Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, everyone, and welcome to the Lear Corporation First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded.

At this time, I'd like to turn the floor over to Ed Lowenfeld, Vice President, Investor Relations. Sir, please go ahead.

Ed Lowenfeld

Thanks, Jamie. thank earnings joining call. and first for everyone, XXXX quarter morning, you us for Lear's Good CFO. Presenting and Cardew, and CEO; are and today Ray Jason Senior Scott, Vice Lear President President have Other also members senior of management joined on the Lear's us call. team

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

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

understanding will remind Lear's assist we conduct as Before I'd to like that future. to the Ray for statements take call, expectations you be we begins, you forward-looking in this opportunity to making this

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

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

First, results. Ray then quarter from first provide and our review Jason quarter financial business the update. a will will review highlights

Finally, Ray some will remarks. offer concluding

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

like begin. to Now invite to I'd Ray

Raymond Scott

Thanks, Ed.

X, first key both year year. which to metrics for earnings financial in the and revenue turn please delivering significant Now compared quarter quarter. last to Slide the started in Lear highlights strong, increases the first

per XX% and billion, increased $X.X $XXX earnings earnings increased Adjusted operating to core XX% increased Sales $X.XX share per to million. to share. XX%

example Conquest for we last last we from and Seating, our are as expand earnings these Wagoneer. They margins another relationship beginning with E-Systems significant market our had for product In Wagoneer X Conquest execution, and production partnership excellence higher that to for on vehicles, call this Slide for key announce mentioned complete Grand and components with outlines to compared growth we award highlights the year. in is the excited quarter. Seating the -- Lear's award is quality, Both will operational key of strong and Stellantis. This later and as over year. thermal reputation seats producing be strong

we advanced supplier In with of our and as electrification to additional the technical recognized our electric increase supply awards high-performance X new capabilities products. selected innovative in battery disconnect Stellantis vehicle. the premier E-Systems, for for to of Lear BDU units a continue momentum

Ultium increase Intercell the our We award General board from to with volumes continue their of backlog Battery connect Motors to additional platform. support

to for and customers recognize Lear technology innovative quality. Our continue

this year, supported the I'm who and Systems sixth Comfort the margins to will increasing a excited Motors. For consecutive expanding in year the in our everyone market want of and acquisition business of we key that recognized are we thank play Thermal for General completed I our which supplier as role Seating. a share IGB, transaction.

time and lot the a significant the welcome of to There's couldn't proud work this Lear close spent IGB to to deal. family. more I hard be team

This sensors. from highlights Comfort active detection new Slide a also add the wheel IGB Lear, capabilities X including of brings scale the Systems Kongsberg of business business. we IGB Thermal transaction. complements growing product steering and transaction heating and the technologies and to acquired cooling, provides benefits our profile to occupant

profile. vertically extend This Lear's comprehensive thermal customer most of world's our supplier, strategy of of and as seat base, and leadership well-balanced the largest the and share strengthen integrated our the OEMs. a has industry-leading consisting return latest increase IGB piece market automotive many global is margin final comfort further acquisition to

and thermal drive by performance, with seats capabilities. while transformation company reducing and the complete systems efficiency improve expertise as well is to cost. of market that innovative weight comfort, capabilities Lear will as only comfort the designs unique These comprehensive systems thermal creating this will incomplete comfort

evolution of them packaging. the on On Today, number you more Slide by component of together walk and OEMs redundant, comfort top thermal and layering our X, systems space that subcomponents are rely requiring other. parts each individually the product of many increasing each package and source strategy. thermal of features through these on them design I will Several for

acquisitions The time, XX will At our this IGB improve as developing and capability best we combined increase the organization across provide and leveraging manufacturing flexibility in Kongsberg seating into facilities. of over have internally to the as improve done work broad-based last well the practices model. years efficiency a the

Kongsberg comfort components. team multiple efficient has design thermal our been more acquisition, working diligently common by the across Following modules functions to combining

modules. with integrates the we're ventilation massage developing system instance, the lumbar and a For that

the move We improve solutions trim will packaging by the systems also them to speed features rear comfort for to thermal performance sensation by This these into of directly size the within integrating occupant the innovative the increasing are the seats. occupant. also closer This the of of covers. to developing integration which reduces thermal components facilitates comfort the into seat,

foam to be a that FlexAir used in product XX% reduces FlexAir, up foam emissions up by traditional applications. alternative recyclable. XX% to innovative to XXX% today's is compared Another mask COX developed to by is and

our XX development These in innovations thermal our for We on currently X are various OEMs with projects comfort progress gaining car lines, have customers. traction XX systems. with different

