Lear (LEA) 26 Apr 192019 Q1 Earnings call transcript

Company Profile

Participants

Alicia Davis	VP of IR
Raymond Scott	CEO
Jeffrey Vanneste	Senior VP and CFO
John Absmeier	CTO
Jeff Vanneste	CFO
Frank Orsini	President, Seating Division
Jason Cardew	Vice President of Finance
Brian Johnson	Barclays
James Picariello	KeyBanc Capital Markets
David Tamberrino	Goldman Sachs
David Kelley	Jefferies
Armintas Sinkevicius	Morgan Stanley
John Murphy	Bank of America/Merrill Lynch
Rod Lache	Wolfe Research
Itay Michaeli	Citi
Joe Vruwink	Baird
Joseph Spak	RBC Capital

Call transcript

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Operator

Good morning, and welcome to the Lear Corporation First Quarter 2019 Earnings Call. My name is Kyle, and I will be facilitating the audio portion of today's interactive broadcast. All lines have been placed on mute to prevent any background noise.

For those of you on the stream, please take note of the options available in your event console. At this time, I would like to turn the show over to Alicia Davis, Vice President, Investor Relations.

conference. your begin may You

Alicia Davis

Vanneste, President Frank at Vice Thanks, both Kyle. us for today for us E-Systems also and Finance, Team, Seating Jason including Seating on and And Ray Senior the joined of President and morning first quarter everyone. Orsini, Jeff CTO; Management Lear's who Absmeier, Presenting the the CEO; oversees thanks Other of XXXX members Scott, Lear joining John Good CFO. Division Cardew, earnings of are function call. finance have call.

Q&A. we Following open prepared remarks, will the call for

You these you making understanding to assist before take But can call as presentation Lear's find like opportunity forward-looking statements expectations this the this that be that remarks at to will in I'd future. begin, accompanies you we ir.lear.com. the remind for to conduct we we

statement XX-K Safe we statements these X, in remind latest our will many Harbor actual detailed during non-GAAP metrics. to I reports. refer you from due on As materially that could financial presentation, forward-looking want today's also results and periodic Slide to other in differ discussed to our our factors

most The reconciliation on slides are presentation comparable the You Appendix to of X. directly Slide agenda measures. the of non-GAAP the the GAAP for for today's items is our directed in to call

will going Ray John recently give discuss then and Xevo. update. is to business our First, acquisition share some highlights first a quarter completed of

financial our XXXX outlook. first results review Next, quarter XXXX will and Jeff financial

Finally, Ray provide will remarks. some concluding

to your With we formal that presentation, take I'd the like Ray begin. would invite questions. be to happy to Following

Raymond Scott

update a share you. highlights today morning be good I want Slide X everyone, contains to and few here Thanks, Corporation. and an give you Lear excited on to with Alicia, I'm

strong Lear - deliver in first results excellence, on of and in key challenging electrification of in Our our well significant we launch execution activity growth seen in able cost a in environment. for relentless structure a programs want our downtime macroeconomic the focus capability, very I operational some moment a I discuss and backdrop, activity. as leading have changeover and Because our heavy strong a in industry quarter despite company. connectivity. also a business tough a key were in drivers Two increase quoting we to will significant backlog to discuss and moment, performed

to this credit also excess cash upgraded shareholders as by We per technology, This commitment month, authorization returning Lear our jointly Award quarterly $X.X $X.XX Moody's was Last our month, to adaptable show replenishing seat the award, Lear's E-Systems This Automotive with which developed many in our share making recognized to have engineers was which News continued earlier our for And strength, I'm and suited to for capabilities prestigious billion by financial seat mobility. viewed share. system. to the our the divisions to an increasing proud another it shared example Seating is easily of continue industry Seating to benchmark by allows uses, different our how reconfigured E-systems' of differentiate as vehicle in for portfolio around be world electronics. for within extremely the innovation. leveraging and by repurchase dividend testament a rating. rail future of customize this PACE Lear's to we a ConfigurE+, powered is well the and

minutes. shows Xevo financials. say a quarter And position and the as connects data their Lear. consumers in market completed supplier from in our as our software few strengthen X Slide team XXXX will to their software, acquisition Xevo, analytics, services capabilities enhance will will of retail more tremendous vehicles. bring Xevo favorite that talent Finally, last connectivity. brands, well further our an and expertise with and about week automotive John directly we Xevo first

tough performance a continued additional a and Throughout to face solid headwinds changeovers, related manage Lear's aggressively testament the launches of financial backlog we are weakness, record strong we cost as macroeconomic have our customer is execution program few capabilities anticipated, to current backdrop and XXXX. new to market well downtime. and for focus on our as that process highlights part As X of improvement. program $X.X key our Slide billion a

For technologies the products and most for we activity, we have in including high year, have the second involving launches consecutive ever content of complex several programs seating launch some produced significant and E-Systems.

be half and key been revenue. have our by some we previously, negatively downtime impact stated which have to first costumer plant impacted will we of As continue programs, and will

electric. million of or hybrid XX% all the These into and production vehicles XXXX vehicle meaningful programs, opportunities improvements and Europe XX% connectivity. as these details up classified second Slide are in expect electrification over of quickly U.S., year for growth X connected progresses. weighted the are it accelerate, will two half heavily However vehicles in activity be of backlog, road hybrid the quoting Lear's we estimates IHS areas with E-Systems trends as new our on as increase. vehicles the XXXX, and for coupled with our to global in sales translating by Today ramp almost accelerating XXX sequential growth will the vehicles The rates penetration continue sold these are pace towards China And business. and of in electrified connected of connected. electric provides by these and be regions. OEMs

we growth excess We electrification January, billion billion. is There pursue but $X.X quarter in for ultimately, consider was throughout connectivity in That to amount are now that expected the the activity of very is selective we deciding the comes report grow continue of approximately number and quoting it and quoting factors what capital. will to are of as approximately year. In whether down a program, the allow before of level $X returns activity. about and to profitable reported our quoting and generate we to cost we program opportunities

and XX% approximately Our I to on these expect win continue. rate XX% to that historical win rate is programs

announced billion and you the electrification about As XXX backlog we there was January, of million business. may recall, in connectivity in $X.X

