Earnings call transcript Q4 2022

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Ryan Ghazaeri

Good morning. I'm Ryan Ghazaeri, Director of Capital Markets and Strategic Planning. Welcome to our Earnings Call for the Fourth Quarter and Full Year 2022. Please note, this call is being recorded and all lines have been placed on listen-only mode to prevent background noise.

Before we begin this morning's call, I'd like to remind you that 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 already done Please not visit so. you've investors.visteon.com material if to download

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

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

now will over to turn Sachin. I call the

Sachin Lawande

Thank you, Ryan, and thanks everyone morning. for this joining us

year for exceptional an Visteon. was XXXX

very quarter growth electronics customers resulting the compared We in of approximately performed XX% or industry-leading sales, ended XXth sales $XXX year increase sales an $XXX production year. increase cockpit year, over production. million million, X.X% EBITDA last full vehicle outperformed vehicle million, of of Our of year was our which $X,XXX customers digital in last Adjusted over an with with X%. the our consecutive of our well, products

development combined shift with The in Company's cost-efficient footprint and to and platform-based commercial sales drove the basis-points. margin XXX product and operational higher resulted discipline expansion of

this we at million, $XXX midpoint Adjusted provided original last was range for in-line with the free-cash that year the flow of the year. guidance time

and at emissions least to XXXX reduce to on Scope Our we committed report and Scope XXXX to in XXXX. compared by by Visteon least X I'm that emissions liquidity cash. has and remains strong to sustainability XX% X, remains by focused over X with compared million gas XX% $XXX have and at greenhouse our pleased

several mission programs XXXX launched submitted more achieved for business new in extended customer product safer, The winning make existing Company well they also and the aligned in and vehicle the formally technology and late in new with XX strength were and our new for convenient. SBTI reinforcing of models. to goal We December billion to validation our driving its year, programs targets These portfolio. cleaner on $X of

extend products trends to address junction year. to new in electrification include and several the These several offering customers OTA our service that services charger, cloud a and service that products at smart introduced app the our this and industry. product converter, DC-to-DC were We for emerging that complements earlier showcased including onboard store for box CES new

for that announced also software-defined our Qualcomm system collaboration future. as next-generation is the the SmartCore with We targeted of vehicles

well business XXXX Our product high market number and portfolio, strong in of position launches, and beyond. us for and new wins performance

Visteon the for a has I industry. entire year for in their would like difficult team to dedication been what and work hard thank the

of the performance Our customers. resiliency team's our the to each and year is this dedication and to result other

X. Page the components. core to demand We the of saw critical supply for Turning semiconductor other a that exceeded products all and year throughout robust

While year-over-year. by X% customers our grew production vehicle

supply-chain related of Our recoveries XX% costs. of by sales robust excluding a impact when grew customer

American in outperformance our of the rapid growth cluster market ramped-up that by market with Our digital over launches driven program higher-than-anticipated the ramp-up in-part production XXXX. was a products to of due recent was North The OEM.

transition in trend cluster. continued Visteon by year-over-year. with digital to automotive shifting This We like larger to smaller clusters clusters, XX% industry's digital XXXX. displays. and of One sales digital new out cars from The higher products displays our a digital benefited cluster also benefited and product mix being the increased from content four to equipped legacy

The helping launches industry significant which mobile by higher sales Visteon XXXX. that all driver XX% is recent grew driven half was shifting to sales on and of performance carmakers about our SmartCore year-over-year, experiences is Digital devices, sales. user in approximately to-high drive growth by drive clusters now cockpit of domain shipped deliver SmartCore Asia. controllers a represent clusters in with

XXXX both in as Maserati the business multi-display in of was as launches, small well Europe displays. Asia, a displays continued in contributed our Ford terms period the decline displays, launched to legacy Nissan larger for wins. Recently new offsetting Visteon legacy of of smaller in and systems XXXX, transition from with growth and to displays business of

and ramp-up launch new We Android-based also infotainment with America and momentum digital the products of corporate Overall, South audio products. in of audio strong sales with benefited we in an North-America. systems recent from activity. of our OEM And launches the experienced higher of from demand systems Asia

Page was XX to XX of company. new X. different topped We clusters and launches, new programs the the continuing with Digital trend Maserati Kia. for globally. XX quarters, launches with launches product XXXX across list, launched for Turning a the displays OEMs with year few the systems multi XX followed busy display by past successfully including

growth for sales these and launches the higher of will this in area drive help exciting product quarters. coming for an expanding Visteon and Displays