they the is more Lear capabilities, grant the these JIT benefit to products is systems, to us. the sourcing control just recognize only thermal limited customers these with begun supplier sourcing our to of have efficient of additional Since Lear. Because comfort control

advantage to higher in solutions us performing we more and and marketplace, an can efficient the customers. provide our gives This

and capabilities by components part reduction comfort module The of our with seat a of can We develop foam cover significant combine savings, drive strategy comfort for mass enhancing occupant. integrated fully all modular solutions design. the while modular efficient an is thermal incorporating final phase our into to the and to the alternative FlexAir component our trim

customers, further These the increasing the value our will cost for to comfort thermal the Corporation. system improvements Lear reduce proposition of while

of comfort addition categories. strong of portfolio. IGB the portfolio the product. major X Slide comfort we us gives have The each outlook thermal provides estimate market position X position of pro thermal our key in We each a a top forma product for combined market

business TCS revenue $XXX Pro for is million. combined forma the XXXX

to expect approximately faster to overall by from over industry XXXX. percentage The a vehicle the comfort to innovation. points will come combination Revenue X We growth market of grow grow million thermal is factors this and than $XXX estimated production.

rear With luxury better take the market are these improved applications. packaging, performance and products quickly, costs, increase more proliferate into reduced confident the as that and we and grow beyond will the seat segment rates

sourcing comfort of XX% on the Historically, for programs. our customers granted components control thermal about JIT

control direct comfort thermal have future customers our capabilities, grown. sourcing to major branded systems. X this has Given our increased XXX% opportunity sourcing us for

we competitive for in better match. comfort developed our thermal allows systems our to provide unique have which advantage a cannot The customers, competitors us value proposition

market X.X% believe margin that higher the strategy comfort our to share, potential Longer target. term, addition in above has our to drive our X.X% system profitability to current we thermal overall driving seating

highlight program XX, Slide in is key in from to the first was that our Wagoneer win will I the Conquest Grand Turning X-year some a awards Wagoneer The February. quarter. backlog the announced included significant business and for we

in award second XXXX. We program also launching late an to seats on provide a won

Frank. billion for XXXX. could in Since revenue combined in number, the reach $X we a million $XXX big estimate won have Conquest XXXX, programs approximately awards. It's X these We

market expect opportunities we continue of share our to strong momentum we are in pipeline gains. and pursuing, Given Conquest additional this result

as EV and wiring at win each to we wins well awards time. well several electrification business and systems, ahead new pace this The this as for high-voltage low-voltage in were year in For of year where platforms. E-Systems we is continue of last

the for the the BDU last we our week, in leaders solidifies win This new one awarded of were as Just electric BDUs. vehicle. high-performance Stellantis position

volume our confidence the our overall additional program. the ICB General awarded of technical example of The in and another capabilities Motors value increasing by for is their

million. XXXX has $XXX the to had revenues million to of increased annual on expected expected approximately this revenue platform Our $XX generate million. We program to over $XXX

reaching added volume, the we $XXX revenue now million. peak see With

to the like over call to turn Jason financial I'd review. for the Now

Jason Cardew

Ray. you, Thank

basis. Slide production year the XX X% was first shows compared period production Lear increased sales weighted exchange the on same rates vehicle to X% Global key quarter. up last a and and for

North and and against the by by in were Production volumes dollar XX% in both in while increased volumes strengthened XX% China RMB. America down The X%. Europe, euro

over Lear's XX Slide growth highlights market.

company in E-Systems growing and X by impact and points, For the new above percentage favorable mix above driven total points both growth was segments, business with the market over points market quarter, X Seating of platform first market. X growing

was on Range the strong from sales Growth segments over Europe, China. industry Defender. market Rover points, particularly benefiting volumes business with in and Rover, XX In Europe in higher Land by production and both outperformed

the Seating as Recharge programs in on region BMW well. the and New strong X new Volvo growth contributed to E-Systems and and the Series in XCXX XCXX content such in the as electronics wiring

production on strong points In Recharge XCXX Seating E-Class in over market X Mercedes China, XCXX of the resulted and and from Volvo growth C-Class and the E-Systems. in

was point. platform industry of was America business in North Our This the business. which to partially related driven percentage growth by by lagged new the unfavorable Escape offset that's benefit changeover estimates Ford of the E-Systems, primarily by X

I billion. XXXX. to results highlight $X.X XX% financial first Slide will XX. Sales our increased the Turning to of for quarter year-over-year

and increased Excluding production Lear sales business. the acquisitions, key of XX%, platforms on impact of foreign and the were up by exchange, commodities addition reflecting new

exchange. the offset compared the impact $XXX resulted operating production by business, addition new on year. foreign $XXX of impact million the increase million The higher were partially to earnings and from platforms Core in from earnings last their of

share Adjusted $X.XX earnings a significantly ago. year improved to $X.XX per to compared as