Over connectivity we programs and have been revenue months on the last three electrification $XXX an incremental alone. million annual alone, awarded of

to related expect We by increase XXXX, to driven $X.X than by more electronics. billion by growth these technologies in primarily revenue new

going I'm turn it to the to to acquisition. John discuss over Xevo Now,

John Absmeier

Ray. Thanks

XX. Turning to Slide

completed user recurring of As week we is Xevo. that Ray the an company Xevo unifies company The developer last revenue software acquisition leading car of mentioned, automotive two a generates the technology connected and streams. distinct experience.

transaction first-mover electronics. The company connectivity. together platform profitable consumers connectivity recommendations Market. software can generates plan products. software the is area no our offers market connectivity through the revenue automaker receives for gateway with is first applications. to to on to fees, platform with of its growth key artificial that vehicles Toyota the Apple retail hardware automakers. identity. consumers product, food, OEMs infotainment has and Xevo next from assistance Toyota connects of step year a platform second XXXX direct global is mobile based a connects Position per its deliver significant is Auto, in OEM Market, company to offering almost interface Marketplace and stream loyalty know-how mega allows OEM deploy to on portfolio Xevo the and the through and U.S. Xevo from and Xevo's by in-vehicle merchants. position of Company's the Market to build Journeyware given Xevo's forms Through a touchscreens, Platform. its Xevo soon. road is commerce automotive software own cannot The Through Xevo Lear's are Xevo Toyota is several and Motors Xevo an something is intelligence. Xevo including the experience captured announce services. its contextual of as OEM required is leading of e-commerce Journeyware newer. preferred system. infotainment Xevo value and Market well most in Xevo differentiator it infotainment run on auto relationships is new the Lear to in Market in-vehicle system with automotive the analytics white model Linux. quality as Entune for payments content other brand the has the the brings Journeyware GM within on to and as in with the applications, manufacturers largest takes Lear's growth a we brands parking, most broadens popular fuel, high to its This and tailored, technology service use or consumer set insights to that that OEMs, revenue software Xevo Xevo placement. operating portion highly Journeyware software and their followed an software. out with is revenue evolution Xevo proposition label platforms a voice that revenue shares currently data Market on recurring produce is customer. to vehicles software, as and The for for from hotel drivers Market's in and with first this a the trend, thus is agnostic delivery data. Xevo The and retail AI have to is map solution technology bounties from is deployed QNX compelling vehicles for in-vehicle advantage. all Toyota suite We customized recurring behavior deliver Xevo to Android leadership allows expertise Acquiring Journeyware infotainment patterns. option and It's many or maintain that as player history General predictable has CarPlay, licensing and currently in do. branded regarding connected competitors XX-year ability connectivity the GM negotiations startups use a we platform Lear's data revenue modules. and to acquisition mobile

we tremendous Arada to business service last capabilities few addition our and software high can of positioning So over There and Autonet, and technology, accuracy with synergy functionality new which offering product have while vehicle portfolio, acquiring brings enhanced with transactions. Technologies. connectivity EXO's contextual existing opportunities facilitate years, recommendations EXO recent Xevo business. models also our our The are by the and synergies

of addition, increase modules. us computing will connectivity edge controllers, become functionality in-vehicle these to value proposition and capabilities This as AI allow analytics our data Xevo's better to customers. to deliver the can gateway modules leverage and domain In a Lear

business. device. to Another smart The example becoming seat is is a related our seating

executives and utilization are China. we and there can business The data Europe industry Xevo's vehicles, and scale model reach Lear's Today on over million Xevo on Xevo XX automotive software knowledge, management this expansion technology XXX The the software, experience. engineers data Using that and our Xevo majority focus primarily employees, unique deployed synergies particular in approximately artificial natural globally occupant are additions U.S. We technology our of and a team Lear, veteran have Xevo's So company includes and Lear. software and in for innovative has a Intu the seating decades between with intelligence. capabilities for technologies. Xevo's and high-tech is innovation win sensing view capabilities we in talent bring as major are of customers. acquisition terrific for to whom

over discuss Jeff, things turn first financial our outlook. XXXX I'll our XXXX Now, and quarter will results who review to

Jeffrey Vanneste

vehicle quarter, units all Thanks all down North perspective, was X%. production markets first China production X% results of the In our or currencies quarter. down XXXX. our major From weakened major was XX a financial compared with highlights million X.X down XX%, America Vehicle John. Slide XX in quarter. production vehicle shows XXXX. currency for global first Europe the Slide for quarter to and first from down the down the X%

down growth backlog. major our foreign sales production million from billion, offset the were by all partially $XXX markets or last and negative driven in exchange, impact quarter, For our year, the $X.X by XX% declines of from

the earnings by in decrease million, negative the down lower was of growth sales, in tooling XXXX. X% quarter million billion, due Core were foreign in expenditures. of adjusted $XX offset which operating flow operating Free XX lower explains of exchange, in the reflects capital first engineering, working from The were including $XXX quarter. was Seating to to impact Slide Sales operating down free above of variance offset earnings result timing operating overall strong year-over-year first quarter and quarter segment. quarter capital by the margins the XXXX. reduction compared cash first somewhat in flow sales in were positive X.X% for $XX cash the sales market. margins the XX% in Core the X% were performance. the primarily and down somewhat the and Excluding $XXX million primarily $X.X million

somewhat down driven impact declined sales in X% down provides in Excluding platforms backlog. adjusted and quarter Lear in decrease XX% segment. first reflecting XX The the a were lower China. were the production strong quarter a in margins foreign America, our for connection E-System In backlog. first transition the some growth offset declines the in by on margin revenue key and was the operating markets. the in were and of Seating X% key $X.XX to in on sales Lear North platform from with by of first part performance Slide Revenue on major our operational walk by were was down on offset of production billion, Sales platforms impact primarily accretive sales models. somewhat X%. unfavorable Lear of year-over-year new margin XXXX. significant our Europe downtime These from volumes and XX% platforms were impacted exchange, platforms mix margins lower by X.X%, the quarter