Our are and in powertrain XX% that are vehicle program electric our new for models. XXXX digital have launches about cockpit platforms both products agnostic of and ICE

new We the in quarter few the XX a strong have and year program half the finished on of fourth launches slide. bottom highlighted the with

Ford's duty and audio on and system. SUV vehicle the new North-America in super vehicle Going Infotainment for program brands. forward, trucks, several we Lincoln launched SYNC commercial transit, for The supporting launched latest system was is Europe and a lines Ford

other SUV ECARX. on launched SmartCore with model the same a In in as of In by followed our addition, partnership digital first and models generation latest the launch the China, multiple China, as in all-electric well be regions. cluster center of will infotainment additional the vehicles. on The displays in domain programs controller Lambda we cockpit we launched Lotus

Romeo. from Additionally, we launched inch cluster Alfa and XXXX, comes And multiple to variance. XX including Jeep, on we for a in production. digital less and won Stellantis that award we in of years cluster than two brands Fiat launched QX The seven

of have been near ongoing we momentum our the launches for midterm Our years, growth. sales XXXX building in programs extensions demonstrate program in and new continued vehicle prior model and launched

and growth programs are launching beyond. product across XXXX drive lines that We all will core in further

in X. the Page new significant won billion of achieving we disruption XXXX, the did target $X single to including set-out considering has shortages. core in particularly beginning is All Display billion $X time We the over $X.X category billion Turning This the caused supply-chain at awards, year. our had the well, products a crossed product in by the mark first in year. this business

first new representing digital for SmartCore the clusters OEMs billion win with Toyota. $X $X very of two brands well, won our We in XXXX, also winning did three and Europe, business over car billion over in adding year. global including

half more digital cluster to in all-digital cockpit wins year the region. more OEMs represented of that than start Asia in as transition to

in for tailwind XX% We anticipate of electric that XXXX, about will vehicles. the wins be in And our future. electric vehicles growth for total digital of a Visteon were cockpit

had vehicle business customers BMS our to for several as future the updated plans added in We EV awarded models model launches years. also their coming

first the a right the driver be infotainment North popular Center QX a camera XX line SUV The a for for version OEM. on will featured of American and on integrated slim design inch facing The is highlighted win electric with display OEM. display tablet a an center vehicle like users

new in We extended that in with customer the launch two a to currently SmartCore SUV India XXXX. will compact models that's in-production program

features an been and Our this functions. updated first this launch with feature additional technology of launches very will has SmartCore and successful SmartCore follow-on OEM with

third follow-on this an with win Japanese display Lastly, win on for vehicle. OEM. win slide existing mass-market the on system follow-on highlighted is high-volume is a multi This a the

was lead the vehicle the brand. for luxury While

multi the trend mass-market how of display come example perfect a So the to starting to segment. is vehicles

the years. major the and trends mix industry is in XXXX example Our we of in transform with our product sales how the a portfolio great was well-aligned automotive expect will coming

million X. loss million semiconductor vehicles automotive and XXXX semiconductor XXXX X.X about industry, is Turning for lost about to improving shortages of suppliers vehicles. a The to in the outlook while X Page

will However, In be the semiconductor shortages chips were microcontrollers. in in of XXXX. nature and analog different more power constrained XXXX the

power In Texas manufacturers by we semi. capacity gradual integrated in-production on and improvements analog made with XXXX, investments and chips device expect like Instruments in

front-end continue semiconductor be will capacity for on constrained to that and However, rely supply. wafer suppliers the foundries

As capacity used that nodes these higher invested not automotive. are foundries in in legacy nanometer for and of XX have extensively

are demand, may start and the soften, experienced XXXX especially issues persist environment also concerns consumer believe this in us to to macroeconomic industry the that macro if throughout causing year. strong geopolitical Weaker the

in to to tighter a forecasting production global to As up units. But XXXX vehicle in be first-half we over to million expect the we up customers last year. supply. X% result, due be lower semiconductor XX modestly are Visteon Furthermore, production

second-half the of in improving the Before year.

