LEA - Earnings call transcript Q1 2020

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Operator

Thank you for standing by, and welcome to the Lear First Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions].

And now, I would like to hand the conference over to your speaker today, Ms. President, and Vice Development. Senior Davis, Investor Corporate Relations Alicia Thank you. ma'am. Please ahead, go

Alicia Davis

Cath. thanks XXXX first and morning, earnings joining Thanks, everyone, Lear's for Good us for call. quarter

Lear's prepared will Vice Senior CFO. from We call and CEO; with today's Ray Jason begin President Scott, President Cardew, and and remarks

You a the copy presentation remarks accompanies these can ir.lear.com. find at of that

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

statements as will to in Before this on opportunity future, forward-looking that I'd be you we call, like the take X. assist Slide understanding we begin, our in this we remind conduct for statement you Lear's to making to Safe expectations Harbor detailed as

from factors Our actual latest other our materially statements due and these discussed differ in to many results XX-K could reports. forward-looking periodic

remind refer that we you presentation, metrics. to to financial today's will during also I non-GAAP want

the to are for comparable reconciliation of directed You most items slides GAAP the the directly of presentation the to non-GAAP measures. our Appendix in

call some outline environment. will to in Ray first and today's of Jason cash X. then financial is review Slide and for have we current steps flexibility of series quarter. maximize preserve overview and results comments the agenda an quarter introductory financial The the on with the our begin taken will provide

and Finally, the and related safety, will community. discuss strategy a Ray business to provide update and efforts our employee health

the Following take to formal presentation, we happy questions. would your be

to Ray begin. to invite Now I'd like

Ray Scott

good everyone. and morning, Alicia, Thanks,

about few globe. a begin would current the tremendous a the people to words The the on around I COVID-XX Before formal I has toll presentation, crisis. say pandemic taken like

take moment us our crisis world. frontlines employees thank I together times. around and employees to these We battling commitment to efforts with unprecedented the their to I acknowledge those on all. This and during that a out our to want have stand Our virus. tested thoughts this want for horrible has And impacted. prayers those go the been

major Industry the challenging a coming challenges we the X. Okay, expect disruptions in pandemic have It Slide markets, been our to now could if COVID-XX start has related impacted additional operations year. and please very to of we months. our to turn in all

on and moving we We the have what business remained focused forward. can controlling

very We us and time. earlier that experience; today learned financial that management us what crisis. industry understand decades of most during more of complex. team, with valuable here of lessons each facing were the a also have senior But talented XXXX/XXXX skilled we're is much We we from

have challenges. a team. highly We and strong and a solid management a operational liquidity, experienced the ample for well-positioned balance excellence, sheet, foundation, We're

near-term focused health strategic operations team have changes, the our business three the industry while As and of priorities: on and liquidity, a ensuring developed opportunities. long-term our we safety preserving remaining employees, with aligning

will We industry even we believe, post-COVID-XX. executing the as navigate by leader priorities, successfully emerge stronger on an and crisis current these

the I'd of provide sales XXXX begins, a Jason quarter which market we over quarter, Before of growth With overview a the $X.X summary X. Earlier like brief results, financial this released had quarter. is morning, we to on XX%. Slide in first shown billion of of our

our both margins would and of Seating exceeded by Excluding the a performance revenues divisions. in X%, impact COVID-XX, operating have solid E-Systems both

a our recognized recently around Lear's the supplier were is Award, world innovation. second This benchmark consecutive with by Xevo for as automotive a testament market. a Award is We XXXX PACE for PACE Automotive Award recognized to PACE industry News the continued as leadership,

of to to review like I'd invite results. a our provide Now Jason financial

Jason Cardew

Thanks, Ray.

production shows for volumes Slide first the rates X exchange key vehicle and quarter.

plants month was of a down units for XX% compared million China, production was portion down and generally vehicle XX% of was In related XXXX, shutdown shutdowns. the global or as were to impacted the by quarter, industry March. as significantly X.X First COVID-XX February in and America continued to Europe North to XX% currencies a other mid was March, major XX% year-over-year standpoint, U.S. shutdowns. respectively weaken down including Europe the From the Production and for currency late also quarter. North similar against markets In dollar. America and experienced production

Slide results X the highlights for first our quarter. financial

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

the reflects of exchange above foreign Excluding sales which growth were XX%, impact and down acquisitions XX% market.

sales earnings $XXX were down the offset in operating $XXX to performance. million, decrease positive somewhat While million due primarily overall by operating

X.X% in were Adjusted operating the margins quarter.

$XXX the operating in COVID-XX of on negative quarter and $XXX sales the impact earnings million and our We that core estimate respectively. approximately million first was

positive was The cash $XX cash in the offset XXXX, negative earnings. increased flow working including result collections capital, close due primarily was million to later free a First favorable cash quarter in $XXX partially date flow million XXXX. quarter to compared lower by free in improvement of

the year-over-year in Slide margins Seating the down from operating XX first explains in the the first quarter XXXX. of quarter billion quarter Sales and adjusted XX% variance sales $X.X were segment. in

were exchange, of growth market of Excluding the sales XX%, foreign down impact XX%. reflecting over

the margins and margin to backlog offset positive quarter, compared were In X% accretive last volumes, performance. reflecting operational year, first partially by lower Seating X.X%