This The the somewhat new initial these January, shows settlement markets impact offset Consistent of lower Europe revenue decline in were the and XXXX, sales second declines were the in provided in full forecast. to Slide all Slide production the America, Lear our of with down in impacted XX% cost impacted Vehicle for supplier has of quarter on performance negatively by IHS X%. margins down the provides XX% platform The million of the guidance to key significant backlog. in volumes major reduction negotiations to IHS mix. Production year-over-year business. declines units, were E-Systems and due our all by from declines unfavorable margins Approximately XXXX. major we January with by platforms to the compared year Since now X.X our in the exchange, was Excluding approximately financial X% and half These X% by of growth assumptions. regions significantly. XX% in customer represents certain in currency the margin production of was in and foreign outlook be Global XX was factors. volumes forecasting as XXXX China. primarily support driven forecast X% XXXX launch volume year-over-year. volumes declined were North production of sales net is decrease global industry their a XX for or XX.X%. our

in Xivo and impact sequentially up on of range. XXXX margins outlook than Xivo primarily lower and From our between the a the from acquisition, of to includes mid-point impact Xivo an the second with respect segment production and the excluding associated perspective, sales operating estimate will low-end program midpoint estimate the financing forecasts the the margin with current impact unchanged of by backlog. impact despite at key E-systems we approximately the volumes the primarily of for XXXX of and now our see basis Our have increased estimated the guidance we half of the be half year, benefit Seating expense Core from the will a the Due range. weaker environment, acquisition, of overall and of of up increase in is first a ramp the driven margins of other January weighted second-half interest both guidance, be to company volume XX points now platforms, the to which guidance we production the dilutive including acquisition. earnings, Xivo will the changeovers

quarter impact margins first compared the will estimate lower adjustments slightly estimate Prior For the to will for adjusted be overall quarter. are we second will down margins quarter that breakeven We quarter. sequentially first Seating the second and expected that margins earnings quarter, be Xivo of sales and from second purchase operating acquisition, be excluding to the the impact E-system's Xevo's of XXXX. higher for be accounting, to company

quarter. XX approach points consistent Slide capital We basis expect margins by E-system's to allocation. purchase accounting per highlights our XX reduce to adjustments disciplined

product is first the in always capabilities to customers, improving cost supporting competitiveness. our and priority our Our and expanding business, invest process our

of targeted, diversification. Xevo, on, capabilities our acquisition strategic to sales product we focus similar and that acquisitions add recent on Second, bolt

our investment to the the In we $X.X XXXX, are three years. the generation. despite is quarter, the rating share flexibility Moody's debt and eighth to We unsecured credit billion of shareholders the through $X.X returned repurchase our have replenished programs. to billion of we performance, macroeconomic our environment, and metrics. for strong dividend authorization over consecutive increased dividend senior committed share operational year maintaining in current and grade repurchase recent Since our strong volatility upgrade result free flow cash financial our

turn it thoughts. Now, I'll Ray some closing for to back

Raymond Scott

very XX I'm And for gives Jeff. you Slide optimistic why. about Lear Thanks sense future. a

a flexibility. been position We have more financial had never better in competitive or

have industry of most the in long a We team excellence. talented operational history in the

in competitive most In our continued large We innovation solid also to make investments position in and and strong as a a of market seating, growing enjoy a are smart such leader returns. we recent and acquisition Xevo. technology,

develop We Award first as long-term to continue the In winning ConfigurE+. and will market and value. capabilities create such product innovation to an that technologies invest new deliver E-systems, PACE we to process continue

growing leader, are Mega well Tech in aligned Trends. markets well Auto industry with We the an Industry fastest and positioned

to Lear place. and recurring the forward has to Lear the CEO take to your with build proud great and trends. very future. and I'd look software, the I In look opportunities business of to revenue Xevo happy data streams. in these now to accomplished our forward across team on we'd services put you Dan what to I'm We continue high of be And questions. closing, family. welcome, to Xevo pursue the continue rest of We And like value the generate Xevo Gittleman, team

Operator

line of from from Johnson Barclays. [Operator Instructions] the first Your Brian question comes

is now Your open. line

Brian Johnson

this? driving what's very see will -- in there coming a used be you, namely more discussion next ROI, of interested change just and to of it maybe good running Is you, even and it back be low. in margin. kind something stepping of for a since margin be low detailed too but a on? this business business been perhaps your question the of couple margins issues? is XXX And management is in leader the it margin I low in points quarter that E-Systems higher both just Is basis quoted new a Ray, quarter maybe operational has that Is was about business

Raymond Scott

coming some and time be very have what's just but spent on the the board. surrounded to the talent. time some -- with had spent in I've with myself now I ranks mean, he issues. and -- there Dan E-Systems is, time have really business news business some Xevo, had talent no there. in we want got I Dan mean, I've team, I've insight his the And within over look and incredible incredible you a an the exceptional. today, in to good operational And with obviously driving Xevo at and is the and addition we I clear, team its good to we within team that,

are this cost returns for on So board, opportunity was less base. it's our programs. in really is albeit And of we're our in some diversifying What's to about a it's margin those margin is not volume we're But segment of E-Systems it's And are nonetheless, to is margins really balancing the going doing strengthen still, our customer continue at team. coming good reduction capital. great excess still to on this business, we're generating accretive. traditionally or higher in in of the coming deep what addition excited well that, that the in to on customers what

portfolio, relying right we I when business two that so, too customer our look now, are maybe And on we diversifying or key customers. one are at

our not there's those particular there's Geely we're through customers, going there I we Volvo -- and long-term the think are play number as with going to to maturity key Lear and we're with other those but those creating of not launching investing of within Now, value and longer-term but investors, but of introducing proposition, a And our continue a just a customers, Audi we that with like that a sight customers it, and to diversify customers. for and programs business. that lose is

customers, issues, balancing by to So, driving that if with you just I no more of elaborate now a the… if little our want know and really don't some margin right Jason is launches the these sequential issue major customer order up those