But the outlook customers have causes a customers driven the full-year. In our economic Europe, perspective, and us geopolitical regional in to and production remain recent at temper launches modest due we our From model low-level inventories. for our North-America books. levels expect to Mid-single-digit order optimistic strong of dealer by to the uncertainties ongoing growth

the last production started China slowly has in fourth impacted in quarter after January year. of COVID-XX

While we production increase throughout X to the the to country from COVID anticipate transitions X as vehicle lockdowns. year slowly

And We expect our global in customers pronounced to year-over-year. production especially China. vehicle be operating digits at low-single with down customers our in

are vehicle supply XXXX in just about summary, account on cautious In mentioned. and I that we growth dynamics, of production demand the

with better believe growth also that the team XXXX our and combined beyond. operational our the in product capabilities of support we have momentum we market built portfolio, However, than will with

billion our the be Turning billion. $X.XX to anticipating XXXX, of sales Page X. $X.XX to In guidance, the to at we from with are [$X.XX] range billion midpoint

the $X.XX we impact which $X.XX a billion. sales, right-hand at based provide the positive billion, XXXX recoveries. guidance page, of midpoint excludes of based On chart waterfall XXXX side customer the of is the sales bridging approximately from which

we of previous in As XXXX. a our customers, slide, vehicle X% in modest production the stated are on only expecting improvement

XXXX, strong base two performance outperformance additional years However, in excluding past we that customer will sales recoveries, plus market the launch continue our product growing with launches to in new the in expect mid-teens. drive

of growth. XXXX, improving base of will expected of open-market last is combination double-digit of impact mitigate to another impact headwind. foreign-exchange, Like With and of year. fewer deliver to be expectation compared the customer as it supply, annual chip net year in The slight to semiconductor semiconductors we need shortages sales we of purchases the a pricing to anticipate

pleased product supply-chain operational expect forecasted which customer we the result, recoveries in XXXX be base growth multi-year capability. Overall, a as mid-teens sales, I'm and XXXX shown on in than excellence in the with our to lower boxes continued transformation waterfall reflects the chart. As dotted

executed challenging digital growth, the bookings, by that number $X build cockpit will the launched our market a during business continue high near for suppliers, in and outperformance billion drive to of I a programs Turning company future environment. investors our to for summary, customers, helped would the to a continues Page record In very support XXXX, thank like what in well and sales to in in employees in X. challenging to year. mid-term a foundation be which We drive the strong year. new

look towards in trends high-demand we anticipate we for beyond, As we key our digital driving and cockpit alignment from sales market electrification our product growth as portfolio of outperformance benefit further automotive XXXX and the products. with that's

We Day at our I will strategy and automotive more on be look-forward vision of trends that sharing all City. couple in weeks in March our for capitalizing are a New key seeing on the able York information to future for Investor Xth to on attend.

over the Jerome Now. financial results. presentation review to I the will to turn

Jerome Rouquet

Thank you, good morning Sachin and everyone.

the a management. Visteons cadence in product with the and financial another to $X,XXX of able QX were commercial million unprecedented few supply-chain operational in proactive quarter quarter of Thanks results recent outperform We for and record very our industry volumes. combined production a quarter launches size Visteon. to quarters, sales fourth robust reflecting strong last came were execution.

while supply benefited semiconductor we quarter, the we the an first-half between from our brokers a securing still of important has and In designs, amount are also supply-and-demand. since proactive Although of disconnect through components year, product the improved seeing distributors.

prior with the recoveries and up our in by X%. from were foreign-exchange, XX%, the which through customers, to quarter. year, elevated Compared increases partnership negative shared we sales approximately impact recovered cost including cost reduced the sales In customer

quarter. offset was production increased Incremental customer XX% price-downs were over by by X%, up also recoveries, customer pricing net excluding partially for While XX%. Visteons sales annual market volumes the our growth

XXX of performing. million versus a X.X%. Adjusted representing is EBITDA sales EBITDA from margin recoveries underlying indicator higher also million, our year-over-year record a Adjusted were to benefited customer base base year prior for Visteon. of excluding business and how of operational level million, up a sales basis. $XX This and improvements. was Finally, a approximately good is year, comparable prior Compared $XXX On

as customer approximately from as in headwinds, incurred the impact claim recoveries benefited $X and customer one-time quarter gross to an these year, engineering increase The last benefits of non-recurrence Partially catch-up costs year. in also the earlier were a million offsetting of well related of both the currency SG&A. in

strategic Sachin, incentive mentioned of by impacted engineering, continue engineering as various program higher by quarter, one-time SG&A were While this areas also compensation while gross expenses costs primarily increases. to in we to related invest

for flow in We inflow higher total ended capital, driven free-cash of a recovery collections. cash million. by Adjusted generated an EBITDA the and by $XXX of primarily favorable million, net the $XXX of of customer quarter $XXX resulting an million with and position quarter debt, $XXX working cash was million increased