Excluding have the been impact of COVID-XX above segment X%. margins would

billion provides year-over-year sales first quarter and Sales down XXXX. XX% Slide quarter adjusted segment. E-Systems first operating the quarter in for first our the of from were margin XX walk $X.X the

of were over margins acquisition. Xevo The negative were volumes, impact market X.X%. down the XX%. in exchange margins by and XX% foreign were sales the acquisitions impacted also reflecting E-Systems net primarily of lower performance growth Excluding

would impact up have been the segment of COVID-XX X%. Excluding over margins

our we uncertainty to March XXXX caused significant On guidance by the pandemic. withdrew the COVID-XX due XX,

the provision preserve update environment. reduce in costs this However, on and thought liquidity and to to provide we cash it was taken an describe steps we've important our

turn XX. to please Slide Now,

ample the maintained conservative slide we to to to our navigate us balance a capital structure through which ensure positions Lear's business Over Lear liquidity past well and highlights unprecedented the in have entire manage This invest cycle. decade, has these automotive sheet strong throughout times.

XXXX. proactively resulted refinancing apparent, debt our rate in XX our over entered the reducing crisis to on the bonds million credit mid-February, under to of was due the interest bond we the extending severity bond markets $XXX outstanding maturity weighted weighted refinance X.X%. In and before average The in average to years COVID-XX in

in addition refinancing, revolver and maturity we're bond February, to August And in XXXX, obligations. billion ability to our to interest also In maturity bond XXXX. in our we on our first requirements confident extended $X.XX our with the debt manage the

sufficient while CFO, take scenario our continuing one is we've most cash As managing will scenarios, top production modeling to depressed. And under But position. have industry minimize continue of proactive done is extreme the aggressively we and we're my priorities extensive cash usage, even to severely and liquidity liquidity. steps to

cash is impact shares in quarter, decision the the situation difficult, one to both economy the the first a and and taken lightly, we and on repurchase clear. from COVID-XX necessary the of the board the became in suspend but March, a dividend repurchases that We became decision This not dividend paid payments. the urgency made prudent believe share as

comfortable; our storm, not investments also both balance support growth weather ample With but liquidity of continue and potential the maturities, segments. making long-term strong we sheet, our debt targeted can no near-term only business we're significant that the

programs company. cash were all on for By COVID-XX. have use the of ensure closely we most while re-launch to supply team members and longer-term to safe to of our the also and suppliers workforce, take re-launch environment. chain our XX, evaluate and new the cost need managing the production. workplace our a have team protecting strategic established were cash our finally, factories I in reduction designed the this and our to philosophy working disruptive Class value downtime share in creation carefully we the manner. the moment to to retaining priorities light operating force wanted preserving long-term potential to of able Slide safely efficiently prepare with World costs protocols salaried in preserving The And Other to balance a performance efficient been can On

cost if lower warrant cuts further determine conditions in other deferring We're R&D while will to investments conditions our permanent, in demand. reduction priority industry are closely economic more We're additional to actions, production costs, capacity that areas likely And it. investing we projects quickly other to we With strategic action decisive take be new through aggressively in become and overall reduce and monitoring restructuring. respect resumed projects. reduce vehicle we when positioning moved have we're discretionary to thoughtfully to

conditions. Slide approach identified XX both implementing overall We quickly costs global We've became taken cash to economy our several these specific and customers' scenarios layered and the executing as business. to the continue on and COVID-XX economic we began to global actions apparent. of we highlights actions carefully to a estimate schedules, And evolve production as models impact devastating monitor created on our flow. reduce identifying increase and impact financial the

board already cost have actions. and items the of stakeholders, X shown members All have all as in our impacted X including saving implemented. been see you and most items these by Phase the employees, stockholders Phase And in can been

As position sense to noted on a of we industry. our strong, way for gain the us better how will earlier, as liquidity act prolong COVID-XX in our be a allowing is impact measured

and increasingly that aggressive if have more in are pull identified needed. have actions to We X levers shown items the we we Phase take can

we capacity, we During take costs steps and during significant by as a financial SG&A capital program We also some our to took lessons. global crisis, and footprint XXXX of right did out and Recession consolidating similar learned the engineering, in but right-sizing we're reducing the and again, prepared XXXX, appropriate. Great spending, lot things valuable our

tells ensure market the us hindering recovery. not reduction experience take to is highly growth damaging to targeted that that position Our or cost we're actions it our during prudent

will affect actions a be to the result our from in later executing cost they fully our opportunities shifts that discuss not today, strategic our drastic in will so plan are want Ray presentation, future. As as We we significantly reduction of ability arise that sure innovate believe business industry the us to keeping post-COVID-XX.

margins. this I'd decremental to Before discuss I leave slide, like

resulting nature quarter resumes, XXXX required that for usual margin automotive expect will is decremental as for When margin to personal We due period the higher decremental with of the production than as protective compared a first ramping to for global in up. cost facility employees, it be we're inefficiencies of production value employees In inefficiencies the somewhat was restarting upon production variable above time new environment. This important anticipate pay to new temporary shutdown is to and the note impacted We to be certain costs our entire margins XX%. layoff. result the that increased to by typically operating of locations, the we partially of similar would our a the chain. process Our other our from COVID-XX. associated equipment adapt the to hourly

industry future are outlined approximately the further we of levels, XX%. savings improving will remainder in cost as a the to of for clear margins production view decremental help intended measures of Once capacity necessary year margins. decremental right-size Slide XX to goal achieve with production to The of us XX% we actions take have the

turn to Now I'd Ray update. to business it a provide to like over

Ray Scott

Thanks, Jason. Nice job.