First increase flow Operating last quarter. customers negatively quarter was impacted sales use significant operating in compared timing in received of by late cash the the as cash and $XX in a to the flow was million. year the a quarter

Our year flow operating is cash outlook and unchanged. for full free

billion, operating backlog. quarter $XXX our on Seating in XXXX, an of Lear the explains platforms XX% the an XX variance were in $X.X volumes the from and Slide or driven strong adjusted increase segment. primarily in Sales by for margins increase million and first sales

engineering business offset in million Excluding foreign launch as margins and improvement and backlog costs were as on impact higher recent well operating strong earnings adjusted the an their spending to X.X%. volumes platforms million, Conquest improved the and improvement or up The by margins acquisitions, impact costs, Core of and $XXX to $XX new foreign sales from XX%. commodity operating acquisitions. our of awards exchange exchange with up in XXXX, reflected support and partially of XX% higher commodities,

the XXXX. in quarter explains first margins XX increase E-Systems or X% adjusted $X.X in segment. variance and sales operating were the for million of Sales $XX billion, Slide an the from

and volumes our foreign higher Excluding the commodities, impact backlog. XX%, sales primarily driven up and exchange were on platforms business key by of new

foreign operating or to of partially exchange backlog, and margin-accretive sales volumes offset X.X% improvement of The of $XX compared million on net costs, reflected XXXX. costs. earnings and higher margins improved launch by in of and our recovery, in elevated $XX higher X.X% Core sales platforms to million the Lear customer impact commodity

Moving X-year will acquisition and to financed major our do liquidity highlight profile, debt environment. Lear advantage any sheet of balance We in a fully be competitive have with interest IGB the a Slide rising maturities. outstanding strong The XX. term not near-term prepayable loan. We for rate

average bond years. maturity in has XXXX, a is debt structure our and Our approximately of earliest XX weighted life

Our low, X%. approximately cost averaging debt of is

had $XX committed repurchased having In excess of addition, to available the returning shareholders, in we remain cash $X.X We quarter, our liquidity. quarterly stock of million along with dividend. worth billion first to our

share repurchase shares the allows of authorization remaining, to billion repurchase Our has $X.X XXXX. end us current approximately which through

XX. the outlook. factors that Slide to turning Now our financial will highlights impact key slide This

around recover, were there and volumes first and to pace continuing quarter of macro the our the environment. global results While uncertainty industry strong, is recovery still production overall are

are As outlook year a not time. changing our at this we full result,

modest levels. prior peak well year, a remaining in industry while this levels expect improvement We below production

and gradual beyond. expect but We into sustained XXXX recovery a stretching

somewhat for is commodity mixed. outlook The cost

did since we a steel late last America prices rebounded. see year, North reduction While has significant prices in in

but seeing component We higher well in as as base contends supply costs commodity costs, and also logistics with higher our labor prices chemical are select moderation as freight costs. experiencing some

headwinds agreements we On offset to with facing our and we're sharing the positive customers. side, performance through largely negotiated expect the operating improved

resilient on demand vehicles key and platforms margin-accretive other benefiting as In well addition, from as our luxury backlog. we're

take risks performance. and and improve aggressive position these continue weigh opportunities, financial our competitive we As we steps to to

to remain aggressive through to steps progress improve continue for the also meet management track $XX initiatives, We and make our to Lear savings or target capacity significant year. utilization exceed Forward and on including capital million our working

margin with coupled in investments high-voltage comfort for key positioned have such businesses thermal revenue expansion. systems and actions, improvement sustained systems performance both and connection growth as products These strategic

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

Raymond Scott

Please turn to Thanks, Slide XX. Jason.

Both The start the with quarter a first year-over-year was market. over margin saw great to strong growth business year. growth, segments

will that results. yield The continues implemented costs cash reduce flow. and to identified plan team Forward Lear has and Our actions operating improve

strong. win new opportunities in very E-Systems, our We continue of business pipeline is to Seating and both and

the with required looking solidify We With look systems We'll a be of our comprehensive you transaction on this person. comfort focus we to to of Seating Closing comfort on update was the June Michigan. Seating in thermal seeing final in a Product hosting business, Southfield, particular giving piece are strategy. forward many IGB completed, on Lear you Day thermal forward XX. a Campus to our

want In industry, proud in for team the in closing, I to you every we each resulted another am their the I and thank efforts with to strong work team have day. Lear believe I and quarter. best tireless firmly the that

take questions. Now we'd to be happy your

Operator

John question Murphy comes first Our Bank Instructions] from [Operator from America. of