XX. Page to Turning

million For the supply-chain challenging and availability. volumes XX%, modestly growth growth benefiting semiconductor increased in as Eclipsing full-year, environment of industry a launches, management when of our compounded production was set XXXX, $X.XX proactive by was Since were Despite from constrained recoveries. robust sales billion. this billion. customer Visteon's industry sales have be annual units. $X.XX continued to achieved came XXXX at previous Which at XX record production volumes in product

sales excluding annual a contributor pricing Compared XX% customer over to provided by growth price-downs positive volumes while prior XX% while market production Customer grew X%, headwind. offset was an of year, a XX%. in foreign-exchange X% was increase was of recoveries XXXX

XX% in the XXXX, customer $X.XX an XXXX, increase of periods. volumes Excluding XX% billion sales base while compared same were production recoveries, increased to approximately in

nearly three engineering margin cost over have efficiency XX% years. higher an incremental excluding on conversions X as footprints With X.X% well adjusted higher-volume last relentless and approximately been Our improved approximately improvements, the best-cost platform Cash-flow with as XXXX. was EBITDA operational an combined our of percentage XX% launched approach, nature XXXX margins of the average dilutive in programs customer full recoveries. platforms when than points

years million Turning to net a highest position position net ended a in sheet. maintain with cash Page to balance resulting total strong million. our cash year XX. a We commitment our million represents $XXX a five $XXX demonstrates cash of of balance $XXX the and in position of debt maintaining and This

extending and we cross-currency were In in swaps. our debt current low-cost drive X.X% ample our our short, and through with debt debt refinance maturities addition, shareholder and proactive XXXX to value. last including a a earlier actions approximately of of strategic year, flexibility In interest-rate locked-in have invest we when

the the $XXX focus expenditures. in quarter. in was in free-cash inflow Adjusted an continued inflow of driven was and flow on our improvements profitability million The quarter of by capital cash optimizing

spot we the related impact was capital better were for to inflow the purchases quarter align an and In corresponding the addition, able as timing working to recoveries. semiconductor

year. year, compared generated negatively we For was impacting $XXX adjusted Trade free-cash the increase our of issued for EBITDA. adjusted levels. flow. an prior the primarily in disruption, in In-line flow by with expansion working free-cash with our guidance million full-year, year inventory original February The to of driven was of adjusted outflow capital last the supply

on we we Capital programs on some best-cost continue than anticipated originally use. as timing as we expenditures we lower at the as million favorable benefited the in as was industrialization for came to $XX practices focus from also well year, equipment CapEx spending.

are With XXXX, year team's to to remain the conversion about to cash the for of nearly we ongoing for that improvements. generate the company. drive Our conversion cash actions continue critical commitment cash for cash-flow XX% demonstrates diligent

to full-year XX. Page XX, for our present Turning guidance Page we On XXXX.

for guidance represents which an to midpoint sales is increase Our year-over-year. $X.XX X% billion $X.XX of of billion $X.XX at billion, the

growth while to up prior mid-teens. this assumes the midpoint, on customer is the year, low-to over compared to X% in be anticipated is our production Focusing market

will normal side, million for recoveries. negative pricing pricing annual lower X% plus translate due XXXX, of to price-downs customers. the associated lower that the approximately customer purchases On $XXX assuming and to or our we primarily spot into recoveries are than XXXX currently are This

billion be a approximately On this $X.XX basis, we anticipate XXXX. in year-over-year a based recoveries customer to equates comparable base sales. sales in XX% increase will Excluding

XXX at EBITDA be and result to a $XXX Adjusted to a engineering Compared basis-points partially operating by volumes increase representing spend. in is expected is XX.X%. million, adjusted midpoint, expected margin XX.X% million a to efficiencies, year, between to margin XX.X% as and $XXX EBITDA range offset with EBITDA of adjusted increase net of higher an the prior

percentage net invest expect Compared of recoveries net be net impact XXXX, the strategic of We engineering cost the as continue supply-chain be of disruptions similar. various to-high sales mid X% to we'll areas. in also range to will currently in a we as anticipate we

by to anticipate will due basis-points that Finally, we customer margins be XX approximately diluted recoveries.

free-cash approximately Adjusted between free-cash flow million, adjusted expected one-third EBITDA is into be to and which million midpoint $XXX conversion a $XXX adjusted at of the million $XXX to equates flow. of of

capital challenges. outflow supply-chain and working be of expect We will for result as sales ongoing year an the the higher a

our the for CapEx India. manufacturing invest is in plant and future expanding at we in million $XXX growth, as forecasted EMEA approximately Americas, capacity

