter. year increase net supply semiconductor compared three with driven of Adjusted the of by was of an impact an use and million, constant was costs cash levels, through of a in the of cash flow quarter a XX chain leverage the mostly first chain after As OEM to negative in ended We six free million the net in related representing QX schedules. improvement to disruptions second the negatively

than and focus QX We to continuation shortages, chain adjusted continue than will have the guidance information impact to year in activities place well. Full anticipated discussed. will subsequent impacted a we is on supply I work QX the reflect year more anticipate continue volumes the of which on slides. provide on previously industry capital production optimization more discipline to significantly expenditure we in being and larger put last which

increase Turning XX the prior reduced to higher Adjusted net representing were net combined offset in increase the higher engineering. an to The margin of Page XX. XXX QX. compared third with by slightly disruptions. semiconductor million, impact recoveries ongoing supply be while achieved QX to results improved basis quarter, is customer quarter chain XXXX to to with XX quarter improvement of which second impacted points sales higher X.X%. versus were million, by adjusted and XX million XXX primarily of was EBITDA continue the compared due million Sales financial margin to the EBITDA costs, of partially an

The production supply Visibility approximately margin the sales quarter the making to illustrated as due be the while adjusted month contrast XXX EBITDA expectations negatively the forecast quarter also In to semiconductor to supply QX at due several the decreased this revisions. chain of the the as Within quarter, lower to chain year, July X.X X.X challenging the impact reduced we by previous were our industry had of anticipated This by compared units September. production for with scale environment exiting costs net points limited would at the was is disruptions monthly million while in by to points. throughout in basis million. margins. steadily million quarter, to related production forecasting by prior continues to in improve industry continues higher units, XX million, margins shortage while lower quarter. in reduced ticked When impact percentage XXX recent disruptions

costs. and As by results ongoing impacted supply negatively was sales austerity lower from shortages. scale benefited EBITDA quarter, were impacted adjusted while XXXX semiconductor the temporary and you this disruptions may total, by recall, EBITDA net chain Visteon’s measures, higher adjusted QX semiconductor In and

intact. However, remain the the fundamentals business of

We continue to benefit from fixed our significantly cost the actions which year, implemented last we structure. reduced

Our continued increase. eventually focus on to fixed margins allow us expand volume management cost as will

Turning Page to XX.

highlighted, third and shortages the supply previously chain As worldwide disruptions semiconductor quarter. the the in continued

to were we through financial significantly our results able negotiations ongoing customers. to net However, impact reduce with the

the first majority semiconductor distributors quarters In the EBITDA related parts also we million costs can and by For to our chain of our freight we an elevated experienced negatively costs. the to open relate we costs deliveries third shortages. supply availability three in the our suppliers, ensure logistics impacted been continue quarter, brokers incremental utilize experience semiconductor to actively adjusted X Tier increase continuing purchases increase market to optimize and to to year, and customers. has XX while The of directly from as

proactively estimates. shortage disruption approach evolved initial Our chain beyond the to the has addressing extends supply semiconductor as

along elevated have the our to to around support increased them to the costs. pass continue also customers, clock we negotiation our While we with work

the This unprecedented and first half third been but industry, our successful negotiations, higher the quarter. recovered of the fourth year, we beyond. quarter while recovered expect the the into we approximately this in we the maintain XX% have in During XX% of to is we in situation and approximately momentum cost

anticipate we net year, million. full adjusted will be the XX around EBITDA to now impact For the

we customers. we For expect costs recoveries QX, remain while negotiate elevated cost to from our

position XXXX. We adjusted XX. Page the for cash quarter first Page our of and cash end our overview at as as free of provides to an of Turning XX flow and cash the well three XXXX quarters the net

and million, to continues flexibility cash total navigate supply cash sheet negative balance leverage. with Our ongoing the of position net we XXX of a provide disruptions XX net million as chain

of elevated unwind for better from drawdown. cash cash lower million of well flow balance a quarters industry. as strongest We in XX as utilization compared XXXX, were sheets have free XXXX. a sales three to of the while in last to revolving and XXXX was Adjusted the cash source working use facility a payments to during began activities one capital of of year of cash the elevated the we cash implemented from interest Adjusted pandemic XX QX first capital credit optimization costs. the the was of million benefited free flow in in from decreased due taxes benefit as to drive CapEx, which XXXX