Jason Cardew

throughout Escape in in what Jeff and the JLR in expected we have that's Ford Yes, that the wire America by decline, three a in volumes as with terms factors, also alluded we year, change lower significant to margins electronics. we North Europe the really to, we the have content, business in of driven where expect second lower see happen in Brian, quarter expect do volumes in second have quarter, some both and over in we to

our cost bit that, we're growth quarter. connectivity be the higher seeing a In to addition driver quarter launch in which to slightly third then is in engineering higher second strong the second the supports cost and really the electrification in and

As you rebounding the factors. of look the of margins to by half see driven reversal the of some of same we some second the year, out

will purchase reduction price also year. costs then normal which see customer And and the the in more fully impact the We manufacturing launch half and the facilities, early be contractual that of our activities year. then our volumes reductions parts will offset second year. the the of second moderating of we benefit cost the half higher in So in of in see granted were

Brian Johnson

programs roll-on in follow-up, as historically So seating over and above backlog low XX% then margin value are on up, margins segment their contribution coming and which ramp on thought because we've as which that should which just or in and is XX%, the margin be segment XX% below the margin you That just seating, engineering Is it going compares to change think about we lower prior about lifetime? margin. contributors of in the defined is at now or to all at backlog, the a bringing in XX how not I ordering, Slide XX% and you the is helpfully, in? backlog margin look coming

Raymond Scott

the we've you're typically overall engineering the able past and typically, average to And when that efficiencies it segment then tends changes program level into on when comes that's that at this to than board, that in No, comes time. program at get a as a expand. and lower on that's margin product overtime said

with seating, our a not to business within may customer pursue that it's What because of a So and business, type we margin and The the we fantastic that backlog cost year let weren't chase business talked XX% again, we piece we're margin E-Systems gets winning. testament difference respect did XX%, low we to as between E-Systems us roughly last that in in have the to recall will came business a XX% specifically margin BMW programs. behind launch with programs. that's the in grow seating and at that continue seating to of take I you out we a that those think at going

that So for with off margin low rolled our that program program, low margin program. us was

very roll-on we off backlog a So combination margin program roll-off rolled of seating. and is a and in low

Operator

next KeyBanc Capital of Markets. Your the Picariello from comes from James line question

Your line is open. now

James Picariello

wanted the I E-Systems I of -- just to make impact fully you Xevo that sure Could on understand margins.

it you headwind hear PPA, I a was mentioned that include is XX Did per think point quarter. when it that basis I right?

Jeffrey Vanneste

We you in be million. estimate perspective like and on sales when the had would something accounting like in is around an acquire $XXX Xevo acquisition the those in XX depreciate ultimately then were here's we certain and tale The But from and in million. We over mid-April. tape business. is assets that assets XXXX on intangible it in really XX place that an that today so Yes, this breakeven sales a closed OI that the you would Xevo, business requires to EBITDA time. from presentation, have of capitalized

by capitalize assets assessment of going that by purchase E-Systems accounting, on on company completed to intangible of points. Now would the E-Systems the year XX to but we're margins have roughly impact roughly we've will full basis have to quarterly margin amortization lead having Full-year basis XX the and overall dilutive points. dilutive those to that basis not points XX given margins suggest estimates early our margins Xevo roughly

James Picariello

of So ahead… revisit, okay if we go kind

Jeffrey Vanneste

wanted to is supporting say No, amortization I just that non-cash-based. that, that all again

affect So EBITDA, does affect it doesn't the OI. the but it

James Picariello

Understood.

about segment, the is exceeding it framework the lower full So sounds it year X% target you're that like – like to still end. just if seems pointing the know hand. by year in I full at for well guide the think the midpoint for the margin margin I

curious what E-Systems, of margin, just new factors for full is including kind the does what for the all E-Systems? So margin year the the the for updated target

Raymond Scott

a think So volume to me lines. the the sell now main with coupled sell that what it's that overall give let fact headline our don't I And and versus explanation specific we we we broader think guidance effectively little car what you story, I industry, gave anticipated a as we initially the to to guidance in January.

their X%. what platforms than regions to Lear globally estimate more So X.X be down Specific estimate and the was what it's what's impact as million was presentation full what now year had says volumes now is in in April of that January are I million lower platforms, said units versus that X.X volumes volumes our happened each January we to obviously with IHS anticipated January. the effectively on in down that. is what in in saw than now Their Lear units, roughly forecasting we major

down key anticipate January. China now XX% to America, North X% an and in platforms platforms January our in than versus versus more X% down example, more is we be will than As on our be now XX% estimated

several changeover to what have now been of that more in weeks then – has January. what had there than anticipated and with coupled programs So that forecasted new or delayed launches are down now our we programs

obviously the and weighted there up the down to primary second the half half. will have mentioned of that pretty between a first that's topline, I half expect fact flows year out second due significantly So go driver line and to and which sequentially, first the sales the scenario the we older we half the that versus the of of think the backlog year that earlier we volume

what given that volume now - January, year first So E-Systems we will of the see of to the average. half year full In full ultimately impact sequentially, to margin of environment what lower, to which what year be the be volumes, higher volume the the we've now year seen margins X% where strong question lower due in average in in and is has the second business. the really more in E-Systems see be in And seating before the similar really getting thought we X% the that than seen decremental finally been scenario E-Systems scenario in mix will full year your would – low we seating. is severe getting than greater the is margins than that in margins lower the in and than that despite story. operational backdrop margin the profile, a That we to seating the to is that's in great said performance that seating range it we've and in be roughly fact half

in second to January margins. similar year margins be of be be terms see versus full first XX% below year in the that year the and we said roughly full So margins and what margins half what range full now now the in be year greater half full low margins E-Systems anticipating is we margins, seating, we’re to XX% to than to would