We systems, display as as investing in also industry-leading and bonding well for optical preparing critical capacity our and are capability battery growth. electrification for management

timing and unfavorable And of Despite guidance, we finally, percentage of in spend highlight is will practices, negative not a the forecasted to some cost sales negotiations these be unfavorable we low consistent customer supply-chain the quarterly CapEx investments as of QX are industry with timing range. in with do and remain which production providing to existing want to even though sequentially calendarization recoveries. related and our some volumes X% down

profile earnings XXXX. As we cadence we had to a follow expect in the a result, one to similar our

and cash-flow year displays Page we anticipate a FM analog to another controllers transitioned industry-leading these from starting trends AM the digital key to from early initiatives which systems. numerous growth, challenging on XXXX, domain battery clusters, secular initiatives in management our expansion cockpit portfolio sales centralized smart primarily we advanced been outlook while radios and outperforming represents to embarked making clusters XX. as Turning as benefit environment. have Since us generation. has enabled in XXXX, and years we XXXX as This margin into

in year. a trends product industry secular new very well a wins and aligns has every with portfolio robust a We now levels of key led to the that business have

engineering with In have been cost our class base addition, we best-in footprint. optimizing our

increase product grow by implementation The that the From supply-chain the as by COVID-XX cost-focused XXXX platforms and been industry growth X% annually organization. forecasted of and constrained introduction modestly to of production volumes a are associated challenges. has pandemic

environment, forecasting strong as margin in In annual generation, actions growth the of we taken. performance basis-points with result expansion an and of XXX sales rate cash-flow representing a recent financial of increase an are have we XX%,

long-term Turning remains to a XX. opportunity. Visteon Page investment compelling

and for close flexibility. expansion sheet company their the work by strong free-cash organization to would and record like drive I provides growth. way for the generation our growth, hard thanking future margin positioned have balance entire We again top-line and to performance ongoing flow in the XXXX for Visteon pave

our with Sachin Day As a to you thoughts weeks. are and Investor in few growth look-forward our capital we and ongoing mentioned, allocation hosting March, we story sharing in

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

Operator

[Operator Instructions] Emmanuel Rosner with Bank. Our first is question Deutsche from

is line Your open.

Emmanuel Rosner

much. you Thank so

you hoping in even towards saw but low-to sort was you The it in sort add like what of in the reported, would of environment I of margin presented guess your that of could needed is, back outlook, some but sort are obviously, of challenges, if maybe be the is past, sort guess, mid-XX%, probably the broader you margin like sort sort I the to like some. the you'd to? sort Inputs of in as be put of what you guidance midterm I of getting existing take, question XX% First go like for or like the margin mid-XXs, that guess maybe I the outlook recoveries, of which XXXX context sort like

Jerome Rouquet

morning. that, It's I'll Emmanuel, good sure. Yes, take Jerome.

showed but in go And we this billion. -- with guidance at deck, down are $X.XX about that still the margin. shows $XXX recoveries with we of XXXX in had in recoveries. will our XXXX, for in XXXX what in have 'XX sales we'll So million from our no recoveries we've we've is, And fact,

really total $X.XXX And for sales, So, at they it recoveries. the at base XXXX. right minus are billion way is are to look which sales at to look

sales essentially, So $XXX by target in of $X million. we're the billion shy

get And essentially mid-XX% if in sales $XXX at million margin, to you you the essentially XX%. would this incremental add a

of factoring our in, and for in leakage the 'XX. -- that's are still we including So that not any even guidance

few at line, we before XX% a target. our we bottom And it volumes towards much had XX% very to the anticipated $X not first originally the So because question on quarters as we industry is are when billion just are track get we gave XX%. of are volumes lower a

Emmanuel Rosner

in guess, a Okay. And very second up, investment helpful. then capital step I forward? needed then and be specifically the I investments to pretty growth. the I of in on specifically allocation flow and one, free meaningful that guess thinking we your for terms CapEx, which by seems on it what be about is should That's how driven means cash going this this in guess terms of year

Jerome Rouquet

Yes.

There's so in we're is, going from fairly between And So a of bit step-up. year we little bit significant in timing that this to 'XX. was 'XX end a had guided a I first in and $XXX expecting. or your 'XX. what fact, were $XX little on -- it million of million say to million we $XX 'XX the point, low must

see we'll that of drifting this year. QX into of So some

do In terms and major, up have, of display nothing we to the XXXX. the the much We investing capacity step-up, CapEx growth plant for of expansions as profile have bit essentially very but aligned well electrification, BMS, a adding that the on as it's really well little on, side. in going capability with it's

I bit manufacturing, say are beyond IT. then a And in we little well would investing as

in past. close used staying step-up X% to we're investment. we've Generally been So that's the of range the part the to that at in

Emmanuel Rosner

Thank you much. very Okay.