John Murphy

highlight much quarter, much of first, stabilization. disruption not you and reoccur one Maybe you you year? to just this just on in one ask expect first the just I'm what caused do if to wondering sort kind stabilized of the last they've how scheduled could to how year simple

Raymond Scott

we if clarity internally always everything just so is lot getting is standpoint. actually, to downtime, this this respect in to a is production that better we're from talked all lot around a what customers, stable It's we we Look, quicker going our respond year, there do efficiency year. can I say When a about -- than lot relative. can last year better an from be year

financial some there's was So better much as around more much production clarity notice, strength. been it year environment, but as the far although still the last than short

that? Jason, want to add you to do

Jason Cardew

a see second of as look Really, the to the it sort improve didn't year quarter. year. of you then half gradual versus last and we of first a quarter. cost seen premium the the in We've -- did meaningful It was improvement, Yes. half again last first prior year in John, at

with what still a conversion and our some of our As years. seeing with which new volume certainly the from still than see with the customers, little incurring some supply experienced the that weighs over are over we stop-start production costs. Ray rates challenges backlog, X challenges our the base, premium on customers but We're programs you last we're meaningful bit mentioned, some in some some changing less

John Murphy

systems there question on have IGB content versus essentially then opportunity at the Is the what second as Okay. of And HVAC a EVs just in in-seat acquisition greater you ICE? you're on a looking with there. sort on the

something said because just X.X% upside to CD And I or want think you to also statement that you targeted X.X% think clarify IGB. to it. -- kind mentioned I are X.X% margins, as to well you that that on eventually. follow which And just -- up confirm I of wanted be of to There X.X% could

Raymond Scott

works. XX glad more amongst call. big I'm the day team a the couldn't back, here question. Lear the for asked in years I John, before This be is discussing Yes, This One, just has been you Corporation. And we're going excited. the

features and seat, cost weight. and how and they packaging At these priceable be we the revamped when about years, redesigned within the XX and efficiency content for completely and And looked could we and mass seat. inefficiencies at talk within the

are One, And battery of our the to so better consumption, the the use in-seat all for particularly those use of customers of just vehicles. of elements the draw occupant. combination on -- seed HVAC of and interest EV the

sets. be I packaging these, going Within think, across to multiple seat the the that seat, able different to proliferate we're

use think system. in I to vehicles, much because just And able equally a going efficient not ranges more have as we're but luxury be important, mid-vehicle a to more

facilities the X and just great, job both with So ability on. complete good leverage, have our at on thing. just our And parts. a doing phases. we're manufacturing looking scale the this short-term, they we is they're purchasing traditional things with great is One really properly companies, to what this in we're It really focused

to that also going allow these protect I XXX grow. us components. to almost on referring we ourselves that, with as to get we patents design into that's far We new as was And modular the believe

And margins. to in we're are those referring components to accretive respect that

our this. but of margin, intent also us is that's our value goal great and offer the a importantly to expand our customers to proposition, really So more is

culminated do acquisition. rounded is within acquisition IGB. we're And really acquisition. But now in the a we're the going it seat far as as system. well Kongsberg great IGB great to features priceable a was in what of

Jason Cardew

the use the that Yes. add, wheel battery to other The and I that occupant. steering to brought an only it was the IGB, Ray, important you reducing heat about about of impact parts thing panel I on and the what HVAC cooling as the heating would role heating, which more also plays important think are and think efficient interior of and for the shifting

additional important that's product capabilities with after were So we IGB. that

Raymond Scott

John, we're as we we to in going change competitive Frank's a share far for a have Day, talking the we're of as about when about reasons. front But the you Investor X it's talked the what don't layup. publicly when this we the transformational of here, -- see lot customer, components, put

of mean, not I us create. can the and we is traditional to for and these have we made get it the that It sourcing we've XXX% on getting acquisitions -- the it's value of We're capabilities vision programs. the because control amazing. of it's

creates and customers. that billion $X faster seat Investor $X.X disclose grow And years we excited the a so and a we on been XX value I able change working to your significant how a really the little have more can about system you actually -- that when believe for think at being over are we've market for what can about to this bit billion to Day, the system

John Murphy

could on Intercell sneak more boards. connect IGB the I in if And one just

mean I is platform. on and that like seem more platform. Ultium You you're winning more the a

tell when I far? mean, on that platform are Ultium so is how what that? you've share story do far won the can have being curious, much think Or sole-sourced I'm that, about that as as dual sourced? you you on So What's you there? on just you

Raymond Scott

position and that It's component, General we still strong Motors a on particular today, XX%. sourced with have yes,