XX. Slide to now Turning

earlier Lear our employees. Members world I facilities health around hard we have have priorities. than As and on have leading-edge of At and globally. safety priority our been higher to Lear, safety said call, the business three we protecting implement protocols near-term in working the of no the develop of team all

As strategically appropriate. a manage to it and while We're that leadership is to act COVID-XX challenges understand we company due for we the when current long-term positioning the success. to team, opportunistically have prepared

the Safe X. lessons with we our China will After needed. off-the-shelf operations, World globally, management Slide and in published to under to and standardize Health With ground took Work solution, XX. realized our I China would we plants environment. local give On Playbook Organization our some elsewhere on no April that Work Slide practices have quickly to to processes practices CDC the Playbook. Playbook back in our spread learned we along new that for Safe was recommendations tools developed best a and teams plant The the started and website from best Lear's adapt COVID-XX and surfaced they and from that provide on this designed global XX, the

chance in the spreading our to is our minimize plant of plan and locations. a the people It office protect virus and

from seen unpredictable, practices the at in very the have is place our today and we virus and best this change world. protocols locations community learn own will as medical facilities experiences we As our around and to we have the continue

has XX,XXX Playbook the response been times our and around from downloaded has overwhelming. world from website, over been

our others own the from there, will understand we update to find If within practice best use ideas as We input failsafe share isn't Playbook out and will and facilities have seek for Playbook continue a we our no that We well. ego. globally. a we will this better we

have of Lear times. consistency the world. Now maybe global the production nearly ever than a seen safety virus. to industry, operational how followed excellence locations. significant history execute turning to by a sophisticated a developed manufacturing auto is re-launch to around across the of procedures the the has on to Slide XX, we our challenging It's This history shutdown of invaluable more extended global operational our for long and potential expertise as plants never to scale even us simultaneous these more unprecedented important of to we detailed a the during protocols a Playbook. task, in the experience add highly an was with spread this plan have need applied monumental minimize by Restarting

the without limited. to team very of execute tools run is The our But to did facility useful. our safely and manufacturing a disciplines the the what well-being plan success Playbook that will be an allows design and and protocols restart framework and impressed ensure us plan, the and I'm employees. to established alone the

feedback employees our early that The and reopened from has overwhelmingly been have positive. plants the

face optimize work efficiently confident Playbook that We will but help way, we transition more new along place, and disciplines right challenges our operate as in with plants to the safely I'm the us the environment. will

long-lasting The have for Turning long-term to importance liquidity us, on will our us staying on on focused, implications immediately what Lear's society and of front only far-reaching pandemic is XXXX/XXXX in day-to-day and financial such operational but and crisis technology Slide global XX. broad impacts economy and the taught challenges of management, as not The also business. innovation, strategy. in COVID-XX the

upheaval. precisely change While to note soon the it industry as is the know too how we result will a of

This both that a changes senior to COVID-XX. a industry technology team working evaluating in for with I've is in E-Systems mega our post-pandemic Seating business closely strategy Lear industry potential ensure opportunities new in to and is and potential market So business that team and world. created trends, landscape, due the leaders evolves with level unit shifts shifts

requires will While we growth right on R&D, back immediate executing now Lear some strategic important business long-term capitalize we're to strategic opportunities. continue for we our day-to-day to also our Though managing attention, our will would near-term support positioning that be to scale plan. committed future investments

industry drive change financial strength, and equipped and well market our adapt Given as flexibility the position, we're to evolves.

and families COVID-XX protective to a responders initiatives need. personal first against by communities equipment describes to support identified taken masks China. battle XX Slide protect Lear in and employees hospitals, the In including mask we and to donating in other February, need for our

on position to came to to As crisis. worked at of design I'm quickly and the Lear the employees as in-house a to and ability this engineer the which develop innovate together and the us testament solution, adapt, our team their to help as put amazed our in a mask. those families, well frontline production the this of the across globe Lear ramp-up team way

produce live over found this Lear's work, million supporting their on to during and use of and their also Building proud the and their so ways we culture strong help accomplished employees communities to pace own, on X acting have the I'm week. where to they on skill of what local team time. have We're our areas. masks per resources

was standpoint flexibility, experienced. quarter and industry accomplished XX. focused managing priorities: employees, and and we performance significant planning. as with ever our of operational remain working the safety remotely Now liquidity had But especially and team. an on truly disruptions three best this unlike believe first strategic anything financial the I from ever a collectively health everyone we've Slide turning In the Near-term, our to was team the we've was marked by summary nearly what remarkable. operational

successfully I While significant dedication continue impressed by I and confident to in to navigate our near-term resolve challenges the long-term this company the remain be position employees worldwide. for crisis remain, to success. our ability

would take to your we Now be questions. happy

Operator

[Operator Instructions].

