LEA - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Dahana, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank like conference now to turn to would over the Mr. I Vice President, Elsesser, Investor Joel Relations.

sir. begin may You

Joel Elsesser

Thanks, and Good first Dahana. morning, quarter for joining XXXX our us earnings call. thank you for

the the Jeff was are President this on the release Also Ray are for is through Scott, website, call Vanneste, and other Officer. members on our Exchange participating link. the press Our Investor presentation morning with Relations Chief Commission several Securities Financial filed call Lear's and our lear.com, and team. leadership posted CEO; and Today's presenters of

Before that making we we risks begin, forward-looking I'd the be like uncertainties. to to remind will subject and during you statements are that call

at impact future presentation that of the described SEC the and factors also Some in statement results beginning our the our of in could are filings. Harbor the Safe

also We financial to referring will non-GAAP certain measures. be

found for measures Financial the presentation. these agenda regarding Information information the can Slide end at non-GAAP Additional the the today's of be slides labeled shows review. X in

the formal we'll your take to pleased questions. Following be presentation,

turn Now it to turn over X, I'll and slide Ray. to please

Raymond E. Scott

current grow accelerating us market like than results comment sales a increased our off our and product authorization cover cash We are our Thanks, minutes. quarter long-term Lear's earnings ability dividend, will profitably allowing and our and our revised product I'd our we Jeff to first again faster a guidance. for trends, to sales great aligned quarterly are flow. grow well repurchase our sales to unique Both start and and capabilities this Joel. industry on to increasing year confidence in full delivered outlook our We're to strong cash share few record production. for We year. segments full results our demonstrating free generate industry and But outlook growth. first our and and year continue in

electrification We and quoting are in product on activity connectivity. in experiencing increase E-Systems a significant

Seating and we launches product growth industry's over first leverage support sales ensure in record backlog period few investments will sales our business invest our our significant from to backlog in is the includes This guidance Seating and our In industry's for includes in growth of successful capabilities. and seat years. rate that the crossover market We that This acceleration XX% In backlog shows million new business. E-Systems, future year sophisticated content of the both electrification represents on growth have XXXX. and the X reconfigurable drive In continue XXXX in tracks to the of three growth launching increased the next of segments our for connectivity. XXXX, backlog for we connected E-Systems higher will SUVs. continue combined module. electrified Slide will we business Seating launch and that most and to be gateway our E-Systems $XXX year above our execution the to an

opportunities growth consisting Last non-consolidated to OEMs. components our backlog Our China to had electric of XX% highlights billion the electrification backlog domestic $X.X China $XXX mostly trends these year, approximately for is high trends, and the related of the revenue of X acceleration related the including sales is power we million connectivity. Slide in and in approximately vehicles. with of

that connectivity. new connected. business. are software, X for growth in to of $XXX programs business Over were technologies. into are of is This significant for $X that and these of in and launches the will gateway E-Systems. launch significant These multiple pickup January, component year, million including new take have with powertrain. now is FCA of and capabilities on we Seating that with the the and and programs we as managing With of rates both Jaguar. high That we growing. strong year gateway produced changeover and electric new vehicles well-positioned Opportunities many content sophisticated billion be we and quoting have Seating, some half of estimate nearly In both the as number launching time, backlog. quoting XXXX. industry's growth expected globally next most Lear key will By module three we XXX our launches XXX E-Systems penetration all key have to electrification years XX% triple reported globally Audi, to the some By $X.X launches higher trends billion opportunities. up are power shows increased In with connected expected the we we number type backlog concentrated in In annual plants. for are at translating advantages vehicles as, in SUV XX-volt modules launching These opportunities electrified markets. we same the crossover related that of XXXX, architectures, and to follow E-Systems, to future are produced well for a launches our content while number Slide

the in make strategically advanced to these modules a Lear's data wireless and the highlights history and and organic X and onboard Lear module, which manages we the investments. in over We data signal to trend. how years gateway added to platform investments signal that Slide management connectivity the participating long several is vehicle, ensure outside a acquisitions continue vehicle has the launches. combine to with vehicle. extend has capabilities and The perfect leadership past connectivity through are connectivity successful gateway position the

now gateway centralized and cybersecurity, product architectures with capabilities such in We and are over-the-air trends is strategy aligned as new with beginning industry in central opportunities. software focused launch updates that electrification to application increases E-Systems support Lear's processing. advanced connectivity include growth the significant modules significant and connected will

Okay.

gateway slide Now modules communication this for connected to year first the launching are industry's turning XX, Audi. we and

development. capabilities. These products products utilize Ethernet functionality product eCall, leading connectivity, connectivity Our to are architecture industry software updates, X.XG over-the-air our cellular delivering modular enable efficient including software

will module sophisticated and another most said gateway communication shows the connected I the earlier, Lear's be in Slide market. As product XX of example this innovation.