Working dissipate. Cash allow quickly and up of to chain from of supply flow an mostly the XXXX. XXX dividend of ramp constant CapEx when us million. increase year XXXX to continues resumed to be of been optimization Equally, our Inventory the capital year. chain as since in XXXX, changes OEM in CapEx million in while expect was focus, unconsolidated by XX from cash schedules. benefit XX primarily an full the beginning Moving has we disruptions close a a payments the inventory from JV. to now to increase outflow the the supply tax benefited output an million, result building in in and inventory will driven disruptions

Turning Page XX. to

will expected driven the will free QX a costs engineering guidance, quarter higher of capital. flow adjusted in modestly are our by adjusted X.X fourth between We flow. be unwind adjusted be by QX. impacted EBITDA to with EBITDA million midpoint to working We production similar to of at look our anticipate industry that now of will is representing cash QX current between the approximately sales cash year. the billion. while XXX sales a inflow our million, expectations X.X% align be we and free full will compared levels, X.XX billion partial adjusting fairly targeting margin cash outlook are midpoint, of and the year At to breakeven of for XXX Adjusted be to net an

times. is than have disruptions XX. throughout at Page This to varying could be out Turning with occurring more to year chain supply turning anticipated anyone challenging the

accelerate However, we we disruptions, secular connected cycle, controlling a Visteon’s on electric. supply we as product is thesis investment like I the portfolio long-term to We remains more industry questions. focused can today embark and and these driven key begins up performance see inventory near-term remain in while the digital, your Thank acceleration Visteon. recovers with the anticipate multiyear an from and increased cars disruptions now well time for content, positioned Despite supply open by to shift ensuring intact. chain to our for influence will electric on trends would your restocking in what vehicles. you trends. the and our your support becoming interest to call the

Operator

Instructions]. [Operator

first line Your RBC. the comes Joseph with from question Spak of

Joseph Spak

year. Two questions, one and for sort strategic. XX the more are one million you on term then semi of saying costs, near the But just incremental

in fourth Are for like is expecting quarter. and that three semi should XXXX? think then the rate fourth we the still inflation moving into about million that So quarter recovery you XX% how

Jerome Rouquet

achieve generally we have our QX. been will results are that to Jerome. in anticipating is it in able to lead what Joe, we Yes, QX similar speaking, negotiations to

is still next XX% recoveries So roughly it the million means early. for year, XX% Talking full to QX. That about for pretty XX year. cost

discussions, discussions what our In first we on are and in today we is fact, for that. are QX, our customers, But the or to negotiations larger of with want embarking we finalize make middle right cost visibility sure cost as supply, well to that to things. recoveries, well including of in including include strategic but elements, and side as the we more only not these integrate

The will going XX% calls and is our update in we thing still next on if for into QX we can year. are say I at targeting next going XX%, later that are year. that, through recovery definitely we you So definitely one least not

Joseph Spak

which targets. past, helpful. hit new you then is to it here, a for of the term planning big sort view. Sachin, year talked billion had a sounds to showed year. you you quarter about to now had And That hit the actually be you wins like longer what And about volume of considered. on you needed really showed for it fourth sort of chart, changing is then just, And business that this XXXX like above your Okay. six are IHS in you And sort are what your versus versus doesn’t sound this

So are is achievable midterm bit by is message think that here different targets path a even been is there little past over still on the everything year? going you if given those the

Sachin Lawande

That is exactly Joe. it,

units. in if think talked if supply we about year to see of was although we to continuing. achievable are the has higher when where the believe our in that an next been terms - the do lowered path XX vehicle this expect happened about of then and on of beginning assumption pace at with look production that or XX So what at has target recovery the today, of million even you that year, year we midterm the And you million at is definitely based on we

other the nothing elements of growth from so structurally changes our And story.

been that of year. some and on distractions wins account it delays I on target say that stronger all made all QX we has we So the new to business or There would this the than close have in earlier. that to has faced, of QX expect be even

relatively and see will still but is that So decisions I much levels not normal into awards say, the these would actually converted trajectory delays let’s and targets, are our programs. already revenue of change virtually more within, very how and new is midterm that is that when the you all revenue of converting those of about booked, it the product look at through And of launches.

cadence product launches. of good pretty a new maintaining are we So

at year. be will about XX We this

as We have well. next another strong year year

the us of growth demand. and about shape next that way It starting really of supply-driven always think been to in a we market to the the direction is environment the so is And not issue talking of for for us an is have one couple over about. up years

So of all the other are aligned. factors

good as position we go as it midterm good here, I the about we as should forward we supply to a targets. expect, and long that pretty we be So get feel our hit in

Joseph Spak

Thanks very much.