Operator

question next Junk with from The is Baird. Luke

open. line is Your

Luke Junk

for taking question. the Good morning. Thanks

you that on just First, remarks operating those in guidance. investments I'm the question the and engineering I'm on expand fourth specifically, and expense in hoping prepared said the terms you it here just Jerome SG&A could going onetime incentive comp in of for items in quarter impacts rate just square the run we saw and the with forward to trying that items? levels

Jerome Rouquet

Yes.

we terms of as in the engineering, But overall, low. fairly just year color I'll in the our -- So Sachin some ended of engineering I'll numbers, being and terms let give with with investments. well start

were we we to gross a fact, In higher a the as that engineering but higher by of million of essentially bit little recoveries of $XXX well. in close incurred, onetime terms engineering, offset because

So year of is to guided think, full were, the what slightly engineering, than X.X% in originally. at I overall, had which for terms lower we we

little a similar to we're bit CapEx, So starting base. low with like a

In terms talking of investments aligned we've services. for his well about been very as electrification. prepared year, next it's much with Sachin talked about, what remarks online in

Sachin Lawande

can I Maybe here. jump Yes. in

Jerome Rouquet

Yes, Sachin.

Sachin Lawande

we so both technology vehicle are Luke, go in the towards EV yes, that. that through on in trends electronics. and for anticipating the the power to are train and So software-defined automotive a domains corporate the and are anticipating initially, accelerate preparing two And these going to going as well industry trend for we are as

et we in we areas, are passenger vehicles, cetera. to two-wheelers, beyond SmartCore our extend such looking as these good today Now technology. and the commercial But those market, assets and at have opportunities vehicle address really BMS assets even

of we technology, and power safety edge to investments as and the of really faster levels is BMS functions, going we mentioned, And in forward. electronics. features require go and EV from new this capabilities, for higher for add add a and power for cloud features And our towards new services, side that push as the charging Jerome and are cutting and train especially of areas there's some electronics, driving

Jerome Rouquet

where were. we of terms increase in percentage for slight are engineering anticipating next So versus we year, a

and said, sales as between of as X.X% engineering for will 'XX this on percentage a year X.X% be cost I X% probably XXXX. So and

as In terms we investment in we of investments versus will essentially in inflation year-over-year SG&A, well modest and what flat there, keep had percentage our IT, XXXX.

Luke Junk

to Lotus in that to follow-up, just with of together? understand both my two Thank then how with for and partnership I Great. the And that. Okay. you are that detail. Very relationship you. mentioned was launch the Thank about for ask companies working hoping the Sachin, hoping you helpful ECARX, mechanics better

Sachin Lawande

Right. Great. Yes.

integration in So is, the cloud terms of in know, vehicles the level as you the China expected when world that's of rest service you market of different talk about the for from China, cockpit. the in

provide we SmartCore our So platform.

that all features and services. that's hardware, OS HMI services middleware, it So of ECARX all cloud the the well the as SmartCore and functions and these of of top their has brings on as and

So extent don't to can. this is in expect something that to able our that partners China to the offer Visteon be we

And so collaboration of sites. this brings breed both best the of

on the this proven has we launched in technology SmartCore virtually marketplace. Our any supplier that customers well really accepted than more and have been now other

And on their ECARX the the way, bring, and that capabilities ADAS, in getting using assets by and with services, other and the China. smart also especially integrated they cockpit voice and cloud more applications with more AI that's

So our collaboration. that's nature the of

vehicles several had have launched We already.

about And for in what so means pretty growth excited that future our for SmartCore China.

Luke Junk

That's I very there. it will leave helpful.

Operator

The David is from with Kelley Jefferies. question next

Your line is open.