that unique the an capabilities this to which system and Gen We recliners. is teams a vehicles' solution it enable Adaptive The recently launched track makes enabling is solution next shown convergence provides ideal applications. Go power product product perfect E-Systems, engineering generation of the on provide E-Systems. on system, & slide. between power for the our easily ability Leveraging in seat and system to developed example within to heating configurations Seating rail rail seat untethered and a is like features mobility Peugeot advanced numerous Its interiors. II seating flexibility Drop Seating Traveller, significant the Our our

production launch generation award in first this with European seating Our a adaptive for power-enabled third system customer. XXXX will major

enable in sales the growth segments. global sales other both All mid-single us are growth business future business autonomous expect SUVs above the digit In vans, see In growth digit opportunities for in vehicles. we OEMs our We on discussions to we market. E-Systems, and range to currently continue Slide market. above deliver segments. to XX the summarizes in crossovers, accelerate growth opportunities range production with seeing Seating, for applications for will the high-single above several above industry both we're tremendous

approximately expected the be year-over-year business significant will to XXXX, increase $X.X technologies continue for to a billion. both opportunity addition growth sales to discussed to In by the our In slides, XX% previous are segments. in China China

gains leadership $X.X market We from OEMs. to China Going demand content forward, a for in seats, opportunities with growth come in growing by powertrain. continued will billion the sales in share China for see Increased drive local higher led and position XXXX. by electrified

outlook. and I financial Now, turn will to Jeff over it results cover to our

Jeffrey H. Vanneste

rate XX key grew a highlights operating XX% Thanks, driven Ray. backlog, in by delivered operating shows the strong first two Lear per share core a per partially million, segments. up Grupo to great sales lower tax Slide driven sales. foreign growing with shows quarter reduced exchange, earnings production for the for by the our Antolin's $XXX quarter Slide volumes Sales a quarter. segments seating XX%. by sales E-Systems driven earnings, results XX on platforms. sales increase Core with our lower Both count. Adjusted record Seating earnings We by in double-digit and the was first record the of product the E-Systems offset financial and share share. earnings acquisition adjusted the of our business, increased growth benefit XX% quarter the sales, earnings XX% and had primarily and on record

down Excluding had X%. up excess and Both the the well impact was in also X% E-Systems industry quarter sales and XX% of grew sales foreign earnings both Seating segments exchange, growth which in of with X% production, Seating E-Systems. in earnings strong global XX%, grew in

and overhead steel shows Despite driven E-Systems segment, Slide our with commodity to to program investments guidance. higher both compared margin leverage our last in segments, costs primarily January, margins guidance, Seating margins the the and our both total by related copper. new was higher segments were costs. accelerated our in margin indicated our driven by decline year, in last the coating flat support XXXX down business is we slightly changeovers, and to in backlog, company The and our consistent activity behind both year. growth of compared lower As accelerated and increased to primarily significant corporate key XX in E-Systems assumptions

Slide dollar the and forecasts. against the prior Our euro, our by revised provides a XX vehicle strengthened RMB. outlook, the have based on most production outlook April Since summary financial IHS currencies XXXX our U.S. of Chinese is foreign the led outlook.

for expect a outlook range performance an foreign GM financial expected our full $XXX as the Core prior outlook to be are now primarily $X.XX the of of $X.XX increase prior including billion, for our in increasing $XX operating $XX approximately from well remainder earnings sales sales billion billion increase trucks outlook. to year Lear first be from up forecasted by to our platforms, The to billion, of large benefit and of of million are outlook. key As earnings. in driven as the $XX.X and We our the range result we of on a the million quarter is strong XXXX higher and production exchange year, SUVs.

by our forecasted $XXX growth capital $X.X to million additional support the more to to $XX at We of have impact exchange. reflect billion than launch cash the is million reflect significant increased sales flow year. and to for still Free spending activity foreign guidance

some I'll it Ray comments. over Now, turn back for to final

Raymond E. Scott

quarter, record again, another summary, Lear reporting Thanks, great financial In results. had Jeff.

trends sales to backlog, continue. we We growth confident continued electrification. in with this aligned related that a segments the system extremely these adaptive of record will driven activity products with quickly, accelerating quoting With seating including trends and like both and growth our kind innovation and awards innovative significant are connectivity experience any of by to

to committed our is excellence earnings With are our structure, and product sales superior capabilities, driving on Importantly, returns. financial and strong focus growth. industry-leading our continued operational on shareholder focus also profitable cost discipline, and our will remain consistent we

be Now, happy questions. to take we'd your

Operator

question the first Your of from Baird. comes David Leiker line of

Raymond E. Scott

Hi, David.

Operator

Mr. your line is Leiker, open.

David Leiker

Hello?

Raymond E. Scott

Hello?

David Leiker

the Sorry Lear's mute. doing about by help exactly Ray, in caught talking And is are that, controllers category what within and versus in was to people? industry and I you your connected people competitive bit the Can it that product what's lot of about other position gateway. others? little we relative understanding multi-domain a myself is

Raymond E. Scott

business. Yes. E-Systems going bit on our respect Sure. to we're at Actually Jeneanne a more little elaborate we're have position doing Hanley competitive where is our and to her what here, in running who's differently. I'm

Jeneanne M. Hanley

position. what you strong to we elaborate show take maybe, here I'd and is, and to to, I'll love know second we're a in a Yeah, very tried

we're today's connected in two architecture in right now So architecture, gateway or number module.