Operator

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

line is Your open. now

David Tamberrino

the or much very Probably that Great very last in five queue. to the and detailed thank you knocked like question. out four response for questions

Raymond Scott

pleased. are We

David Tamberrino

Day discussed Yes, the of what's really he because was it where that be acquisitions you I player we A so to vehicle now? to the talking software bit much think to just larger the to being year. become and of opposed worse about at I'll all headed, last don't as accretive the E-Systems little want timeline interior do a about a to the margins in just really going, see Investor to John. joined, company asked yet it you do really is turn where fit see it lot but this the space

John Absmeier

David a so, Yes question. it's good thanks

of of I as think it's control the is and units as changing evolving you changes, know, in the that architecture that electronic the car. the the car landscape architecture

change extent, different be need some in vehicle. and computers connectivity that look to and prepared and we body start our into electronics evolved capabilities at the to for to how domains So

And seat. offering that. your how even It's sensing about so, definitely, as the question in our part seating E-Systems - of occupant yes, going the in of about the content cockpit, in to as more I are result as and about changes as seating sensors sensing as mean a well the

for it's to I'm or with turn to how question. win, So it it to that changes respect Jeff going accretive

Jeffrey Vanneste

the we amortization estimate from XXXX certain dilutive accretive would intangible of perspective, on thereafter in and to – again, Yes, by assuming that effectively income today is EBITDA a asset, the margin I be EBITDA. assuming the flat that operating and think it's unaffected important note intangible. margins. and somewhat here an between E-Systems distinction to it amortization But see that would E-Systems

David Tamberrino

Got it.

Raymond Scott

one for fits job – round And the first-mover I to acquisition now and some nice We've with been to Dave think this Arada perfectly. no of kind ourselves done just of in advantage. and Xevo. EXO There's and Dave, put that's capital Xevo, things and today really our disciplined a very space we've except that's up allocation type a Autonet in Xevo, we've that with to

leverage get great being to Lear gotten of the business mean I to a Xevo us we've our And down sit calls announce And I really but shortly and next the going think level customer customers and from and about talk the executive response going highest nice that OE in and a able major the to have so building on an at really and team within Dan here, within make job, I with we're announcement the now have John done phone steps. the back a with immediate to with responses. award. Xevo nice

as of aligned And for of term, long-term. value with for driving value those making acquisitions, so as been longer Lear obviously sure far what and we're it's customers, driving one doing was type our it we've perfectly

think all something, the home so a And I this is was way just run around.

Jeffrey Vanneste

the one this margins that we on via company the huge total on and for I'll that opportunity obviously seating of growth more E-Systems. say anticipate and or than growth incremental greater business color there much is Xevo is some thing

So that the significant. incremental pretty growth profile here is

David Tamberrino

that XXX been what this, now or XXX, historical indicative it’s to order think you're gross when $X revenue XX% you because breakeven for in you it’s licensing has breakeven to higher margins Yes, follow-up tech where is earn this to purchased be business. currently on like grow my was billion? margins that and a you do was significantly you it, What operating going get need to

Raymond Scott

it year XXXX know is don't going mean margins that at we we XX% next and slightly where margins dilutive E-Systems only XX% whatever I in assuming slightly, be but E-Systems at XXXX. anticipate we’re to exactly sales margins, to Well, believe being are only to those are, I point. what in It

very very impact trajectory it's you So have a that the business. segment growth that see can accretive of quickly, to going because of to

Jeffrey Vanneste

streams the And somewhat in it’s insight more much a much rate this both recurring is little a merchants not, familiar merchants. it’s at to this It and could faster get we awarded we program, the at because in revenue pickup software quarter get too, pace. could a isn't programs quicker traditional the

but this there been I at recurring the conservative ways is, looking of we've a revenue. our somewhat number in generate analysis is think to market,

where faster doing insight So that than it's lot something get lot we moving lot how a getting to of of, we've a of work at been and a lot today. that we're can

David Tamberrino

any performance, that And just to quick net have settlement negotiations customer downs? of the your do one, higher E-Systems, with the one price did

Raymond Scott

the of throughout higher the relates our at year. Yes, the portion beginning to of Price of are year very slightly the happening net offsets price than cyclicality year last the normal that reduction year reductions really with we've time. over that a is that line relates moderate as where over of really components will some what view in we much some seen electronic last that price specific to on increases shortage The it’s something on five years. being but and a average this then implemented the balance performance

second So the that performance driver in net of the was quarter. the

Operator

line from of question comes next from Your Kelley the David Jefferies.

open. now is line Your

David Kelley

you and of it side merchants going much in more new platform. to a follow-up see thinking application? $X an to then being about XXXX. about the addressable of reaching for of to consumer that we're potential Do Xevo, to that looking mentioned growth how I conversation at further and slide how If the and Just OEM market on much penetration platform, you tied billion software the and Xevo addressed by out think quick bucketed integrated a that E-Systems do deck more buckets see you

Raymond Scott

portion there's That's two vehicle so mentioned of licensing I in revenue elements but piece a of market. the The pieces software addressable the addressable where channels the number of a it's is have. a smaller tied Yes, car. it's the embedded as to more actually to merchant tied the is That revenue as to goes the we piece the journey the user portion SAAR, not and it's of is tied that's engagement, of larger and market, sales. that as that which it's portion vehicle and addressable which the of user the to the technology to using market tied market not is tied in the sales, adopting people experience well

or prefer. and things So different they different have different dislikes likes people have

experience with annual vehicle on more disconnected bigger So that a it piece with the as more interaction improve from bring faster. as and much and and again continues And data much to merchants not more sales. we it's user it's grows is --