Operator

Rod question And from from our Lache Wolfe next Research. comes

Rod Lache

So had was running thoughts us guided to changes of wanted about. on incremental still currently I had margins X.X% give color from the I things The hoping a little on your to bit a could guidance year. ask you E-Systems couple at what you just here, Does X.X%, I margins. for of hold? And

make then would Because business we in, new the And typical it would the higher to that. on Seating, mid-Xs? from? incremental quite come obviously, the that be that -- that is average margins Or exit bit it rate in something a is should on extrapolate

Jason Cardew

with start part first, of second the question Rod. the I'll

So look Seating the you range. XX% about years, backlog we couple I roll would has on. X% been rate rolling out in next And anticipate out the over that, the it if think that's to of would

Sometimes, in where you seeing. blip have rolled to a of mix rolled a has in generally what's that But off quarter we're you have what is range XX% on. it's X% a versus what

at last of converted look at. that's you the If quarters, we've number what

second we guidance, to means quarter, our In the the of in first of the the which E-Systems of We If midpoint look expect see terms X.X% be margins the than to so half maybe margins, year X.X%. would expect at the higher half second similar year, quarter. E-Systems first second of higher you're in in needs do in roughly margins, the slightly right. in half out the the quarter, here we second

are than they launch of of our number much significant new will year. in launching not One, of changeovers. the the we higher We're the had to There's be catalysts through but just a second half the half program in year costs the backlog, going that. first

referenced Colorado prepared which program So the is also we GM in big but Canyon Escape, for with E-Systems. the the Ford had a remarks,

beginning investment of programs, significant that in the in be X the had launch will those So year. the a and year, of less in half second we part costs the

recovery. the we'll achieve we're have that, in in to work we've inflation commodities in do to we nice year. that lot for a customers with We but the a our full discussions, addition negotiations we're outlined In E-Systems that deep of commodity on did the quarter, there. confident And job assumptions for and

that, In addition normal you to have seasonality. your

offset agreements actions, that LTA year, the first and contractual that we cost year base. that in first quarter approved savings reduction the of our purchase get had actions, the you the own normal restructuring supply then quarter, are so with plant through And part negotiated our efficiencies, second throughout

say you we And the And particularly throughout see typically layered to stuff believe, X.X% on in E-Systems. taken would in second half little as of X.X% is the is of the quarter, sort a we bit fourth that together, the the case, to even those that the beyond for E-Systems, things exit year. maybe the year. as year And about I get range in X% us

Rod Lache

that. net little you're it -- quite didn't understand of could takes And there's that commodities. and of kind I sounded the elaborate an bit the Maybe range macro, a of And higher on puts Okay. you not in in mentioning you just like light just the your surprising the but year. coming potentially earlier your caution in of about indication given the end tone, of had in guidance on at

terms in that conservatism? that seeing that? of is anything mix Or customer is resulting in schedules you just or Are

Jason Cardew

Yes. investor this the as I and conservatism Nothing quarter. I stage. conference at in caution would changed from it characterize earlier more has an when spoke at

hold the or and year, the a a labor here to balance that As negotiations see the the production in for today, there little then revenue we end in production, maybe those significant the from of first isn't that. the impacts happen, bit even don't conditions guidance and at sit disruption impacts Canada up things pullback range, the quarter due that the if of beyond we U.S. demand high

of that a more kind color an it's point, And on important point. I'll provide little bit

[$X.XX] the And $X.XX guidance. average if margin And quarter. the than of kind the would $XXX than higher revenue implies million at at out So conservative of in [$X.XX] modeled the less be rates, would about the That convert last you a overall. full that foreign in exchange company days X first little what year. we through just included have the a we on have balance relatively exchange at for assumption year, the

in continue -- getting that, through. asked as the in revenue about source passing that to One first directly the directly middle that just suppliers negotiate price addition thing with, kind experienced our an we suppliers, elevated commodities. now we are and directed to and so In customers that the that increases, is quarter expecting administrator we're pricing are of you both our

revenue you're as million as additional earnings So new seeing that's $XXX development That's and without started our negotiate direct-to-suppliers our customers. revenue. with the of year, we a nearly

in on And as additional from seeing that. we're component see in our business, We particularly that. we're E-Systems, cost revenue pressure almost increases of negotiating pass-through additional on agreements million $XXX

the may that together the closed million of and we So and about revenue little have associated of to sort a commodities that $XXX million FX lot with earnings of taken fact earlier, IGB a $XXX not that. see tailwinds bit

lower may hold quarter above end some at bit than new the a development the consistent range or with the up with revenue commodities. the these end So little staff that, high high maybe as first conditions that see of or are we that's with earnings at

changed about in specifically commodities, original guidance America quarter price our steel time. from a speaking at our then So one lock what's North we there,

first the really the on quarter. based was so quarter And fourth

a So and first in nice the nice we saw reduction quarter. benefit

by quarter, half. the quarter of that, down. it price that in sequentially. up average second fourth comes going assumed continues then And the the is so that quarter, in based back Second We've on first the is sort

benefit, million assumption, $XX now a that a is net on benefit. being million steel, Based instead about the for $XX effect of

of impact -- little portion a unrecovered the steel. bit for the an So of of

component to with chemical we're is bit favorability some And Seating, of in freight logistics, particularly that's in the wire. so again, steel. seeing in That on challenged. then the costs, higher base than and pressure E-Systems part more costs, supply offset helping insulated a seeing some and We're more

think very you see Leoni evidence of the that are challenges with I that, public.