a a broad the years lot marketplace this number with. today, product experience in have of of We're two XX a is experience range customers. with of So we

in where we've foundation know made take you last of of aware and you're you as to connectivity, we're positioned the that perfectly acquisitions take several Autonet, improve over when so that that's as organic look that our investments at I then Arada, well years So the EXO trend. to advantage that the that cybersecurity,

highlighted we today, the just of one products. So

vehicle. to of advanced all updates, how issues customers see just facilitate the so is, updating now we're amount moderate a able on can over-the-air it of our doing You the instead of

that there roads tomorrow. autonomous how enable long-term, today will needs see are can the ultimately it short-term You and for then of

David Leiker

about So, it on the what Audi would is from is you're zFAS that doing the that controller, at separate way should think this or that? sit we

Jeneanne M. Hanley

we a So longstanding do Audi. with have partnership

But so enhanced with do. have secondary communication it's gateway of And we module connected capability module, is a that already we so what what an there's also goes that. a

David Leiker

one. last how the business of the Of much then is And E-Systems today? business, in space architecture just connected your it

Raymond E. Scott

So, Joel, (XX:XX:XX)...

Joel Elsesser

Yeah. pretty It's small.

between electrification today. So and around combined $XXX connectivity we're million

Jeffrey H. Vanneste

About $XXX million.

David Leiker

Thanks Okay. Great. much.

Raymond E. Scott

Thank you.

Operator

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

Itay Michaeli

Great.

Raymond E. Scott

Itay?

Itay Michaeli

congrats. and morning Good

Raymond E. Scott

Good Yeah. morning.

Itay Michaeli

morning. Good

two to Just with financial off maybe start questions.

the might just for margins a growth imagine thinking want bit to of your organic for think margin with to the FX on just then year? the what the in have dilutive of be company that how the you QX get move do just Jeff, First, about a is? then latest XXXX and the rest thoughts the that? I business, on having updated And

Jeffrey H. Vanneste

So full in Seating it up if said think Itay? year XX% the that it your E-Systems of was and question to, impact respect With in year-over-year X% company the X%. FX in the excluding year-over-year, think was I we down margins, exclude FX, was you industry growth second total presentation was on with so was an I X%

Itay Michaeli

the the year? cadence as And Yes. throughout well

Jeffrey H. Vanneste

you'll during throughout do overall timeframe. both see a cyclicality third cadence consistent. I of given segments. year think pretty the see margins some the as typically that in that experience be our going of Obviously, we'll the to I downtime even cadence But we is the think the typically pretty quarter OEMs in

to As guidance think gave we has as was that We and a highlighted to you investment lot E-Systems said full support we for of investment backlog. related significant the relates a highlighted associated be in incorporate see the the I in it changed in and R&D-type what the growth when year. things. some margin there and we That would going margins what couple the at January connectivity. with costs overall, electrification the look not we launch One to initial to impact

great total a return well. overall as we China business, And excess joint that Its control business. that of had result low the cost It has are of capital. business copper and Secondly, it's it E-Systems then of And north our in couple well ventures effect over. in in XX%. some XX% wire we albeit we previously a mentioned its highlighted as margins a took we dilutive of on has a that in non-consolidated E-Systems headwinds

And We North American headwinds And changeover. for Xs. had with that, we headwinds back with and steel. in a we again, associated rather and to going would And heavy to suggested had curve. a that January, in commodities, had of we were we the suggested business JIT that a continue in year all-in-all, our E-Systems coupled as see some that we'll associated European some we had see low-XXs. So would suggest margins full launch Seating with margins was in result, low primarily of Seating, about that third

year, in year-over-year I is in think our overall notwithstanding look for reasons a And in up were were a the note overall definitely Seating but overall not was in the outgrowth HQ pure margins it's flat our XX%. higher the margins that flat see getting year-over-year X% line. the and were the explained, is the earnings margin that important the E-Systems And which benefit versus in at the outpace company not leveraging going in you I would down costs full top flat growth to those – increase Seating that of for quarter earnings necessarily as our profile. E-Systems our quarter, at we as and in pretty significant the would the in wouldn't we're a quarter, both HQ up margins the costs

So, margins we see associated from some year with the facts. a two in should those full company overall benefit perspective

Itay Michaeli

is with X be? quoting? activity, that indication split gaining the follow-up growth on secular every think for invited typically of between what's opposed the So, those just for helpful. Thanks share very is And two given market as not Lear might might quick perhaps to do that the just that be slide you supplier the for really Ray perhaps much how quoting in kind detail. a That's increase increase

Raymond E. Scott

from getting respect in just before in is share it. and technical the respects significant. list, can And list that seeing capabilities you just I incredible have we some to we've I have I take the respect mean Yeah. processes, on the amount timeframe key to on Between you that January process. million a Itay. audit presentations. I seen don't the we audit And to anywhere through do go the back six we that plants, and process we're when bid quoting of the really But quoting to quotes in three unprecedented gain. they get were unprecedented I'd have seeing your to mean know, secular today. $XXX is here is tell at of as market think just we've talked this they thinking talking we're months an to activity electrification. your and amount where been you the in to bid in this connectivity

Itay Michaeli

Thanks helpful. so very much. That's

Operator

from comes Evercore the of McNally of next question line Your Chris ISI.