Operator

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

Luke Junk

for taking Thanks morning. question. the Good

is I First to ask progress having wanted question made cost the recovery you that this semi on costs. higher XX% to the

your Just you evolution bit into supply on whatnot. strategic next chains what price and going of enter into business talk an little terms more or the of better be those we things look similar could those year. it downs, customer there visibility about that discussions if new the terms, customers mentioned in terms other better elements of a of could more wondering discussions lower Is like well? next Jerome, with layer some into terms as in

Sachin Lawande

take first, and then I comment we will also Luke, on have Jerome it. will it

times first is look thing not has we at industry only for of is good would the provided very visibility is much that shorter OEMs the on increased. lead have the this in visibility of demand than are if been a way, lead the why the typical that of we - fact in account with are the part have supply The the Most which, past. by I times situation semiconductors, that in reason say in you

the a are, visibility has and So lot the what to suppliers times of parts. difference what of that our in actually planning we lead certain grown, and between inefficiency semiconductor has that caused the provide is

have of entire don’t prepared remarks, holding in vehicle mentioned the stop have more we on we And to critically the parts is chip some production. of and now where production as a the we it short vehicle. up all that some that my takes is So situation of I one are parts need

solve a with a part allows in we bit better itself that year. XX-week their So them that visibility just this that plan getting at by will encountered production shape planning better our we challenges have clear that provide of the quite part to so suppliers least

So level that with and are next our well the customers very is discussion the isn’t that the the at industry set is we way, suppliers. up to with something first this that do. having by And

best practices. we bringing So are some

Some job our doing customers are others. better of than a

part cost also on cost to is experiencing. to customers. into the our inflationary own help We increases of will are contribute semiconductor efficient insights the all discussions. effective have and the to is pricing with chain all And have will that integral pressures industry we more and discussion of supply as that gone those make the whole various the bringing as And of come to realization have of that part more that chain our account up semiconductor an that, supply

the So discussions it fairly and the I conclude the to would are hope by we advanced, say end of year. majority this of

amount can then of huge year. by out and it to effort of OEMs item full map You end it item the for go all takes imagine across various the a end

you as it exactly is in it circumstances. that to more what can Jerome? on. well as So going is add these imagine going Anything would And is

Jerome Rouquet

just maybe because early. were The only pretty back achieving successful to come thing It we started XX%. on really is we pretty QX, in

very add. a point that seeing is XX%. we that are with early that the in these year, were the to great challenges we and think we I achieve to So on The discussions fact given able our embarked customers,

So could host the with team achievement. this

Joseph Spak

forward. about going some Thank things that. great you to for think Yes,

question. bigger you Second, to I ask wanted

little might that playing first the some in contract announced it that front. OEMs, maybe BMS about you terms bit GM for formally LTM front is you EV cycle learned Now that the for the dynamic clearly, does of have this a first of announced? product. what year bookings sales play their I’m the clearly, two next on platform. a of been beyond into what on How wondering someone on GM wireless you that wireless BMS other have that already expect in catch-up strategy, we with foot since terms

Sachin Lawande

I remind before them for discussing BMS. announced had to now, solution another working Look, for GM, speak a specifically besides Right. just we we on OEM with are everybody global large the also that want we are ones I that about

those two, So engaged we are, in OEMs. say, at discussions to with multiple of And are stages addition these progress. would various I

Our for we very all we focus is of EV ambitious almost can the believe plans models OEMs really the And developed scales have that work with software OEMs. the solution and have because different hardware we solution have a on that that larger effectively.