And we're negotiating so agreement on there, pressure working with that. seeing customers but sharing a our we on also some pass-through are cost on

Rod Lache

any didn't that impact from Just no peso to exposure. your given clarify, -- essentially transactional mention the just FX you hedged? Is

Jason Cardew

Yes.

on hedged our XX% little in most first the in impact the year, of about a XX% hedged little a the for were currency And see we so XX% peso. were the we're range. pairs full We sort did quarter, So less there. to of

don't year the this full point time. at significant a for We program. rolling hedge we have And see XX-month a in

$XX as So that maybe -- it's not next here expected in XX% the start year exposure the meaningful what we to as we full flagged sit issue. relative at of million year which so for the well, a help. we year. for about But should of today, It's

Operator

And our next question Barclays. Levy comes from from Dan

Dan Levy

Sorry, you I backlog, in I conversion the but a late, you maybe address prior E-Systems, and is lower volume on mix talked on know the was and which just seen jumped meaningfully could quarter quarters. had than on you in bit about what

into you quarter? on within could maybe E-Systems bit So just get the a conversion the

Jason Cardew

that mix of is Yes. Part region. revenue of the by

Europe Asia. And so and little in North America, in than where we tend to have a higher profile variable margin in

platforms like a GM the the program. these the Colorado and Canyon, activity changeover it's Ford on Escape pickup key given so And

and little So on Asia. revenue bit those in programs our was on up a European down and

to look so balance roll in program region. XX% E-Systems. And sort of on by continue in out of we range of we that mix the year, the really of that's the driver, the Backlog, sort to for as expect the

And pretty on. we to be backlog good So feel as you is see the can margins about continuing rolling accretive in how that to E-Systems.

Dan Levy

be maybe Europe. some the components, seeing material what freight on non-raw then I year assuming you're Maybe the said remind there that which know commodities, pass-through you said of recoveries as prior for some labor the items, million recoveries assuming within you tailwind. number, just million or that now for $XX And $XX you're on just us, could or versus you a you're for Understood. follow-up, it most notably outlook

for recoveries within going be assumed had to was labor Are that side? assuming you some that on your wage there inflation I you where know

Jason Cardew

Yes.

competitive this we that at Dan, that point, have. our customer want segments, oftentimes, for but are And labor. be with reasons, bit on -- with negotiations our to we both think, in models careful I customers in we work have a business on we

rate has model the so labor input. And the

with our dialogue opportunity certainly level customers. of inflation And responsibility. so us wage that's for a an have There's has that a certain provided our to

we're experience Mexico, productivity. really costs. we and that each it extraordinary offset after the places year, in a through What significant We there wage in was where increase like is inflation wage

Now in XX%, and terms within that we're year. of the XX% cost be of component between that, the recovery increases expecting recovered will of

not be that on on seating the a directly. negotiating is expecting significant because components the expecting that headwind. with XXX% customer to side nearly supplier direct of we're where our We're most So is

to of see little high that's level The work recovery year. do there's there's a more directed, E-Systems we those still happening less but a where this in negotiations,

Dan Levy

just And can the on or a clarify a within if number? net number gross $XX million gross there you the that's that there's

Jason Cardew

growth Our about estimating at this is point year that for impact this million. we're $XXX

Operator

next BNP And James comes from question our Picariello Paribas. from

James Picariello

E-Systems' just the component million on $X headwind look the headwind, or rest $X of commodities and for quarter, million through like -- impact can the for confirm does X you the sourcing So E-Systems? the year what that

Jason Cardew

it quarter. see a year it we less -- in as little balance the was It's the first than Yes. for of the

I second quarter more recovery will And the happen of half similar. year. the be will then think and the second the of first in

be don't So it $XX expect for the full to million. year, we

in the we happening million, half. If that than you the benefit to it were the that $X with second be extrapolate less expect to of

James Picariello

the And on to expectation Right. effect Or is just recovery tied in associated the lessening some there's half. second this pricing?