Chris McNally

much, a XX-volt. the maybe question of on the talk maybe on of a Could maybe follow just success you could a you around had driving that Thank sort markets end little we're E-Systems forms on the gentlemen. activity? you've quoting, that bit quoting electrification so breakdown about XX-volt seeing you of higher Really and little versus bit the

Raymond E. Scott

seeing more connectivity. Yeah, of it's and shifted. kind split between We're a XX/XX electrification of now

I think and pickup more connectivity was two-third/one-third when earlier, the we definitely electrification/connectivity, it seeing of the were activity. a we're in side talking quoting of the

respect the Jeneanne, as far this? any you have numbers with breakdown, As do to

Jeneanne M. Hanley

entire looking out back it I of think and (XX:XX:XX). in. we'll Yeah, opportunity When be believe a out of that $XX will just $X future then that of we you bit in marketplace years XX pull billion, having the and little the billion an further mean in

definitely and range and the a be you are this the bigger of even a we've range CPV is full are up portion their of Asia of the spreading predominantly lot will vehicles. customers when think we're really really out the on of activity in also electrification at though lower Europe that even in to the would in where there's say point. electrification full, provided, So end XX%, full in range that their of it's options The I a seeing But that. strategy,

Chris McNally

these before, historical to And given is factors us but get – rough to from of demand couple I were quoting obviously you've remind are that quoting billion annual could just years That's an on terms if see $X backlog a numbers to know going think a we great. trying of would typically the each know convert a up, I people backlog? range electrical of of you just conversion in I don't what to basis? sense, but

Raymond E. Scott

what respect to is our in rate this Like (XX:XX:XX). win

Chris McNally

exactly. Yeah,

Raymond E. Scott

it's XX% been XX%. historically to between So

Chris McNally

be that right. add-on And range is backlog, the would I the sort essentially top-up? perfect. an Okay, of your is say of XXXX – would to longer sort This

Raymond E. Scott

Yeah.

I think had Usually will there's through. what year have doubled still that cases working in we're that on you've our the quotes year, in of today that reflected in be going year, quotes seen a so lot that historically we're we third we've backlog. third third

Chris McNally

Perfect.

Thank Okay. so much. you

Operator

of Langan question the next Your Colin line comes UBS. from of

Colin Langan

Great. question. Thanks taking for my

Raymond E. Scott

Yeah.

Colin Langan

Last your they're have their remind night getting Ford backlog right you announced cars. in rid us some of now? and what that's Can that if reflected of you exposure

Raymond E. Scott

there our were Obviously, some side one Ford. backlog. program that would There's in in be passenger reflected discussions Yeah. the with

that win to the replacement talking the to best about secure for relationship most and be it's to kind Company. vehicle However quality, of best If the our closely sure Ford type to we've and a product transition with new type a work of make infrastructure going look with of have the plant. cost-competitive, really business a product, the Hermosillo, we'd that Motor the the with put and we're they're way them we any in them any place, if deliver relationship in we on at, that they're might good transition

in It's minimal. Fusion it's So, the Hermosillo.

Colin Langan

how was any us a your steel what is Got said hedging? of remind and Is it. – on are hedged it steel, can you large mean you quantification I two-thirds headwind. you there the it And

Jeffrey H. Vanneste

pounds Yeah. a buy. XX% With billion at we And buy steel buy, that respect exposed of we're of to of year. X about steel that roughly

a we in a handle they OEMs steel comes buy program with XX% the the which steel is The fabricated other in the either or risk way. participate

steel. some XX in XX our points basis XXXX on we've highlighted So, exposure to guidance,

ahead have entire for We buy our for steel bought XXXX.

current will in impact fairly XXXX the steel negligible. with prices any So, changes respect to in the be

Colin Langan

of is And can XX-volt if split have sure of it. today. What think not remind electrified $XXX just of connected what there the and Got earlier, of us, EVs, million and I is missed business you the you I'm connected? between backlog that that I this number

Raymond E. Scott

its Right two-thirds. the It's electrification now, Yeah. in two-third/one-third.

Colin Langan

electrification. I there's So that EV? know business about is two-thirds for you're talking And like, invertor-type like XX-volt and well? as

Raymond E. Scott

primarily but XX-volt. It's a combination,

Colin Langan

All Okay. much. very you right. Thank

Raymond E. Scott

Yeah.

Operator

of the question next Emmanuel Guggenheim. Your comes Rosner of from line

Emmanuel Rosner

Good everybody. morning

Unknown Speaker

How good are Hey, you morning. doing?

Emmanuel Rosner

Good, good. Thanks.