RBC of And Capital Spak your Joseph the question line from from comes Markets. first

Your now line open. is

Joseph Spak

you're that provided is know start, COVID some of on margins. the just you XX%, -- rounding to sort and second some maybe wondering like actually was than the on on could the you in there's I decremental spend experienced which sort comments because of but margin you XX% of I was quarter. if the information I maybe sort estimates another it decremental better your Jason, just using appreciate

just you the second can move So sort mix the And bit performing regional margin you talk a as about little when what's quarter I see importantly, of on guess decremental there? more going you changes? that into how

Jason Cardew

Sure.

to you prior So in the our side. a and customer that impact on you volume and the mix the pricing had COVID-XX, addition usual in first happened performance layer that, quarter, Joe, of to of fluctuations had

so had And that those the factors you impacted other all results.

look in by and in where than to the new fourth had that we the last slightly quarter rolling But it year-over-year changeover from old -- see continue quarter the the Seating, if at new model the obviously same of segment, E-Systems conversion you margin. effect a programs of in better model we on to year, saw third lower we

really you that's year-over-year of see the in main conversion the diluting the that thing first So quarter. sort

that with all that So to necessarily also business. COVID-XX, the XX% fundamentals not it's is are just happening the attributed other

and to in for and one-time a prepare for -- balance that the XX% or cost costs incur our And combined. margin in environment. about post-pandemic forward, on effect both As facilities to the going variable is businesses we our this of three expect we other other to XX% point normal see combined year, we're about of re-launch of the of PPE to impact sort look the

we've capacity running with that's production why of it's expect of then an point at inefficiencies as described two but less to what impact in of about what to you're week see XX% ramp-up, we to for levels. volume one see a seen Many example, period at shift going And plants, And the full similar than of extended normal restarted associated the for our a ran XX% we production last or in facility Europe. new time. result have on a you

you're seeing output. have overhead full of XX% your you the but labor only complement XX% your plant production and So in or of normal

million And could remainder neighborhood the of but the will time, so that we believe the in $XXX year. of that be over diminish over

that's -- the other that's factor. So

your takes that XX%. XX% So up to margin decremental from

for savings And to million to of the which other operate where result Now working in to cost of we're plans. in a we our those an program, were have plan XX% $XXX full-year we designed that reduction down see volumes about as direction, expecting environment XX%. the

So if if volume in on that'd in margins from to point XX%, improvement to that, down revenue, about you five do down the you reduction math out about that is a works point $X taking XX basis XX%. be XX% improvement or billion

assume four for the XX% you program or billion $X then in revenue reduction about reduction points. be that volume If full-year would worth a cost in

to big So range the that's hence Joe. are takes, puts the XX%. of of and XX% sort Those

Joseph Spak

maybe Really, appreciate bigger just really the color. Ray, picture.

that it's it some to mentioned like like more why bucket only seems financial guess and the take if some during I of SG&A you us latter of same If move implement tactical look things to because you some in truly a And you re-evaluate been that so here Phase crisis. get is plan sort the could is leverage the to had is It of Slide everything? You things additional needed really still opportunity do wouldn't stuff to much at if need you savings took restructuring. fast to-date just to worse? as there's sort try XX I get X haven't the if or chance happen and more on that especially your with the Lear you really, savings, actions still

Ray Scott

doing is good getting like their this Europe costs I did XXXX/XXXX and of today. more our look what really well. it's demand question. immediately. America at is our America, in our nothing were volume a And cost. crisis overall really could based I think really way Yes, at This on North we're South obviously but that then come experiencing financial and cutting really cut we cut was obviously, in customers XXXX/XXXX And was in XXXX/XXXX down programs China a

could And do very that programs. given little we aggressively a so their bit things differently cutting customers knew were we their

that a how supply what impacted. this to And is a going it But is demand issue. now. right issue on will is Today, lead isn't be really demand and today to know going clear we to

different in demand and phases. on work models that Jason on So, had plan we like. the based up different through what scenarios and I will And different put we at place from had really look this it looked a built that we

we this in come cutting. from do don't is aggressive scenario did volumes with have believe that very do. and advantage we that in to is we want we XXXX cost not when in take cost were And did something more and we're our do do to What XXXX; We of want And a we learned position to to get cutting going those. of be there's that. what to back, cutting mindful

to have tactical selective we that. much think about I be more and

But I to much I type back a a is we V, come back think this on be it And particular shaped benefits. want quicker strong good can aggressive we start in position, steps in programs. those everyone be that, to gain L demand U, visibility if and we as question to or the get very more is think more scenario. will position

strategic next know very know how we're approach our is every quarters. more, single so to to like the week several and take what going going impacting we to more a on tactical but demand little And the approach seems bit look this I and think is a what be in we business did potential

Operator

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

now line open. Your is

Rod Lache

Good morning everybody.

like determine ready you you understanding to recover. have I because I just hoping maybe rate are did the be for that a clarify just if while. a at you pattern revenue if maybe were to holding a stay kind for QX Joe's does can us production think and was to run wanted lot that on suppliers just in Just of of I follow-up question, you

$XXX thinking just the we you just So billion. were quarter, -- the in should a what about observing we from is here, costs annualizing if like permanent? from you clarify by be that annualized viewed -- sure we there inefficiencies and I'm Can were recovery not it are should the as in savings be incremental other be what those some how what And the of that mitigating margin see were million we observing versus we $XX should quarter? PPE you

Jason Cardew

Yes, I have of say ready volume a little in the queued environment, better business of all, out would sense once of first terms the just a looks adjusting number lower crisis. a up we to have are to like of go restructuring run what we of plans rate that the coming

to And that towards basis out more taking half, structural a first in so cost second margin into half permanent the XXXX. geared those decremental of are improve

those can actions. So we take

and least meantime weakness volume particularly some will we've capital is component near-term we plans, be putting XXXX. there have capacity though, that we're what we put anticipating in less the spending, in at In into done -- cut in place, the

the further margins, So next that that will that year. will a if be to factor improve decremental out look you