David Kelley

the I How with taking versus discussions ongoing in been the as with we Good well. start I morning, recoveries? those XXXX visibility much my and about guys. I customers? negotiated the how should to Thanks today for sales. wanted think recoveries, guess, to questions appreciate color on has your expected on impact

Jerome Rouquet

Yes, Good good that's question. morning, David. a

close So very to XXXX. had in better, pleased the million, of we versus original slightly fact, in level first was recoveries with target. Net leakage our $XX

mechanically, XXXX, of would of go most say surcharge we recoveries or reset. a the I are kind that into As

But at customer for these that XXXX. the our the same months, discussions with last have time, would indicating had cost continue we few increases into

an that increases still recoveries cost are And is decreases that have. some we'll are expectation XXXX increases cost we of we'll XXXX. the obviously into as far true-ups XXXX there roll in for of middle level add or So, negotiations definitely And the concerned. as will

distorted other a earnings negotiations profile as to the quarters. in throughout little this year we more have like are of bit of we've middle recoveries. versus of again close and year the we'll QX ramp-up success in other of you'll probably more earnings successful terms I indicated the as in will And a by right on be think, see So lot that, a well, suppliers the level profile that our

David Kelley

content Okay. That's change away moving were an follow-up that then I higher let's last micro-controllers you in A, to from helpful. the supply impact shortages back type at supply have from you it, And digital to acknowledge analog Got due dollar held Does a in And does it. the mix on on the shipments disruptions. ongoing all year. those shortages the call XXXX? maybe chain some guess, the issues of just and of question on impact like of the XXXX? in and mix

Sachin Lawande

No, us expect And 'XX Yes. 'XX. that shift to try mix how that in good a that's let explain we impacted the me has and question. in

chips. mentioned, shortages of So products. across in all analog area the XXXX, the as in and And primarily I power as were they cut such,

keep build you in if there analog rest of some circuitry. the the requires chips chips into One involved, things And these we product also the the are displays mind picture. is power drive are that that of there can to every come

were So our some all impacted of in to level virtually XXXX. products

Towards end is of work with the of started the suppliers. improve. our and that to of supply see the analog started we working in specific these log account ahead power we chips XXXX, of think have to that in of terms done And on I the also industry most

chips see respect here we start in XXXX, as to our power with improve. analog situation we So and

of suppliers lack year. that is shortages that in improve. great We more to there improvements, to very to of emerging -- the the wafer foundries seeing But end driven micro continue the the semiconductor of and are last supply towards areas of not those by from controllers our have that already we visibility expect was that

more became digital in a micro of in controllers, come will year, as started situation line controllers. others. Those than, the apparent it to or more those micro particular, clusters that to we say, with our start And shortage end product or our affect the SmartCore we

as And So mentioned we expect half that the we I've the also anticipate in year, there. before. of improve to second impact some

the is we of we've market we especially position and forecast to that around would over what in 'XX. that forecast, At then we some would work more to to demand as of some that us as the the same to give in anticipate are continuing we we position on clusters flexibility the redesigns our a with shortages, the redesign the time, with especially growth so products address be in factored be forward, a we go more launches had forecasted have that for that's our

David Kelley

Thank Got really really, it. That's you. helpful.

Operator

The is next BNP question with James from Picariello Paribas.

open. is line Your

James Picariello

extent perspective, limiting choppiness to chip more think X%. up But prove the in some second morning. this year to weakness chain, your from for half, the supply Like industry full-year through chain just as demand back some to were supply above still growth. resilient a see supply half, to of first half get semi-supply standpoint production what your what's MAX in the to assuming relative growth you the you're LVP then a if it? the the again, to can handle production assumption taking do Good from Back better X%, demand you

Sachin Lawande

Yes.

half, even that like But So having we chain the first in of would it supply to today that we holds the especially improvements we clarify demand I the outlined. stronger the believe is to the said with have than up, what that, second production then units address. if all, that I the beyond expect demand improve as see XX even vehicle can million

up for -- me that's say. from hard to XX, from far it might Now how go,

expectation that would be production, be the million constraints And of somehow again if would if would the units XXXX industry industry were supply the where that I to X to you so would added do that kind be able to of XXXX, think the that range lifted. about about my be expect

James Picariello

add do the that? would growth, assessment would reenter that? we your Got Visteon of again, it. were thinking hypothetically, be market units How And the broker we best to production point, for if be could X contracted chips? should to that your -- that have likely million this about Or support we to force spot add buy, at possibly supply if

Sachin Lawande

that of the Right. because case done. have we the all in redesigns In expect that even demand it the we higher be would is that general, less

will help are of two levels has that there account So in on supply suppliers. up by do our work we us been dynamics done to that go themselves the 'XX. the One, expect

that problem, now is specific area that are And a we micro bigger controllers. which highlighting the

able be that it I are would around the that second the work we to in half. redesigns we With doing, expect

expect where spot and our lower with increase the demand we So keeping supply buy up that event overall, to in I the even our see be demand.