What of of below question of of on profitable come there one very margin initial does into it sort electrification the average this backlog or So is initial the and in large revenue? lack or kind it Is connectivity. investments because sort pretty follow-up quickly? some your of scale like

Raymond E. Scott

know put way. it You I'll this

our financial have when after financially. internally that we win metrics and business, We have and go we hits business it disciplines we the

So we that far threshold don't take acceptable. business we that is as as below up set have the

and it's are good it's business, in So, at with in it's our mean business. where E-Systems seen profitable that. I you've line margins

Emmanuel Rosner

Understood.

of Okay. sort to just I side. gears guess the switching And then Seating like

your Can main has just us...? troubles been mechanism remind having you business. there competitor the and on structures So

Raymond E. Scott

you for up. bringing Thank that

Emmanuel Rosner

this the sort here? or as And a how you us of a business Can What is guess, have structurally view, there are from like issues any challenging your supplier? capability it of of derive you to sort please seating point a remind is like revenue important from I specific is these? of

Raymond E. Scott

having focused without of business work for that some And big some but and as structures does on we don't capability we give still advantages but is certain believe need profitable. from you do, question. profitable. And in our still can to have it's do more of our business chunk we Thanks We enormous always circumstances amount structures. structures. see you we've results in have well an do we It think nonetheless can a extremely need One, with to you Yeah. capability. our

how the out just very sake it to cetera respect growing second dies very, for is with you In question and type And launch. your of respect don't difficult have years difficult is prior talking a this about the to go three, And a of particular desire (XX:XX:XX), it. and in we're to we starts people experience. any that their grow four, business. business that to it et business right that So in invest tools have and to five

I'd say know so – or And issue. in all you say in hear place you particular fix put guys structures these JIT it we to wiring, can't. or trim can a In people time me the

in to, capital cases start new tools have dies, some You from the ground up fail-safes and (XX:XX:XX), everything. revalidating equipment,

have respect asked, it challenging a been very questions very to in going but so we're do any of And of it – to, I'll business to difficult take and if hasn't out is that going if business on. take of. that on business we're you answer it not when And any any to issues is get then

Emmanuel Rosner

That's Okay. super very quickly helpful. just clarification. And then a

of it of below them of about the of consolidation like dynamic margins of The of manufacture and that You geography lower function margin some you of and in JVs the a margin? is one the there that or are were mix E-Systems was just average talking the is sort that some products the China. there,

Jeffrey H. Vanneste

and Well associated with A, lower the result costs is a think as wire I investment it's there wire.

Lear operational north apply of not at we control of with to here we'd prior. is be these able and a So our But return investment as margin think the would issue do a the operational JVs to taken disciplines that on typically bigger profile able over X%. these been we've result that have we I gain a JVs

get up I both should seeing So the the type fact wire We other that in given in do. what think we would get other business, regions, and in to margin anticipate there of we profile can the need and back do be. to region where

Emmanuel Rosner

Great. the color. Thanks for

Raymond E. Scott

Thanks.

Operator

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

Dan Levy

Hi.

Raymond E. Scott

Brian. Hi,

Dan Levy

Levy Hi, for question. you for Dan on Brian. This morning. good the is taking Thank

Raymond E. Scott

Dan. Hey, Oh.

Dan Levy

when comps this Thank lot the are putting it's several historical guess is the argue but of that a what are that segment today the that Certainly to trends ask of in years ago, benefiting of E-Systems growth. robust several what you are which occurred compare things ago. wondering organic inflecting you. are. your but I several really of digits, I'm is really question, growth I about below just fine this low-to-mid just which had wanted single would growth because that were ago today years years organic to sort that up guess, E-Systems more certainly should what is wasn't a I in those one have place occurring I

So a Is was up it of is several some catch there customer? Is sort? that product? than years growth when better today one much particular is so particular several there were ago? one ago any Why some competitors it your getting any there of years

Raymond E. Scott

taken think time I too. Well, this some has

in capabilities in. allocation a and people with best take that was inorganic an we different for I when was of what some should If the talk how most we we standpoint, and just the we did business you from we from putting remember I there that and it know looked back in at investments what building and our made did in invested up business capital and we that place, brought plants, the completely that invested a our E-Systems right do go in first standpoint, in talented brought and organic but we talent was reason. billion investments set infrastructure the those But was how $X.X money Well, not time. of we some you it we with people people lost

what to now division not it, a a And great was heck one mean So just in we is, return are and of shareholders. I I our results. the we think great of seeing is you're on built grow that returns position more I top traditional, made story. trends growth and I forward. that unprecedented is we're mean out the seeing secular we are electrification. investment It's these trends like The said what with with with industry playing the what with connectivity moving really perfectly compelling. these this to

Dan Levy

Okay. one follow-up And just segment. on you. the Thank more

margin the several you today low albeit expansion more contrast was ago that that, of You you significant years could compare had thing and versus off comps. other know coming much

fraying slightly Your several comparable because bit come room winning abnormally the you're investment that's was seeing what's bidding ago? margin. it a of a you take I high business But years growth, but Is still There's on be versus margins and that. what that believe for more that get today could profitable to on here down? ROIC some are could that of you're sort it but you're I at maybe little it said the you while lower

today dynamic versus how that So is it years what ago? was several

Jeffrey H. Vanneste

the understand is dynamics that are I configuration think getting But, higher of in the the which what get we around that a that is given think of in return important we've on the have on it it's wiring than that we we're seen the of current years. ROIC cost to the I overall, relatively recent segment X%. capital at products with two-thirds business low profile investment, margin a E-Systems, in that our being

is the the So, XX% suggests margin that profile getting fact in we're significant the on that return that. a

years, the over make. they look think we've continue allow you a natural there's the ROIC But had the last you to what to with several in going general, at associated grow. are that baffle I So, OEMs to if returns

Dan Levy

Okay. you much. Great. Thank very

Operator

of line the from comes question Goldman Sachs. of David next Your Tamberrino

David Tamberrino

morning. Good Great.