In the the what permanency terms nature. of with we've reduction our program of here cost temporary most actions, done reduction of is in cost

next out, until back. come put I so we at a taken in year, will that something look as repeat that costs of lot And volumes that wouldn't we've itself won't back

of of to differently that costs volumes of we year, facilities any back next as ongoing into cover from carry target will it enough because operating our volumes of the that results come in weak. But will see much We recover. some remain pandemic. the of that would So

say are would cost to COVID-XX, you for would the in of year to impact of permanent put push, just sort be then out. a incremental basis sort and the I on place be permanent due a efforts So reduction balancing we some that the if the look Rod, costs goal of at that that of this

Rod Lache

I question differently. I'm guess the trying little just a to ask Okay. bit

given -- is talking revenue been time Are of lower restructure question? about ultimately X% margins Had the margins could impact this to of at to this those north for or X%. segments of I enough my you better You're that it been not base, guess for able have kinds ultimately COVID?

Jason Cardew

have something or a a the Yes, that objective allow a programs that of in we lot period the that's designed in to are environment. us time XX queued can lower do month but restructuring to moment I as time be margins operating that volume would period, over ago to a wouldn't mentioned up, one earn say do quarter and that I we a two absolutely XX just similar

I don't But that's of think it'll X% that. in with bit saw same. quarter a than lower be that overall of precisely first we we're be the impact The probably the plus it'll excluding COVID-XX, little the objective what the doing restructuring.

would by next I number a probably year. to caution you precise from put margins trying So on operating segment

parts would right there's think too but longer-term many I do the moving now, just goal be to just that.

Rod Lache

Okay.

customers Mexico here for us on thoughts of Just lastly, some you're from trajectory number I and the on what which has a been from your an just suppliers? you, production Ray, on for hearing for, think giving you mind would perspective issue, any

Ray Scott

And conversations believe they And the talking up the there's I'll it optimistic. demand, that very our say customers -- a I've there. getting customers, readiness, from Yes, running. the obviously they're and across of our board, have around generally been had lot demand about with

had number getting and so up to And conversations we've customers volumes and done our requesting. the plants in running are our that they to a of with respect

producing been the very we've to weeks we've for doing We'll job the you, on I'm supply indication able to of of at vehicles. albeit very a the tell start to And up optimistic been now. facilities; able positive, our somewhat the nice not XXth. running I'll given run run two out coming And early chain efficiently. to be been would has production here And seem they levels see. they like Europe is

was and some down Daimler Tuscaloosa of push volume our up. just last with volume they get other to with customers, and what's And were going in trying out actually I week

seem And well. so to they be running very

there. think volume that that I demand they'd actually closely So but like the our generally optimistic is they working see, stated customers with and the do to believe on and volume the

Mexico, respect us. to challenging Mexico In for has been

we've virus to I employees spread. through China, at hit And has our weeks haven't in different We we've North have weeks, three Korea, world probably starting spread And this this XXX pretty production, production Mexico the been And virus. facilities. running and I around shut unfortunately, throughout with it's our been America. been four then is then here XXX,XXX in Wares region, think behind believe hard then Europe, America. now down, we to Italy, Obviously, the by is world North been the timetables, weeks. six over over for We've down

So to challenges. have I still think they're some going

behaving bringing protocols far have the very making anything them as can't obviously as we taking. But do in our We're show to a we work with manufacturing we're We're that our workers environment. aggressively safe steps because regions obviously, sure curve manufacture orders components is do and -- that we see hotspots. some behind I or in the we're starting with But virus the to Mexico to in believe material. are can't particular of that respect and this

Operator

And Levy your next Credit the Suisse. from question of line comes from Dan

your question. may You ask

Dan Levy

provide color seen Good typical drove the in doing was should the start broad in outgrowth. future any the so on customers China, the the quarters, outgrowth on we outgrowth the than was where quarter? on any North you quarter one-time payback first question America, in a outgrowth, pace in quarterly up a pre-downturn in higher a more there we'd with the if what expect benefit, the color of morning. to mean drivers just in can just stocking especially I you just and a the a I little wanted past, had lot

Jason Cardew

held And driver Daimler is business terms up That's Yes, else so with outgrowth saw we particularly strong the strong they and a particular. have very in really main premium customers a the BMW China. everyone in the in in in than had China market. with first And have that what quarter. we driver of better biggest of

platforms both In in well. in predominantly Ford Seating North get that a that was our year-over-year in And in you to E-Systems a And significantly America. last year we're and and performance the about major from us changeover did. Size America The we strong that we had through big Explore GM's really we that going talked North trucks. saw backlog for this the up was lot Full platform and strong as this, first quarter will eventually we fact, of the it's

So those Dan. drivers, big are the

Dan Levy

benefits one-time there? no no, And in

Jason Cardew

No.

Dan Levy

just was outgrowth future got with And of small just extrapolate lucky quarters mix the that. this this we this type Can or you follow-up Okay. then really to one on quarter?

Jason Cardew

Well, quarter, I any second production higher China, uncertainty rest because I the than around added phenomenon customers But be to of be as ramp-up their a at when say to complexity the into they're pandemic. able going and that going seeing a that to have much launch so the think of to customers producing premium there's see similar would setbacks to you seem rate will market. where in whether we're the with who's the

business benefit, some in a expect we would particularly of result see to that. so in continued our And as Seating China

is ramp I up, pent-up think also tremendous in can platform, North extent America, our platform. Size everyone for GM the largest Full to which there's truck back demand the

in outgrowth further some to lead could North that America as So well.