Jason Cardew

the recovery -- It's second difference first that drives half. to half that's

James Picariello

-- a initially? I IGB, last million don't we what to contribution will that saw with business the trend Okay. what initial $X quarter And know, margin Kongsberg about, year, for similarly then losing for Kongsberg

those can clear Can pretty speak then get as on line on the just to just Lear margin confirm And point, you time when over to view Seating time. that business additive there? thermal businesses maybe or you it's comfort

Jason Cardew

Yes.

I purchase in change that slight in thermal some do to think be lead expect accounting, But to could we still roughly do a work to on that year. have the the this. this we comfort breakeven margins

through now. And seeing purchasing the going some some restructuring Ray we're We're there. opportunities referenced synergies.

on next combined we're for to be so track profitable the year. business And

approval took the margins line. for still about to or probably in end and longer the towards closing originally talked had We it finish the seat regulatory just being tail it We the 'XX. over accretive half 'XX get of in that see second IGB because to

that accretive, year about year So our later had at hands, it's being full talk kind X and obviously it be would months in when we than that the assumed we that. of that, point, 'XX this

margins bit to I margins. on programs. being similar the we think to certain seating seat even to see business this contribution or a going in little are XX%, range, XX% So be still XX% And so accretive higher,

detail save increase the so June. some And as we margins above continue the that to seat that Day in of that point. that X.X% bit Investor over time, it about -- X.X%. will impact details will more culminate the We're with business, that little to drill at pushing in for We'll around to a X.X% range talk and on excited

Operator

question next our And Emmanuel comes from Bank. from Deutsche Rosner

Emmanuel Rosner

I better point a back your in a put hoping on and then in bit QX to expected, improving were there. I was I played final even guess, outlook maybe than assumed and, what's March. you guess, out,

sequential obviously some in E-Systems, you'd midpoint outlook, for versus despite unchanged maybe be improving profit deterioration in end, that's quarter the first stable or high the on of margins assuming example. sort based like the at basically and now But at

the can about see a So you you of just are out? holistically talk Where rest more keep guess, play of how cautious I that would caution you, essentially bit the year the areas maybe of sort now?

Jason Cardew

Yes.

around about on it first strong mechanically, the pretty a drivers. a have the full assumption the suggests production the such be and handle is that just caution we will second good And just the X.X% that I holding quarter, year the what lower. volume of so by rest is think quarter with

are the second fewer North industry the America. Europe, days work in the think are quarter. There from about first down in in quarter X.X% I volumes

that sense. we think makes So

And $XXX in production say it year. the lower the the second that million volumes would the quarter that year, suggests if than So low first sizable revenue. to of fairly million $XXX of on speak, revenue contingency, half half so imply the to then pretty so a holds, for second

if call. -- factors earnings macroeconomic hold We we conditions like the it first quarter was Again, in outlook thought at this to early. certainly hold geopolitical, -- look up it's on just raise so second are we play. prudent the serve to our in point. And There quarter, would many

Emmanuel Rosner

follow-up then the on I on E-Systems. -- And guess Understood. one

midterm obviously, a outlook, on your quite upside based second in of the your So needed bit like X.X% even target. half, maybe margins more some towards

second Or rates, fourth there midterm I just and operating past, we big driver more half other exit the or as guess, revenues your leverage? to main the any factors is So look quarter the view? get adding are there you to

Jason Cardew

in that XXXX. And year from described think, talked certainly this, I this X.X% sort fourth on of We settings, to we've other bridge about X% in earnings the quarter call. Yes.

XXX of different and 'XX of at look and at points of So that is net to sort XXX One 'XX, as ways. you improvement then volume see just can basis way We basis points performance. two backlog. it looking the from

of year, both negligible sort segments. in net So performance this is

We passing positive that benefits costs saw realizing inflation, a as just 'XX reduction restructuring through initiatives inflation our basis points wage and it higher without fully we other in commodity high of some success and of weight through XX cost in 'XX added see this of lower year. the program combination and extraordinarily that continued

in way from about Intercell systems. to at by if certainly, it E-Systems basis we talked the helps and on the the being growth look connect segment, with there. to points improvement to driven XXX 'XX, additional And about connection board you progression business Another this the look 'XX by GM volume of think

now XXX little the revenue That's So that going we had that previously of more to platform. expected volume than $XXX with a points. basis on there. million It's awarded bit additional additional be

business, growth a sort wire and performance time basis that core If and business, doing with what we XXX in which electronics, period you look basis points then X-year over of that of and electronics is points net we're of at combination stronger see for leaves volumes. margin XXX the our that