David Kelley

you partnership signed about example. go-to-market to follow-up with as has going the the a to a Domino's an someone I past as as in know And think merchant. rack we Are Xevo

the since getting you the rack as you, high are relationship they reaching these OEMs cut and describe merchant stool, out merchants bringing to of you in the this maybe So a between or could to clearly also level the kind of well? three-legged maybe then are

Raymond Scott

great with the the one does They tied question. Yes, for merchants, want as a to value maintain a which consumers, it's the well. of want relationships or Yes, and these to brand don't OEMs. all Because most to for have the be actually they build cars. that's merchants merchants, is Most a access platform. one Xevo these value to huge

easier scale also to something that's provides works Xevo because an channel the in OEMs embedded that that and effect for. multiple It's that the So car is path, the the look that way software integration merchants where journey so the that experiences is you it's same new software add merchants content deliver cloud, presented because without updates through software and can resides the just car. and in basically the doing and in exists any new it the more

the continue and will Xevo are speaking generally yes, expand to and channels So that. by merchant built maintained

I your answers think that question.

Operator

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

now is line Your open.

Armintas Sinkevicius

curious keeps second first and of ability front about the to numbers when half center and think what gives about but those second in hit the When to of second then? what at the what up we of them, just those biggest your questioning and half are your I'm concern what hit not sort hit I'm in the ability you night your think mind, ability between to confidence you you divergence numbers. half, sort areas the

Raymond Scott

one their and anticipation volume, the are the launches having hitting is first production of Yes, I the building numbers. think how the look the we volume. We at customers

of attribute half I to second think biggest the in the that's probably terms the revenue.

teams a and the doing that have we I great think work as job. to as are far our do,

efficiencies things in job. the very in can that's cost we that do the that drivers confident something think nice a we I we're and control the really

biggest the say I'd in the things the thing really it’s production with half. environment, we've first the dealt So that

Armintas Sinkevicius

top And confidence far you the gives minus China you're you've XX those you've is reduced X that America are from on the minus as right to what guess guidance what from the as minus I platforms, question North the mentioned expecting minus levels. XX. X,

midpoint that of is saying correct? revenue you've guidance, is on from taking up the following to the to midpoint cut just the that production guidance, low you're high-end to so, to – this effectively, cut so And end you the

Raymond Scott

takes think Xevo, our Yes, mid-point which the comfort ever never in low effectively, terms us impact notwithstanding that to it’s is gives taken correct, to of we've us of I the but the changing position forecasting. What range.

suggest excess volumes And saying. in unfortunately true, our example in be our fact down that. down is that proven we're For some platforms was China IHS in key in of and of what other would forecast forecast that that continues and for internal our key the than be our to first regions quarter greater on in some of IHS to some the platforms

volumes they're you got those at if one of look of platforms our Ford we've suggesting north platforms XX%. on And that For IHS and example down what that key XX% in China example only year-over-year. is declining suggesting are volume is some

couple more the last taking view we So been we really unfortunately than in problem quarters right been have The more a we've wrong. - on are has conservative volume. as

Operator

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

now line Your open. is

John Murphy

explain terms As about Xevo you think is somewhat a taking price you're in rounds Basically understand. another when put it got like siloed great taking like. with GM to in me North customers going technology to with that can simple all lot Is America this a done global so is have And question, it. what and it? to it sounds good that way your it other

John Absmeier

the are largest There also customer No, some other for market actually world in is so of in other alluded for and there's GM - customers largest already is can the Toyota Hyundai out OEMs is on is proof strong will be OEMs now and the Ray that of customer there to the the customers as two concept of largest GM of announced. information other proof are Journey technology that There's it Xevo. concept. automakers find deploying you

and job Xevo of been of that, however, is U.S. fantastic growing its in its doing a the expanding. has own So on Most scale

can connectivity bringing on is based to important is services. Europe U.S. So and for what in solution reach that there region extremely of it it can that. deployed terms isn't because think we're do in from offers be expanded need global China and there we China any a Europe the a and that to in ecosystem Xevo globally is there China. for

Raymond Scott

Xevo is little further really the taking -- Toyota a really is along further and think bit relationship the of market with be customers China for that or Toyota, Europe a and puts with to your put is, I this about -- it's access to meetings a move notes that overwhelming. on it's Xevo's taking that's and years it relatively this our quickly were been and and position so some next now was actually not to scheduled programs of with that can making program are point, we China mentioned something us like I along out, vehicles, intense going we the things, says something those four is much positively and and this some think step. We've like key in strong to takes can to and obviously big validation good that it a very it. to get but development overwhelming We originated number absolutely we're through with is traditional What these can that three the got type quicker. And adapt to within easily Xevo

on. so that's what we're And focused

John Murphy

just how because and kind it is thinking you of or potential you up space if in think like there set at of of on this as smartphones if differentiate and or set, about seeing be sort if in Xevo lot illustrate a vehicle of lot phone my you our competitive sort could already device between when for So this to potentially opportunity of the competitors an this we point should be going trying the against seems white phones I to about you is also of stuff is? competitive might a and going could and sort your

Raymond Scott

great Great, Yeah. question.

monetization phone in the transactions the digital today. happening through space from is There So today. into will, phone, like web if growth biggest it are The coming this is doing e-commerce the car no and direct are are transactions the and it's of the mobile competitors mobile vehicle. you that white

taking this the mobile mentioned couple it reasons. So I for the sort but a from those, One, cloud dollars and the stool. had car of a that three-legged do is can that piece, There's piece. it's piece

the car, you've this together car, the how many the the Xevo three when issue the about a mobile user. that look you in and a and eliminates suggestions It sensors a car, user driver they've the sensors experience -- where make how in lot relevant user going, phones in car. information to better been to more of what hundreds people doing, is driving others with application distraction are bring ties got you long and they're So at also better can the use

and and it's in safer data experience. a it, So better approaching a way the phone, more experience the that's and using it again user at offers looking and it we're experience a better

taking So that's how it's away.