the So far it needs. engagements is the different take learning developing if you from approach, addresses in had our that so have most OEMs will, that we trying platform and a a of to solution

of technologies, of chemistry the in or of a also the is and there technology evolution OEMs a terms better the industry on occurring safety. the the the with same lot underlying going also with. also that the battery speed at with to of same At accuracy we of perform or whether some I time at where semiconductor evolving being is able learning is to measurements respect is that the new are tremendous the that Now catch-up time, of through amount say account faced are would the the

given planning as relatively can the in the So as couple activity products structured these And you to quarter.. mature are will come XXXX in for the that maybe position to it. be next us as huge more more a of is, yet are is will as to terms be get a amount industry of and some trying a terms years, going I of customer. probably starting year with expect this of third how see cadence new do all hope in. the fourth we this announcing But fairly of not importantly, would the imagine, but for a that we busy everyone so in

Joseph Spak

Thank you for that.

Operator

next question JP Morgan. with Brinkman line comes Your of Ryan the from

Ryan Brinkman

taking for Thanks Hi. question. my

offset of suppliers working think the declines given of countercyclical that nature payables, a when I as lower is customer capital production enjoy nice the And production can provide to FCF receivables. impact typically, softer.

inventory uncertainty. to amidst of to heard chain that supply led conscious continuity to are or goods, the a from or strategy suddenness of ensure an few finished materials a they call-offs of even suppliers On has we purchase hand, times other pursuing have supply at customer components in a invest that raw the build

what that capital So track cash and may flows ask forward? are in the And a working I softer wanted were of to thinking we bigger thought be expect how how might going in current to managing the bit quarter. about and I drivers you environment FCF the

Jerome Rouquet

and QX And is adjusted a Thanks, the negative main cash flow free point. year. that capital reason It in this been challenging Yes. has things Ryan. specifically, The for inventory true on build. that working is few the inventory

year. that the from bit exposed. one teams, to fairly first to is with were coming And we days maybe therefore, had close a level more year we this due our of We management good in low XX a the The going little inventory. started

And year. regular well, on safety So we fact changing levels. have critical highlighting as have situations, production you looked well have given during as that customers the same Sachin increased were we their At a exactly at was we uneven the suffering as and from time, schedules from basis. schedules the supply highlighting been the and as were

to So little around the we And the have been our materials. trying safe said more as have increased I inventory bit most well, of builds have earlier, safety that has and been seen raw a be we as is levels. where

have we we safe XXXX. production reductions QX, So be want going think planning especially into the will not into to on to we ramping are major that up be any when side,

So little we higher coming down stage, a bit of at this want into and XXXX. there supply, going will inventory better be careful bit the to But we levels. a end is be probably hold little until will a

Ryan Brinkman

to just the thoughts of peers. Thank of for EBITDA as totally stack the I you It not current latest of you are seem some in helpful. And just you. up produce. very relative the your decremental a on the know, lower the is you And representative on to high situation run business. product That I Okay. long course, what that revenue margin congruous as on of check of then in potential of But ordinary where the going earn is your rate margin obviously, margin, nature to were with given wanted value-add persists. doesn’t

normalize, a you is get years of out? revenue, conditions to industry able of the when when what be even So reasonable a couple type margin do you do higher do think to target

Jerome Rouquet

been say, extent to level normalized a we it, is QX think achieve XXX normalize best costs. in would Definitely, a by I way large these about had at has very run similar way We a of levels, sales The points us running and QX fact, level were no, by, to thanks. basis by last million. year and XX%. where our XXX X.X%, were QX to QX semiconductor to able to we year scale has impacted to we measures at at Yeah, authority look at we scale that look extent at by impacted a some to when but of and last we able in were of kind

mind, demonstrated that sales per has rate of XX%. million And and So the XXX that X.X% in every in level. the is of quarter, current environment with in run have kind we kind quarter

are we nothing thinking way it this the has fundamentally So about year, changed.

by impacted are scale. We

key into and making alluded going year, we minimizing sure We earlier will into XXXX. recovery, as inflation going the are is next be on we focusing inflation that that

Ryan Brinkman

Great, you. very Thank helpful.