Raymond E. Scott

Hey, David.

David Tamberrino

doing? you How're

Raymond E. Scott

Good you doing? morning. Great. How're

David Tamberrino

a doing your ask increase I'm you on your to segment. wanted to elaborate I you, could Hey, okay. bit little willingness metal's

one one be were to your again announcement just and bit capacity to challenges I their was how little of of European having up Lear was competitors would asked if by there, kind that in that conversation OEM of they wondering partners? pick really slack I of some earlier in facilities, to of that's think some willing the a quarter much of the earlier you're your there one and increasing alluded

Raymond E. Scott

Yeah. customer increase the To more question, specific was we an request. first a that did to announcement answer make volume

And so, we that obviously extended our returns and was very some fair respect were investment. specific in to

The second lot great on a of question clear, now. be we going things I'd very have right

We launches. have our own

launching this and going launched some products You year can and of most see that the we're year following the be are next exciting year.

what deliver we're and the us what customers we on could deliver our needed future. to growth to So, for focused

crisis. of is any that it problem. a up structures can a We in have distraction That serious become situation interest and zero in could business become a picking

way picking competitor having brighter too business future that a from a opportunities lot problems. many in our We structures than up have are that's

David Tamberrino

And Understood. then... Okay.

Raymond E. Scott

does Now up it. the event and said thing this, add that a JIT us if will the customer – talk there give us about they're to only I'll thing plant with to if maybe we'll add want come the their I've willing only to they business, pick us in it, I is the

David Tamberrino

the amount truck just us what that for you're the on of that's underlying return capital and I of cost for on ROIC And refresh to overall passenger pointing significant corporate your is gears, profitability Maybe to one to an think is that light businesses car shifting from from new kind light just you're trends continuing Understood. coming where shift and a of seeing what from of a truck Can businesses. passenger to and moving platform? is a those difference the fair on. your you harp relative car Lear to

Raymond E. Scott

and contribution SUV, I think for a leather And terms cars typically of when gross it's rows. generally content it, XX-ish two more type with of in those difference. we content a example features. margins be really other tend it or three in to have you vehicles, I They of And could the have to of think XX-ish which what And in XX% doesn't get outfitted it in you maybe XX% be see into function content percent. the be as could much type the – XX%. with to margins passenger rows

David Tamberrino

I lastly, know, little it we a about earlier just And bit Okay. talked today.

quoting, else, your it main from we would that the a X trying think Tier in Are out the you automotive as suppliers traditional, to in it perspective? seeing competitors? there businesses? lot a or who business call Is let's you're companies seeing of any of there, On come anyone Xs those E-Systems E-Systems technology Tier

Raymond E. Scott

Yeah.

at new part the for and the that traditionals the compete there are are other, to into this there I space. entrants, some players. is For against against get we looking most competed technology new traditionals the but of, you're there's aware it's have companies most part mean, it are that for years. But as

David Tamberrino

Okay. Thanks for the time.

Raymond E. Scott

Yeah.

Operator

question Markets. of Your of Capital the comes next Spak line Joe RBC from

Joseph Spak

Thanks. morning. Good

the at of in the and driven And Europe. then Is does I earlier the Just big by it's gets CPV E-Systems more and in that increase I on? E-Systems if disclosure a know how as put the breakdown we existing some guess – primarily higher of some look the breakdown? related geographic to compared on bidding, you to some that geographically, of commentary E-Systems especially content

Jeffrey H. Vanneste

in, main I'll Euro in elements really FX, that significant last Grupo have well. Europe. a quarter came in take is did that acquisition in the in see this May Antolin first to had first biggest backlog that. acquisition of pretty we one between last the significant a – on The as And quarter. which year an There's year. the increase We region first I the CPV believe of year. three significantly with the and did CPV we to respect appreciated in We the

would the be year-over-year completely Antolin incremental So sales year-over-year.

in three the Europe. that were drove those So factors CPV main

Joseph Spak

Okay. currency, then business – mix of the the I opportunity versus just And constant current geographically? that thought okay. were I like didn't you realize E-Systems CPV bidding at the on sort

Jeneanne M. Hanley

we're now right bit to in and that the Europe, are weighted – more firm heavily North with been So Asia. contact to seeing comparable, and we customers, have think American close a in opportunities more come believe we maybe specifically there it's but I obviously

to the I today. be think right But that have little business the now bit is current to that's going – that something it a dynamic. bigger somewhat correlated is we

Raymond E. Scott

third. about a third, a third, a So,

Joseph Spak

be to well? that correctly I sort about it with might so your the not that, getting customers line does – their toe for you as just that if a for business, back then thinking And wouldn't I on pricing of the harder positive would Okay. mean competitor be – required structures

Raymond E. Scott

the the All that positive. direct through be relationships are shipped would that of us Yeah, all components. components

they So the and our puts the programs know hold, customer is you and or changes contractual well. of and it to desource opportunities, for either of obligations out that want – go you down start that that your on next doesn't they locks would profitable. relieve something most remove ask yourself a kind future when want with to about that's unfortunately, you that any And to step you're increases you have work usually business on that an growth immediate or go bit price new little directly. And I

Joseph Spak

Okay. Thanks for the color.