John Murphy

downtown as a is SUVs, issues we're interesting. there major changeover solve correct term? a the back of second for cadence. I short it a ceding in that sounds or that the seeding was some on online impact taking It may that was, Very that it, seeing the and the our maybe comes GM just in assessment on product like their question

John Absmeier

impact was quarter. first in that a Yes, the significant

the So Tier that they a you X.X as happen coming had they bit won't year, weeks down change the next but they over had had of a until downtime down truck X and prepare the And Arlington into last first quarter of well. ramp-up out plants in slow those online up ramp second the of end then and that of weeks starting very as you this coming have the year. pickup out year to of

quarter. So both the we'll sequentially facilities second see in volumes those of in improved

John Murphy

just and stronger the second Okay versus you mentioned first is much then half. in backlog lastly, half the

first and on given get if half backlog kind that split? sort us us second the of past, you you've just numbers half but on I the of backlog in think could you if roll remind roll

John Absmeier

in X/X X/X, X/X, second the basically Yes, year. the of half

Operator

line the from Lache from Rod comes question Research. next of Your Wolfe

line Your is open. now

Rod Lache

thing, about it share vehicle the total a commerce addressable can you amount market. do of that, the you're that that are I revenue could focusing to some target of for on conceivable Xevo $X is -- one bit for XXXX us you just billion would maybe the per little achieve vehicles just primarily follow with company Xevo up and Xevo to? a of to sort that On like is in exposed talk the suspect that more for what's

Raymond Scott

upon It's have. and it's the Yes, it's to that engagement Rod. dependent great merchants you hard question number a Again answer today. of

software in-vehicle generating Journeyware So piece that piece, the in, the and and type that the that a the sales revenue of of typical from we're scales it's of still life the with software and early number it's the vehicles the car. licensing is so the company license maintenance service Today the at is the fee and of an with stage. part bigger over of

days it's we -- as market the side, for On start early that.

as and as up each higher. people ramping bring analytics artificial gets engagements the get more, and better and just data with it better we it's So that and experience in more and interact understands the improve user therefore and intelligence

say it's and at this to stage, So licensing that it's number tough exactly what higher is, but it's than significant fees. the

Rod Lache

the that commerce that even sort it a single think digit targeting, it way be is percentage to that? a is that, about than it Xevo what higher of would would like be could So a of company low

John Absmeier

number, thinking $XX. we're about The is $XX to

Rod Lache

follow-up on in obviously lot a going of the particular this on quarter. just margin, seeding detrimental And a things

a that number to think a I detrimental talked reasonable -- business. over time something XX% about like you've for that Is still real use?

John Absmeier

program underlying to profitability, the of depending typically integration between on profitability XX this vertical are down. Yes, that runs XX the level and and platforms

Rod Lache

And in then about Europe. exposures lastly, just talking your

are you're and of a the to companies right in there's OEMs [indiscernible] key comply an Some obviously going some cases, altogether regulations exiting are platforms, discussion lot time how they're that as example. that of forward the with plants seeing new with about segments German now over happening

there there of are thinking what of be we you about would are some on that, the should you changes. significant percentage a you guys As is think say could list that be how or the in about -- on Europe, endangered

guys to that pretty market. given have the Just that you high exposure

Jeffrey Vanneste

any business diversified European region. than better Our is very well perhaps oversight other

see disproportionate be our to So going a there, book business additional we don't of any risk to are cancelled. with particular nameplates exposure

OEMs weighted customers. their luxury of the book It up our JLR, of us, is within important that really the and of FCA group little side, a for elimination about customers are in will think to pretty well. nameplates been discussion premium I or no business German us. There's that models brands hold for general are bit important customers

Operator

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

open. now is Your line

Itay Michaeli

terms various I And of in to is go at decline E-Systems North tied pass how changeovers want a much Could was that of just to exposure get cars $XXX just remind of some sense the how just just customers you to million to your tied think base to those America. much the we're revenue in just seeing be it changeovers? year-over-year. in back the that E-Systems us business, Just of

Raymond Scott

car significant change So in related to quarter, build the in that really of the E-Systems was first focus. only out the pass for us the

the so, happened pretty quarter. that had meaningful year, in on So that revenue impact a last the year-over-year

Jeffrey Vanneste

year before, I components And well and as to had last first of what to with primarily third started there China into what said was respect and provide Itay, really think very Group steep that and going programs and E-Systems the forward the we for with on decline we've the that over quarter. from seen quarter a we

programs, reductions. first of quarter look those for right volume this year you volume significant key the now and comp quarter comps first anytime for show from some very in at So, example, the the specifically of last year, China

Itay Michaeli

revenue there of in Cs the would wires terms an we in product margins any or decremental margin quarter? the in electronics on of was issue impact either that the or mix E-Systems, or then about kind had And to Ts you change relative and think

Raymond Scott

that and Ts variable margins the margin reductions probably volume the conversion bit weakness as in to - of variable intensity to mature that our in consistent with that's see are two engineering the business, we high a of of business further book Yes, higher infrastructure Jeff's we that in rest a business and carries that overall the overall margin see to higher, continuation more and of did as of our higher volumes XX% both business there business. saw underlying in support steep It's in a higher China. been bit reduction also and because Cs import there's little were underlying little impacting XX% capital the well margins has than in with E-Systems but to And administrative last Europe the year a than seating. very sort of sort higher downward seating Those with our half programs outliers. in And reduction the has operating little second that range. to comments, In led what some we that much book-to-business. with

Jeffrey Vanneste

quantify FX. Itay, E-System drop year-over-year -- as say I'd to the that sales it more in trying one relates thing, is the to sales