Dan Levy

just second is still some the intact. in make which that intensive, a is And then spend pulled like makes cut the the the it if Seating, could have sense spend, you back aggressively more this to longer-term want. temporarily question exposure probably for tax environment, less capital you focus which One on given argument sounds predominant much leeway which company's back you've the great. on Okay,

ability back so shouldn't really be cuts in spend R&D is what very on to So cut the spend? you're to spend, in it's going electrification opportunities compromised? connectivity or that Or the modest margin? tax that it on it's E-Systems the be just is And still just future only and the still, to view

Ray Scott

that that and said, approach do being benefit. we and Yes, spending in innovation will very we're we strategic to like we're our technology again believe in I we think continue

Looking their at the is we shifts, see in a Europe megatrends, well China good on position. don't for example, is way, significant

still we in So being see place. megatrends the

capital think differently Now, said, virus. this they're going have every is post and and different, with to at they their that liquidity needs I customer look different

and intact those we're what megatrends. place technology with doing our we still that our so to going our megatrends And how are place talking and technology, so place and believe about we're be investments at we that who really where technology supports looking we the is will

going to lost above XXXX/XXXX be about it you're what in position; still business important with you you opportunities much, step to good lose is connectivity now, believe backed back We we're similar where And the talking if to off future. growth very your going you if too was real market.

the we'll And And look continue. we have so that in that unfortunately But emerge, have do we it that lot fortunate in to believe do we to we're growth in we and when customers of -- equal. luxury our that. being believe selective, believe way. flexibility particular do regions all with particular they're continue because And the a we do don't very can have the good and trajectory. megatrends to A position we ourselves suppliers and be we're not positioning at

Operator

line And Emmanuel your next of question Bank. from comes from the Deutsche Rosner

your may ask question. You

Emmanuel Rosner

the changing, megatrends sort I basis how the where comments may look does think know you post-COVID elaborate some Hi, opportunities your go-forward on actually the say any you said just I was you prepared a are just bit you to things be opportunities? that will industry these intrigued by you there new shifts change as more? in not provide of forward, remarks little business and that shifts, can any

Ray Scott

and Yes, position it's we put a focus But to to customer do in can somewhat business. on ourselves customers, win the add a we part. I good if we believe on and speculative our question to my believe value safe

some some customers And with let couple were our Seating. of in you responsibility of me full examples. for and service, a some There shifts changes design give

components that of outside and components maybe right XX%, are our Now XX% Seat directed capabilities. of consists directed now,

which vertically seeing service to can as spend cases the they them. engineering us that through world. being help us good Company are and shifts most that their and start awarded help in in go dollars really We a their were It rethink full in to in Seat integrated customers our we leading being puts the to some position

engineering components, job talked is, great business. in engineered a and wiring Balsei, great I prior from to those talk would to for a nice And profile and opportunity us increases were I our another an of our because components think Carl example also about COVID. a were that job to content margin Esposito value the opportunities customer to doing which they they winning we benefit Mike accelerate and think And our doing can proposition. with the team, it's

the behavior on just then interiors, to relative resistant there materials, how opportunities to now, hygiene think, and customers changing, our the I And generally from right world's antibacterial standpoint is change. consumers infection, we're a talking just

we why can a aligned very that's develop that's accelerate specific help strategy set plans growth. overall So team up with our we to our that

approach our is So the I to because believe, years think over stay the aggressive, sitting in here cycle right much we more them. is really Being product and help I same help thinking that proactive approach. not that I the there's short-term, where going good way the world to the customers of to about think in do terms think some I five one needs a can

we I'm front give will they ideas, saw our value-engineered. were customers. have of million we on another it more I or cost XXXX/XXXX, implementing And value-added and call of in much hopeful flexible in what $XXX back we optimization technology example;

same a worth can of and that building on like additional said help ideas queue, customers, time million Lear hard margin I with content of help growth, the $XXX worked we our opportunities. we at So benefit

have through being those. might issues occur has excellent team making and done of capitalizing an and the on that all of a number different sure we're very we're behavioral watching so And we that then and opportunities the thinking focused that working on different job

Emmanuel Rosner

the that's was you pretty I $XXX Are any in launches? new then much outlook reported seeing on the cancellation the any launches, backlog or curious time -- And about in the quarter. in was things business Okay, terms year. for you progressing the delays million interesting. launches, of obviously, And

initial was million. $XXX you're year, guidance volume, and for year this the your speaking launching new business reality new still assuming is just year? directionally that think the but I'm for anticipating I you're this

Ray Scott

me will and some I'll the then let with hit part follow-up Jason first Yes, details.

the were Emmanuel what everything's is chain have a of restart the have to like or lot quality, our we've know cancellations that been from in kind place. gotten place we respect I by in delays have same that PPE been and I around discussions we all of time making supply those down. in sheltered And time timelines equipment our the just down sure customers said now and shifted

the time a lot so of down. the to in respect that we're programs And have moved

that of As and canceled, things been seen far as nothing those we've type have cancellations, derivatives some smaller programs, significant.

that product to about window, and think down, needs it years, looking they reconsidering I customers five, to details, crisis. five-year we are believe the intact this because been three, but reprioritizing and Jason. of the at our wanting we've don't their insight four their significant at some have you far do the no think time this of much respect delays are with as I But talked some have a I and as I cancellations. planning in just time. of And you're of this think way, pretty capital that do