Operator

from our question Wells from Fargo. comes Colin Langan And next

Colin Langan

Just wanted to follow up. heard I'm it right. if not sure I

commodity there's still of a of net but million. said expect You positive headwind, you $XXX $XX million gross

thought million $XXX and you I'm net. I there $XXX 'XX, I million, was confused little guess, back about a in got because

that? versus of that Are one, recovery you the much mishear you did I now last sort contracts years' -- couple the the could So different what get given of gives past? And changes? confidence two, what that gives you

Jason Cardew

the effect. lag it Well, part is of

some part higher steel to that costs example, you're that of in first So the year. relates for year, recovery seeing existed this last

seeing. of so bit there's a And lag a that benefit we're

of it risk. as kind of to insulate from balance hard components agreement we've try get many an is the of that indexed as really our on worked And we to and us can

And place, it as pass straightforward changes bit there so that that to through. are little a more makes take

ton looking certainly the in of Frank by It of kind at work business both segments. doesn't easy has make team a it

pass-through. The important other million see we just big one-for-one factor, is more increases though, and $XXX that probably of it's the a supplier factor directed about where

increase, and So that's so on OI. the what's really impact no there's driving

So it's pass-through. XXX%

So from that it's little misleading bit a standpoint.

beginning what be year, what If million you gross of expected we anticipated to happening with was so at back steel. to because the impact the we go the $XXX of favorable,

passed seating has directed And a direction so the million gross by suppliers now unfavorable $XXX through. has and That's where that with seeing we're away just that swung in other in million. again million all $XXX that's on change impact the $XXX a of

Colin Langan

Got it.

headwinds. clients about Okay. million not the $XXX overlapping. labor the And to That's million then about last gross talking talked [indiscernible] quarter, $XX cost incremental the you in

how so the on year And the of Or on get progressing? that recoveries through hit, majority of of that? more to Has come then that working the already any in you're color later that's year? does rest the

Jason Cardew

year. mostly on of beginning side, hit inflation labor the the The hourly

various later. And have but January in dates some and of some the programs Now are effective are -- the world. salary some around

second next in take through think, discussions going to time, continue, year. done started balance into first It's the of the quarter. and could the It's and leak even The the year. all be will of the I quarter not some in that customers to that going

have and the And be ultimately, competitive So them, it's a difficult option we are. most discussion with to for we the customers.

world-class and think I our footprint these excess in segments, both We pass through costs supportive negotiations time. of a over that's to have

Colin Langan

just walk? think fall look net Where XX there's Is that I And Because follow-up. don't does I under on one performance, XX? that and XX. performance Slide quick at net in the even if

bucket follow? which cost that does added So

Jason Cardew

That the net is performance. in

You're correct, Colin.

Operator

Jonas final our Morgan Stanley. comes from Adam And today from question

Unidentified Analyst

in curious or measurable change [Indiscernible] or slowdown of orders just you by behalf EVs year? have to on this any if Adam. production seen We're the see for guys OEMs

Raymond Scott

across mean, on push It's heavy additional customers I that. even are some out and and a quotes seeing the of board. additional all not EV, capacity volume. with for our We're customers still from

with perspective, seen haven't our side the we the the So change top OEMs. demand at particularly of from all

changes. no So

Unidentified Analyst

the over production... that shortage Or Is Okay. And then a quick is follow-up. you still incremental -- is now? chip say can there

Raymond Scott

position. is I'm tell what see say experienced engraved the was we're negotiate. a to What I better Yes. hesitant that that they're in long that. hesitant. little at still you will we're in for a we're trying A me much time. brokers, there's that costs I to I premium is

hands chips be other on, those that that There associated available through outlets can with might are but we premiums our still there's get chips.

So that necessarily dissipated. hasn't

I where better much a say still a think, better that to chips, think get, we're year a in But position. certain were generally, to ago, we position. tougher in relative but much we're I'd and There's are all it's I holistically, chips across all

Unidentified Analyst

so you, Thank much. Great.

Raymond Scott

one? thank Okay. last the that Yes, you. Is

is I all you. here of a team nice Really there phone, nice that I single job Jason, hard Really heavy the everyone today. for and every all the appreciate you're the I work. thank job That's So day. the appreciate job nice lot that's team, incredible for nice on a doing job, a the work work lifting good Lear hard quarter. and

want family been Frank X now Lear And again, this We just this up. years. really the XX working acquisitions so complete. mean, on of excited. We're move I welcome a We've into for very I get family. the could IGB can change transformational to I on margins be strategic the Kongsberg this thing that can over and and IGB think those And for were us.

appreciate to work everything. I Thank so let's guys. you get And you.

Operator

conference today's and and We with attending. presentation. thank we'll call for conclude you Ladies gentlemen, that,

You may now disconnect your lines.

Lear (LEA) 27 Apr 232023 Q1 Earnings call transcript