Operator

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

Brian Johnson

Good morning.

a rate talk to and about little want take Just the bit booking environment environment. the

with maybe take rates. second, starting So the

when of with launch your As new can schedules, has customers’ of take models maybe be then models contribute want where to existing electronic customers initial you to had we to try factors versus throttled rate really the look features. of at your things be that, know that the and that cockpits have those the what shortage, want expectations could to on ahead outgrowth digital rates you related some ease some of versus the between extent to run actually customers program out features which of the set production up and if chip channel sort heard kind take check you the of automakers was back depressing actually

digital talk So could just maybe you environment? about that in the cockpit

Sachin Lawande

Sure, And bit alluded to you there great as it, it. nuance Sure. it, of will And a question some is a on Brian. but actually. a to that put light try I to is

need dramatic I digital rates increase quite say, in clusters. like that detection, you largely have spot popularity cluster is driven on the and factors. render features et in the by thing case that of would is information to ADAS, be we assist, So has is And first that. take cetera, are ADAS blind for the when that to you is One digital the the change of the see rain cluster that two

running they at XX% are indication anecdotally, their So vehicles, you, for rates cluster XX% on can had in in given tell our rates. initially take example, about Europe, OEM of digital us for I take an

but models shift also is factors esters are the are rates digital same these different just content powertrains, take all are they because top offering And with EVs Plus are and of many higher have to cluster the them. eyes well as on versions are a vehicles that, it so as the going easier together. they EV of having for as make of it your EV coming significant digital the driving and

improvement increased on terms So of us. if availability the to at that And had meet for of of But sales third that performance spite look that our have other of The the shortages tailwind clusters the quarter, even would gone course, a of through, and both in increase side take semiconductors digital is we challenge, demand. semiconductors. more positive actually have obviously if rates better in you unit is we we far the year-over-year of in all in and sequentially. done

we we the So where with to see I puts takes go trend that continue. But is come happening respect will this and that take hopefully gives a you expect on to perspective what as parts, us and more the rates to available start forward, for there. semiconductor

backwards. go are We not to going

think take are an in see products. digital to acceleration going the our I we of rates So

are not our clusters. just We seeing

seeing SmartCore, the same also are are larger for and displays. we the same for seeing We

Brian Johnson

bit and your a well future. is investors is the on comfort pace securing that quoting out, rate, XXXX win Okay. for the How more rates pointed priced you bookings OEMs of pipeline, And even little second, business does just going give in as particularly terms pipeline look scrambling into that of the attractively the opportunities that with of bookings rate due chip there to on below anything bodes quoting one typical to softer and even though supplies. were - win

Sachin Lawande

Yes.

look at than actually pipeline for I next the pipeline first, year. if pipeline levels. of it the the at is stronger you bit is to the year, year even, on to beginning And look So as at back this a this it come the even were pre-pandemic

So the it about be is we as The product pipeline pretty have talked seems strong. mix before. evolving, to

opportunities. more seeing We SmartCore are

are as content. also We seeing because is is what the ASPs a of are that for displays. increasing observation, in opportunities interesting And larger increase more general the

well I think for the that all future. bodes So

In terms of nothing we rates, win changed. see

we for XX% that the have change is around roughly are next years. talking had horizon that few that say so of is we would point fundamentally. anything about And the We midterm the historically are last given. I beyond guidance the to expect year don’t or we the last rates win obviously Our have

growth of is where it the even outlook. beyond business have going continue the going to currently forward So provided as we

Brian Johnson

Okay. Thank you.

Operator

from question Jefferies. of comes David the line Kelly next Your with

David Kelley

than more like you for QX as about sounds just specifically, a then thanks color and thinking little taking Good headwind of wanted with IHS, well. QX cautious of It bit more revenue guide my morning, production. bit levels. but there. mix, Maybe little walk us customers’ a through has And QX a question. auto your exposure just Can been similar to how kind starting the you are

thinking you about impact to as curious are how mix also. Just

Sachin Lawande

share Yes. That it. thinking a is with you me to we let about just try how And are question. great

one have to half, nature the is the of prepared their kind of in remarks. I my that and thing semiconductor in first impact in So shortages QX note mentioned changed that versus

visibility able were that supply was the to shortages the less many weeks. suppliers what and we the quarter third beyond by they of semiconductor more in that the were a so to many shortages that not are suppliers And sense at of saw the also impacted changes in the predictable were couple plan late provide

parts a more some we in ended And less of so critical some had I and semiconductors situation, we parts. where of as mentioned, up

although As in at will more in that There say largely QX. than seems may that QX, parts continue, more we get aggregate, we QX in will probably to semiconductors, look we situation still QX. be provide our that cautious really And of is how in be is to unevenness for causing what I supply. what terms in call we as a this bit us outlook

what that have really is thinking the behind out laid So we here.