Operator

the of from line John of Your America. next Bank question Murphy comes of

Aileen Smith

talk This Aileen is John. morning. you Smith for the... about Good on Can

Raymond E. Scott

morning. Good

Aileen Smith

relative Good major the morning. initial Can you talk backlog the production with about quarter the of the of quarter to that in regions? especially moderated estimates, some your through the schedules in realization

Jeffrey H. Vanneste

they in where would I be. we right thought came think they

had and good the year, the be cadence to backlog at you ratable we full balance, if a So, I each fairly think of pretty look quarter. it's going the for in a backlog

Aileen Smith

of the related helpful. result That's And a Joe's ask of of as Great. very on the one question competitors is facing. a to Okay. dynamics, pricing pressures to some your

other Some forecasting some substantial the seating in are respective business next pretty over of peers your few years. growth their

With these muted dynamics think in growth quoting the for any more would environment, that and among would pricing competition again material a in business change or volume way? players major you new increase

Raymond E. Scott

you're supplier. In I the in capital opinion different we've one our it sophisticated market of just always we because I'll space. programs very they out built it We to of seats of has our the competitors to been – in, my business for was even that think And changed. last in hear was it reasons, are win to No, put add a some irrational don't there think They anything's well competitors lot some but for right where like because go that know in only has those I try think thing going below had change. build I customer too. didn't or players when taking it cases, to the place. our don't the worked and was seats our below investment haven't in customers to for year and

hasn't so And changed. it

a seen and a either. see significant change don't change moving forward haven't I We

Aileen Smith

of for Great. what If year. your I'm the earnings the seasonally on implies Understood. conservatism this at QX, the schedules be back half the Is some earnings roll-offs versus where might for be half question full-year launches And it operating in Jeff. sit now a product what there notable outlook back you more function in anything a reported or or lighter from on production in is of harder year? hitting of one bit looking final you could that

Jeffrey H. Vanneste

the volume I industry we It's the commodities, thought. think No. I think little we hold I had but think think it's anticipated. if I respect mix, environment what environment better helped has been type volume FX exactly well, be. that And as at end what in, pretty has conditions of the guidance. those other would things, of with thought than post a what The out than we bit to it high industry our would much Quarter that we us

Aileen Smith

Great. helpful. That's my That's end. from very it

Raymond E. Scott

Thanks.

Operator

line next Armintas Your of Stanley. from question of comes the Morgan

Armintas Sinkevicius

Good morning. Thank taking you for question. the

Raymond E. Scott

morning. Good

Armintas Sinkevicius

about the about the XX an that and think we by raw opportunity at vehicle think data When (XX:XX:XX) terabytes I of talks hour generated an autonomous (XX:XX:XX) vehicle. is

much that'd of if connectivity, great? data the in that, capabilities, it talk developing could opportunity be investments about just how you're in you that you you And hardware, ecosystem? software talk your in is about making the versus about mix roll curious can then, of Given a

Jeneanne M. Hanley

and I'll hardware we've both take engineers I'll the start said that, back one. with over a Obviously Yeah. on I software well X,XXX maybe side. and mean growing before

do so we staffed that internally, we're So fully in-house.

that's the transferred talked be quantity again why that's You and the we X.XG highlighted and to data key enabling the years, and going capability of capability and later speed, being all XG in about is we critical the one that. product to know

the one may their customers, than we don't is of So different bit that our with them. with we that's be things partners competition compete little do a we're

in speed quickly, with that and that them bring data our capability to help data that latency. data, in try It but it data lower full delivering have monetize own to the now more or plan to accuracy. we isn't manage accuracy, in going right with with do we're So

Armintas Sinkevicius

vehicle? product to the just of product ignorance is but, so sort data within do And of very from the the about does? very I think the to trying what basics, just here vehicle, of understand basics sort How gateway my transferring vehicle, the that Okay. the your pardon gateway

Jeneanne M. Hanley

Yeah.

the your consolidate internal that what updates car. more the or became it level the was would what processing super in central Kind cetera think some ability was vehicle the to it your vehicle. first Bluetooth the now updates it service, Again a can be, would to the connectivity required now, able some do communication. addition hub, would module module still address gateway, amount but the at of of to So high over-the-air cellular of so the all a the connectivity you it the in you so ECUs to we're of, enhanced is, connected starting updates find infotainment it's of in of traditionally communication a et with a just or or foundation

you bugs, to the think on a quickly software update or really in much now et about cetera, the it takes role warranty ability for So vehicle. expanded

Armintas Sinkevicius

through? is Okay. revenue And or trying one-time model that scheme if just just monetize is there the effectively end, you're know your a working the recurring to data or trying own it for sort think vehicle of you a revenue payment now to of any you're for

Raymond E. Scott

thought we've that know You through this.

customer proposition in for is with line right gateway value our the what with Our we're connectivity at module. doing

some tiers competing with OEM interested we're know that some in. into respects our directly As something that's far – and mega customers, space getting I getting in there's in as

But We have value getting as that's delivering in. the something we're customer really interested good proposition us space boxes as and the into sees seat the value adjacencies, not those gateway delivering in that a in. the really far as

in complete think on customers. just enormous and of gets capitalize have And opportunities said front to I the that like with sure are conflict our I in make us them. we we

Armintas Sinkevicius

for question. the All Thank right. you taking

Operator

Research. question comes Longbow the Anthony Deem of next of Your from line

Anthony Deem

Thanks morning. me in. good Hi, fitting for

Raymond E. Scott

Yeah, good morning.