XX% we're company, about XX%. Europe, E-Systems in the in were As north but we of probably

of of So margin in to given we're segment fact more is because that a profile top line the to that we FX. and in that And of be are margin exchange. the going E-Systems segment in declines the later impacted E-Systems Europe vertically profile as with respect integrated our connectors, exposed result to in terminals

Itay Michaeli

that? to try down that to or kind and engagement on where roadmap question and the on the What's Xevo. leveraging maybe engage that data the basis just that kind deals in And and if drivers already encouraged is a road, occupancy the location happening offerings levered the being data the product transactions so, and that for car of and to of what's timetable location-based

Raymond Scott

of where like and synergy driving into GPS knows that's transaction gets you have you smarter good today, you and because arrive car more or rolling imagine one basically, information It's A being one rolling of you’re of a but very Yes, accurate, and it of out knows headed, might only lot areas that's the some is using are car an question, eight the know use we I get that now relevant but have. with ship piece that's then and you're station, a can which at, used fueling to mentioned, immediately a once where that's that you're the you scenario cases better with be today out of can there none. of button not information pump tank once to gas. delivered time. facilitated But at location over that's and the click maybe be car gas park can the you gas in you if the that

Operator

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

now Your line open. is

Joe Vruwink

Joe Good David. Vruwink morning. for is This

on clarification ultimately topic. is is maybe to for margin, though, gave XX% pressure, lot that sounds XX% quick But back from like you lower Jeff, of margin Xevo, reasons is profitability to the a go the why I hate under correct? Just one E-Systems which even to move entirely

Jeffrey Vanneste

due that. is to fact, that in none No, of

in year given margins to estimated the XX the XX% lower we’ve gave basis E-Systems Xevo, with margin respect So excludes that January, to we on that the now gave XX%, point guidance dilutive that margins. full when of is XX% impact we which have roughly impact

Joe Vruwink

similar additional the thinking year XXXX set And and XXXX, it consideration be terms add then backlog bigger of that flow should Xevo to an margin year, it to that playing implications? to that a the already next about XXXX in has is was be dynamics on are E-Systems should in organically, when backlog revenues than there out

Jeffrey Vanneste

is talk that we think of Yes, months, Ray I business. by which were awarded to XXX the is that in couple some E&C million last implied and the an slide just incremental of

of the So we will first, second years. yes, growth becomes anticipate as the and backlog we fully year we've those see the second as backlog becomes in the the third that always said

connectivity, slides changed we're doesn't perspective ongoing. were one Xevo should include want say So quoting just just as and that to I backlog. my just that from make E-Systems add summary back, and traditional in electrification that you Well, just the point, it my I'm business nothing is

want do I to an is give what update. so And

an which we drivers I Given be the some of for in to electrification the is new the us. consider team conductivity, awards. of on good some the did an of what awards the the job and time wins want some to changes in update really give technology capturing of excellent

Operator

of Our from RBC the comes final Capital. from Joseph Spak question line

Your line is now open.

Joseph Spak

platforms there sort tied my imagine is that's China fitting that. of your is question. just the WeChat you rationale a I'm consumer I Thanks of through and about understanding runs everything sort Chinese because curious in so certain And John, the like of yet sort much the more the Xevo mentioned the for deal. for market that is big one model part being and the to reward me is here. of of much sort more and opportunity

the correct Xevo marketplace than sort U.S. So what to Chinese the Is you those of market sort Chinese different what's of strategy you onto and the market? pull onto it brands that get sort is, platform. individual how maybe of could where sounds the get that in platforms those go-to-market sort the attack of if

John Absmeier

you're It's and an correct. observation accurate, you're excellent

there's So model aggregate you as the indicated, of that different has already. technology China than a mainly merchant the the some of be often lot players western channel markets in to in because

with have customer in the those user position bringing relevant maintain affords their information but also to and car and in it car, their So keep need the we work And the a because -- the OEMs channels. user we're brand which about to their experience satisfaction, again, contextual better identity. in

of sort can through continue window that the and into own the China as OEMs that the offers to here, it's that region. that's Xevo are services channels and is So the same difference channels branded different in now only merchant it, partners their the in

Joseph Spak

onto aggregators, And actually there much with and those or sort so does what's the there? additional there does that thinking platform are it -- the of with those since your make lies so it of them or challenges getting is power as easier

Raymond Scott

Yes, I'd say it's early to answer that.

therefore, I they the control some want of that dashboard, the to maintain it. and going interface challenges always to is again over that want they level think there OEMs on be have to but

very in safety that of it a know lot we and the phone contributes the dangerous car is to So using issues.

that able to something experience the the their is to able being to design merchants with and want So control facilitate control be interaction that OEMs and users. those for

the So will the through that's you reason it dashboard, in why will. come if

Joseph Spak

free just quarter the quarter, flow cash anything quarter the real was just think, in else is drove -- flows I Is the light. that quick, in seasonally softer that quarter? there Jeff, all sort that then And cash typically is of first

Jeffrey Vanneste

a better engine. previously came bit we then cash versus in thought, in little Actually invent we flow what the in quarter, have

lot due job. inventory did the great volume that the given a was volatility, a think we I of managing to of

no our guidance, So there. cash we're story flow fully full confident free year in

Raymond Scott

to on commitment are to our we ensuring that things, right want I to work and today opportunities that I the to portion. excellence, want the again, on their and of bright call I want profitably. on front different operational stay Q&A team continuing the And differentiates we build driving business to move ways and the us only and every incredibly with in as in to everyone thank technology, that and for our and done in we're we to continue to think the the the family, I I think I to good forward outside us our this can't participating everyone questions. Xevo that's grow your going welcome day for tell team, your success business. that, to innovation, With We going doing are for be whole focused single Lear you be people, to hard your embedded in thank

So I that day. want you your to all work thank do every for single you

So with that, thanks.

Operator

today's conference call. This concludes

may You now disconnect.

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