those And of it have these visibility out the certain that we lot hoping capacity, things have problem with are We where what suppliers that in really come that And we what outlook as of further that of get improve. more out, has our than and back at we for of full currently happened certainly go is to QX. new account as a suppliers. I’m has also COVID. But being of online on some facilities been terms are will is improves

David Kelley

a targeting not year. you helpful. you and That longer in Got That be follow-up in sustainable a on the cost the of are term, another next times. seemed is I was it. And to Okay. you. the also then it elevated it assuming positive kind think recovery XX% into discussion. pricing rate that XX% semi net quarter But strange Thank with maybe but to third noted certainly

guiding on and I but pricing realize are any given XXXX, just So year pass-along there? out thoughts the next not some are that you pass-throughs the kind of opportunities into to of

Jerome Rouquet

David. Sure,

times. exceptional are these right, are you So

So to be pricing not the are few carry that may There a something going on. is buckets. positive

The first pricing to we how would we say, our I is traditionally That customers, it. about one from is think the business suppliers. and that give that that offset, generally by is pricing is our we get our equation. That

is got for in the other any gets things essentially either grand us of or inflation be longer, scheme So temporary is last that element neutral to that XXXX. then the well making recovered. that will sure is And

going these we So our XXXX, equation are buckets, with overall into negotiating, different but two customers. are the

that looking are So will early it. a at we is little how but bit to land, where say we

David Kelley

you. Thank perfect. Okay,

Operator

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

Itay Michaeli

Great. Thank you.

but I do if and you Jerome, quarter, the fourth the impact it, the fourth apologize quarter. quantify on missed back in engineering Just did I

it going mentioned be should versus higher I think QX. you

Jerome Rouquet

We that and not, incremental versus five have we in number. million what it engineering is QX, have six a is to seen but probably million net

Itay Michaeli

couple on And a it. questions maybe then of Got the bookings.

with you you still the think, year. for I Sachin, confident mentioned are billion six

what kind been hoping it quarter? kind delayed of kind smaller a kind large you are win in of that or of of in the programs is look you medium-sized a just few into it is there have the at or bunch If quarter, programs fourth fourth to of

Sachin Lawande

Yes, Itay.

delays the third everything. the of account in say now of on it quarter, mix So is I would a

usual would So there programs. is your a higher smaller value lot as say, of, well I as

and value, is million I typically in don’t somewhere that to change QX. expect around program lifetime XXX average Our

Itay Michaeli

term. maybe of Got growth of over longer it. kind just on market thing X kind And last

to on about think Is of the I next programs to have mentioned lot any I terms you Obviously, previously may winning even Sachin quoting of XXXX think, the company, market actually environment X% of for how beyond that XX% high-level of, a pace around kind in there over growth earlier highlighted. think improve you year. are EVs. thoughts you the

Sachin Lawande

and how about it. Right. talk just just want Yes, you yet, more about don’t I with a early will number next. we to be would let specific we thinking give share some you it But me of

products If about rates of you and to digital revenue actually very our have improving, that look I call would the mentioned these SmartCore be with digital near we expect doing earlier, the clusters, here from would our as continue. on displays. what call take are And new XX% we comes larger at products and as that term, well

despite growth good of had of these you general semiconductors go QX, over market were even that into chips the at of if a look shortages why So we able is we to more products. the one reasons source digital that

products. And those drive that growth we we like see, more years start this situation as the the long barring market through I we to expect any as next is couple story into I for that Now this to natural fully I to expect for that territory. chips, be have as disasters to would as double-digit talk what continue that be growth of would our improve, more to able our we need our get we we And get year. suppliers the that, chips going of to gone of market

Itay Michaeli

Thank you. That is all. very Very, helpful.

Kristopher Doyle

earnings in Thank interest participating in call third of ongoing Great. This Visteon. concludes and your you, the for our call today’s everyone, for quarter XXXX.

me have you contact Thank you. questions, any If follow-up please directly.

Operator

This concludes Visteon’s third quarter XXXX call. earnings

You disconnect. now may

Visteon (VC) 28 Oct 212021 Q3 Earnings call transcript