Jason Cardew

program to that be in of production overall launch year. the over beginning on of would And some that year, I expect volumes. programs delays significant in time, There bigger hasn't any going later shifting into were been we certainly maybe of programs this issue planned the level per But to would the backlog se. the see next slipping

Looking to second the backlog. impact alone, from meaningful XX% have the in quarter at anticipating reduction XX% somewhere the that volume previously we're will in we've neighborhood what of expected a on

our well the we're second a be And of would third and demand But volume then seeing the holds half building how that. plans and up. ultimately on we it's there'll the in just and into the fourth matter that further certainly reductions ramp-up quarter of how year based as expect progresses

Operator

line from your question from And of Itay next Michaeli comes the Citi.

is open. now line Your

Itay Michaeli

a couple of Just questions.

out the working for kind share the to XX%, directional could of around for First to in as then any the rest well? should you think that the beyond that the also, And by segments? about XX% of CapEx then color year two Jason, maybe going decremental back we how and QX, and you break capital if can margin

Jason Cardew

the the to decremental margins. first, the back Okay. Well, of maybe with and second I'll part come start question

end. see in benefit out mentioned in as I capital remarks, working quarter, a the we result the prepared late from first as of the in So QX a quarter did

quarter bringing quarter. working of a result first that as There's due in in material see our second the by in customer would our working We on going additional of that ramping quarter the capital April up. on collections our to headwind $XX an to be restart a itself. as that, and of ended So in second to some second about so the we're in the X, the ordinarily quarter quarter, headwind anticipation due happened of million production happen customers capital

quarter a those so some of the until likelihood collections second see receivable on And incur in the high the third full quarter. disbursements benefit not cash and will there's we

on that. million another $XX So to I plan $XXX for million

damaging allowing offset see any So out a the headwind and we've in in the capital million spending. and and out. to XX% that to spending to beginning volumes And of next I the that range plans push second number would us on working in of We've that this steps we year to in operating of mainly cut capital industry quarter. believe that, the even try some $XXX overall $XXX our capital delays seeing the because we again without lower take slated million that launch can taken later we're were year, programs

realize to second So trying quarter working cash volumes. that's to the the -- the the and in happen possible losses due as the going cash offset burn, production we're anticipated bit, we're much low in due to that will quarter -- help benefit a capital as very in help of quarter little that the going to majority the second to to

the be I for quarter. will second the talked those So factors about main

the margins E-Systems that the XX% talked runs XX%. and and of XX% segments, In between decremental this past between terms to in about between Seating we've overall, XX% two

maybe above below that would target convert we that and see spread is similar points to will points the five segments. That going very this two target, year, going the is to be five for that be So speaking, Seating to between roughly E-Systems

Itay Michaeli

And awards helpful. improvement any update build that of then on win in rates a and to new very just discussions, for and up how business ability activity of Ray, versus this the your about QX. backlog and you're thinking kind And just That's an XXXX in the level QX year? maybe follow-up directionally

Ray Scott

quarter, great quarter. a of this wins, wins. new had we a primarily Conquest first business tremendous had We amount Well,

to obviously, so on a pandemic pace the having start year until we're And the hit. and good really

looking you forward And kind add to some Jason, Awards? announcements And making we're want with to of so any color the here. New Business

Jason Cardew

great had, we so Ray slowdown. recent a this as first quarter before said Yes,

Conquest New had awards. So in quarter first we over in of including $XXX almost the Seating million of $XXX Business million Awards

year, So it we've waiting in been talking number this about had for happen. began We had we $XXX so saw awards, for last we to $XXX first million quarters a of quarter. million this the of Conquest

So we're that. about pretty excited

Business we saw E-Systems, Awards. In Awards. pace million, New New quarter, similar In to the Business in first had total we $XXX than more

a sourcing people and down bit our quarter. result to we slowdown overall, as process remotely We even a as and so segments. the maybe in the for working expect would see pipeline -- just by of of for But a into have a year the little the that both certainly second seen third strong the is total maybe in result awards

both place in So fundamentals still certainly in growth underlying segments. the of are

Ray Scott

quoting remotely, business we're programs. say customers add And downtime with to in that that, even working even and conversations some had some and big key the I'd on good we some really

working as remotely respect the as specs and in working they programs customers And things slow we were Jason were far like materials. so for aggressively I'm quote-related But everyone's quoting of just technical some process, needed what to optimistic, as as mentioned, the in of we're up. and some And getting on I think pretty intact. far quoting in working the did much efficiencies those general because bigger on some

So with it conversations -- having moving remotely the we're that despite good moving working was customers. we're and fact our

Operator

the from comes line Barclays. question from next your And Johnson Brian of

now Your open. line is

Brian Johnson

Thank you.

you're in a to what kind with customers standing get different is had obviously You of balance of this, trying XXXX/XXXX in balance with quite different. chip than supplier place touched plus blue further sort on some color, just you a sheet your is but sheets quite

further about of hinted you it a you of that, integration at, Seating So be using more M&A, things where perhaps cash see larger or bite-sized versus kind stock kind and opportunities between would And E-Systems? the you at for using thinking of would hand perhaps combination vertical looking of cash? in kind given on that using