James Picariello

helpful. Super Okay.

one year. to cadence last ramp year? to sequential know point quick I the chance it's one. a for Just similar on a finer get the Any

a to relative marker get the on XQ or year-over-year how just on XQ Just basis, for maybe off? better a starts a to feel year

Sachin Lawande

really two any but by guidance for We it's impacted things. won't QX, give

and production. the is second negotiation. the First, then the point recoveries of And cadence the

I QX. down think for IHS is already showing X%

throughout what So quarters the drives that's essentially levels recoveries. well as the the year, as production level of

Operator

The Wells with next Langan Colin question from is Fargo.

is open. line Your

Colin Langan

for questions. Great. taking my Thanks

areas. versus When just $X clusters last like on to or of XX% there's year. cause this think I wanted other if That that the swing, XX%, by that's reclassification that? Just there? at last going something about I about mix there color a business there was of swing? impacting big it timing look be that ask Is Just billion this year, offset would is would kind any year year wondering obviously, wins. the Is in new segment the

Sachin Lawande

No, no.

is So Colin, Sachin. this

year It's seems but strong, issue. don't a just not had some structural year, Last pretty I anything other we as be there's this clusters, sectors So and to for think timing good were XXXX. there. reversed a the in of

say respect expecting So views different we anything I that our go-forward on with wouldn't clusters. to are

Colin Langan

it. Got of a I incremental excluding And something sales, the looks the XX% guidance, like recoveries. the like if at impact it on Okay. look

these on costs to input call the XXs of mentioned just a then on is low input sure you've I just costs, - there I and any all as we're any -- normal. get R&D want And The think this offsets. I expecting? the size is make color that a headwind

Jerome Rouquet

Yes.

So - sure. we are Sure, Colin.

right. you're So

are we we I are XX%. the incremental we but at -- value, think are face XX% So recoveries, removing

offsets the in that well in just we low as XXXX, levels in converting which that are largely is we 'XX. the are at because recoveries. engineering, in the harder levels as bit seeing said, that are The mid-XX% we absolute the and volumes are, the comp, came given engineering of it's It's range. not So increases little normal a

And by is operational modest We SG&A. increase offset have this as a well then in improvements. all

had would $XX what would of We're XXXX terms we leakage the carry in essentially forward of, terms call million I I leakage, say, that In that of will disruptions. into the the in net XXXX. assuming chain supply

a amount amount XXXX. but same bit is little be the of different, The may same So for geography forecasted leakage.

Colin Langan

of more this -- timing because this that's and called thought out? semiconductor year suppliers same the is last is at as year other year getting costs have labor-related to and I of Or related the recoveries? And because those it was last that a lot

Sachin Lawande

us, definitely It's -- for more semi-related. Absolutely, more it's yes.

Colin Langan

taking for Thanks my Okay. questions.

Operator

Citi. The next Michaeli with Itay from is question

Your line is open.

Itay Michaeli

morning, Good thanks. everyone. Great,

is GOM can year mid-teens strong. kind is -- of that sustainable beyond -- do bigger bookings targeting years? the think a what that that maybe picture How you are sustainability this you future into support question sustainability year And Just of we obviously on kind XXXX? should this

Sachin Lawande

Yes.

So billion in let's win, year, see market how in happens continue And last able and will this the about at and be of we'll the should we of the into we we GOM this But that future. have talk targeting be, year. as of here terms wins what term. going level least near done -- again, to with $X mid-teens our

having we our percentages is the Investor up Xth our base. as color on increase it here and how simply forward, will going more of of see to coming be go some increase outer future Day the base develop. the of that's the on will on the on sales we provide GOM we we March, But as about the Now because more effect talk years

Itay Michaeli

sure a from cadence downs? have this follow-up. here the maybe on some Terrific. these of early year, just Or settlements are of quick timing so recoveries That's more be a Back issue are to price just to year? it proving normal clear, course challenging of kind the in helpful, Sachin. And is to I the make that

Sachin Lawande

XXXX. very to we what It's similar had in

So negotiate it the takes recovery. with some time to

negotiation in negotiation similar we cadence the cadence closing anticipating XXXX. the So to are of we had that be successful the and in 'XX of will

differences two. the no between So major

Itay Michaeli

Perfect. That's Thank very you. helpful.

Kristopher Doyle

our fourth in This of year quarter and full your participating for you, in interest does XXXX. ongoing earnings and everyone, Thank conclude call the call for Visteon. today's

have or me, directly. questions, you. you Chris any Ghazaeri If contact Ryan Doyle please follow-up Thank

Operator

Visteon's quarter results concludes year fourth call. and This earnings XXXX full

You disconnect. may Thank you. now

Visteon (VC) 16 Feb 232022 Q4 Earnings call transcript