Anthony Deem

a have here. few I questions So

or indications any year's momentum into are Do you see faring give potentially awarded business? year-to-date better? early activity XXXX last or First, continuing quoting us you competitors Seating can of

Raymond E. Scott

domestics going There we we're because our still see the as as launches at lot have and more has they the business Achilles' the of cyclical traditional one a from of believe is we're nature a a of they're their think We think much market and that's at more just I share. now meetings say but of taking domestics China. competitors success and now their We heel. – with had I and numerous look of let's our level. a through where the the at right in now in want we we've – suppliers going they China They and a they are time Seating exclusively far efficiencies, opportunities Seat wallet, want more the their partner one don't seat want from technology. they because portfolio. we're as the balanced advantages where rate, of in heavy quotes share still is is the win cost meaning quotes want want right we look want the our spending on effort want we're same multiple They through No, XX% quality. business a they

come So big growth. is that's for you think China with the in know we what going we're domestics be our seeing is growth and seating a opportunity to in is where the

Anthony Deem

split of and activity in And your categories, maybe billion a secondly, your really even In that so XX/XX? blend in you off. call helpful. backlog quoting the used or existing VXX two Very consolidated with non-consolidated even between it mentioned $X the to categories? is it it's questions, the then security just maybe all or these primarily trend's obviously connectivity now of third OTA, Is half, be a taken emerging

Raymond E. Scott

first to at Yes. To an what growing accelerated have rate answer we the we're question, actually today.

domestics. saw I And OEs. So we with was the with with have XX% foreign it and domestics about position a growth rate, our XX/XX the you think

the question... domestic we're to in With second actually our China. So increasing respect content

Jeneanne M. Hanley

Yeah.

is there we activity the year, communicate maybe we're high talked well. it it as to dynamic. we be there from area. the the we in is the dynamic when communication, range of to we'll base level but these have is the activity over-the-air. but just you VXX of Obviously are are you, in know, and particular, to next backlog continue with with be on or you seeing Connectivity Just the right seeing the more update VXX was another horizons, which different which the is know the full time with expect embedded end today prepared for about connectivity, But, I

Anthony Deem

for mine. you. taking question. Thank then, Thanks just And last

shift and do the Given and benefit larger you larger estimation the the your vehicles, you expect the an the to that out you backlog Ford And preferences consumer and of passenger when next mix decade customers industry then sales really indication? give your conversations and plateau? trend North America with cars towards early you. does or as Do any thank announcement, in really see issue

Raymond E. Scott

heck Wow. of question an Yeah. there. a That's

we're is significant us don't And we're the we that as no that final There several a brands where question popular shift. really going I for years, are on it. mean up programs think, The I have working number. of a fortunately lot are giving to I but over don't it I that about percentage, ends the seeing next seen far have that launch as know. a you

Anthony Deem

enough. Thank you Fair much. Okay. very

Raymond E. Scott

Yeah, thanks.

Operator

question line comes final and from of the Jeff Cowen Company. Your of Osborne

Jeffrey D. Osborne

Thanks cybersecurity missed a guys. there's squeezing and software me have of I'm still quick get for in. aspects? be just we in beyond, this, to is trying with of and a wiring other E-Systems or more the compute? electrical thinking as legacy moves morning, to Good One mix there years and out hardware, quoting in three platforms connectivity might I versus XXs in but one, a sense more as should differential XXXX margins

Raymond E. Scott

higher to earn level of a and is, on business. I at look type it return way think when rate of programs, the you it's investment we the look everything's connectivity-type a got at investment

But margin to going to in not that's E-Systems a term theoretically return should it's have the or it slightly going be. we is significantly as of near So where kind profile think result, a higher. change a

that, that we're in to I think going XX% low-to-mid we be still see, given range.

Jeffrey D. Osborne

mentioned Got just it. electrification of higher other? is follow-up, or lower to or you're XX% rate XX%, the quick one pretty And in that or one you then maybe win consistent connectivity within and the

Raymond E. Scott

little than seen Yeah. higher a I at think traditionally bit we're today. actually what we've It's than where

So, bit it's higher. a little

Jeffrey D. Osborne

it. Thank Got you.

Raymond E. Scott

you. Thank Yes.

Raymond E. Scott

Okay.

it. that's think I

just team, to There's do I one the say want the the no One, want I with your is for to quarter-after-quarter that outstanding team left to we're everything results just continuing the by industry. off things. keep it's we work. you on call, I a produce really and doing. It probably thank it and think best the Lear in no pays question we couple about have

that doing. but We have for everything we're a with and said year launches, for thank know really up I it tough year you're I you like our this

Operator

participating Thank today's in you for conference.

at time. disconnect You this may

Lear (LEA) 26 Apr 182018 Q1 Earnings call transcript