Ray Scott

types obviously Yes, good an at and opportunities themselves. question. too of different plants But process But eye looking I now and it's the themselves keeping type that early. are different think opportunities to focusing it's that these sure on at Right early making might running. now a -- this too of on start we're might we're we time, And of M&A. any mindful looking it's present getting that at in are it's we present up that but

a solutions. capabilities; doing, been vertical become the job In areas. the complementary We've more be of job. a integration E-Systems respect in us to type We're nice it vertical the nice grow. pearl about and approach of would more these, doing nice talked we've area very string good companies that job of I and about powering what where, up building getting the our think done the help to software we've can talked of we're and We've doing need electronics of

So opportunities we be there. think might there some

still industry of make We at right, is think But Seating. take opportunities prior We had like very vertically the the back landscape when to really we is how being present very much we integrated sure of I we're COVID. going the opportunity themselves a in them. company. we position. that strategy, looking the But think strong in we're the can the that and Seating. and if in -- with that's want we said, very what's will And have on event just changing. mindful But We're this strong to intact in most advantage

Brian Johnson

deepen on? numbers bending with. any Would or kind admission which going talked biggest of that your Okay. follow-up, have up agree integrated and as struggled you vertically business quick at any plants playing metals have a work just about competitor taking you those structures Yet own over integrated and do I metal being they your be with. seat their looking the into you of also And vertically desire to alternatively is by

Ray Scott

ability no --I to -- have we design need No, think competencies very I to what we've business; no, We we to that no. we want structures, have clear; have strategically In we're the is allow capabilities gives to grow move be area Seating in a well-positioned we the for business. the in areas, allows that great good to intent good ConfigurE+ we other the with grow. us things when doing feature throughout to we're consumer But have a that vehicle for that's a the which you about think us. flexibility, great

and at customers can biometrics and we technology look give seats, We smart continue innovation. our and value adding create content in where to

So help we embedded software differentiate our technology products. That's customers the is. of see value proposition to of and more our their integration where really

nice really job of position we're seat of and customers That's of a contracts in with on contracts if not is in focus on that system within We value there. structures. our intelligent and those their the there's that a we're the in through why similarities number And to we're a getting can what we're a That's that area design customers features with very E-Systems. doing focus doing component such great which applications. believe really to there's creation products our content our create where differentiate

Operator

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

your You may ask question.

James Picariello

there, accretive timing think impact kind I believe Just beginning was break-even XXXX. expectation original we for about some on the Xevo, how of should an in

like situation? given unique that here look So might from timeline curious I'm the what

Jason Cardew

impacted year, the our to impact Yes in volume this due I business that expectation due certainly to revenue think just by for is volumes well reduction as full-year. for the licensing

this will money So on we that likely business for lose year.

see not but be accretive, profitability be get into take XXXX, to bit would next what think path to a it -- do I anticipated. had out expect much it and year, Looking little than to initially little we we we will a different a beyond that glide to there bit longer

James Picariello

China industry the decrementals, business that's an in obvious legacy and that just it, comprises the updated the just attributed what maybe the how the impact segment? Legacy quarter. then in for helpful. pressures of sizing your to mix margin segment, thinking much for And Got E-Systems And of higher quarter's about

Jason Cardew

E-Systems quarter what in The year. in the biggest we margin it's continuation saw throughout a issue of terms of the -- is first compression in there last

So last operating we XX% of year, margins at in QX were E-Systems.

the had margin last quarter higher So that impact that of programs. that was sort of legacy

that And year, launch the down so saw as at come the those stabilized it's rate. last and then year, number in that quarter throughout programs we second

saw So quarter. basis, with if you in in we line look very on sequential the it's a much what fourth

and outgoing line need very to programs margins was in consistent more or expect last that most to new in So changeover come not where come we of margin with sequential it's will launching that not new over platform, there's that months margins above last a high the China; platform time it’s to new segment. some would the they way those launching, in to But margins the more of they're it's quarter where Europe we're we more program. do those any quarter year with time existing the back from before good. XX sort changed all back. XX% at -- that than due E-Systems. But that had we're fact in see of just North the America, erosion into lower business watermark in But we close our old see previously. were we the to so first it’s an again had little And seeing are bit a We over six margin

James Picariello

months? next business the That's really into just Thanks. incrementals E-Systems, new experienced been base that, last the backlog. XXXX given about a helpful. to Got about plus that and for changes it. business that the should have follow-on XX think How excluding base quick over dynamic when on business And year thinking the we

Jason Cardew

and in a launching the backlog. bigger averages. take see proportion the to electrification is start connectivity segment's line share that power backlog the over in of of products expanding overall businesses The generally as time or up the with We electronics

see, business, we've second start it's on next of consistent some last So if into the sort you margins towards a XX our of you'll as out on half think through with our months. the to result seen rolling wire But core XXXX, backlog year over I that accretion look the historical margin that.

Ray Scott

Thanks. Operator?

Jason Cardew

We lost our operator.

Ray Scott

was team an passion we to that what we passionate in put and our that the this it. it within apologize and just thank execution operator, about team. the for happened think Lear I say about shows things delivered I and I incredible organization. the built the this truly we're have quarter, I I attitude cutoff. no incredible it getting for way Well, something priorities. am in, and handling I know doing, incredible, know whole time, everyone we're But working it question remarkable. the like hours remotely. and the Okay. absolutely, to at was I the an but you so we There's the mean right the

thank So I just team, want the you to you've thank you to thank, say whole and for done. everything

Operator

conference call. you today's for And Thank concludes participating. this

now may You disconnect.

Lear (LEA) 8 May 202020 Q1 Earnings call transcript