LEA - Earnings call 4 2023 | Lear Corporation

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Operator

Good morning, and welcome to the Lear Corporation Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. 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. ahead. go please Sir,

Ed Lowenfeld

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

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

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

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

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

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

First, our our will quarter then business will update. results review review provide the outlook. highlights Jason and Ray year and XXXX full a year financial fourth from

concluding Finally, Ray will offer some remarks.

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

to Now I'd invite like Ray to begin.

Raymond Scott

The XX%. revenue to per for Thanks, an earnings XX% continues grow. flow us of illustrates Ed. record Please over of by an XX% quarter $X.X Customer was by highlights thermal Adjusted interest allowed grew $X.X XXXX fourth free seating the metrics exceeded and full XXXX. of billion. earnings highlights Slide our and from acquisition XXXX. and financial from XX%. Slide key to to X of cash X, financial turn IGB operating XXXX. accelerate our increase of generated increase and modular comfort in $XX.XX, to our target $XX.X increased key solutions. Core billion, year Operating The capabilities XX% share improved which of conversion we business to billion, flow cash development

process seat margins. with program. awards $X are BMW, In and of significant sales Grand we seats thermal the additional for customer took Renault projects making we consecutive record, further modular received in complete our over source agreed the share the from fourth new we by well and XX base. Lear and e-Systems General our first us launched XX for solutions. This allow of competitors products year-over-year successfully to improvement different continued to comfort EV our to consecutive of company program Stellantis. allows seat for We to our We to large E-Systems, a while systems unprecedented global Motors billion over won as our and Wagoneer components have programs. supporting customers core won earnings third replace We components awards the thermal complete progress won XX driven have our Wagoneer, were a and improved continues with year diversifying quarter with complete awards that individual the [indiscernible] on award control differentiate gains. We and grow from operating Geely. Total in of comfort the wiring production conquest an business market the customers sales mid OEM for with as

continue some the eighth recent of and most of stock our worth the our Lear companies cash when award million quarter second to allowed key X admired in of accelerate over is $XXX in for culture. the our a in Including year, of the pace repurchases XXXX. Industry for quality million week us Lear conversion one of in highlights Our through Seating. of total fourth recognize the we repurchased named last strong to $XXX the upcoming for performance FORTUNE half most excellence in consecutive share publications launches Magazine year. Slide

XXXX launches next-generation customers. current replacing we our a have the of in as combination include We brand-new supplier all of where launches vehicles as key wide outgoing a models with of are vehicles. several -- In regions the well range

products. The alternative. be assembling provide application third the row addition in complete Fe foam, cap to a the In utilized production vehicle recyclable Santa and the variety of integrated thermal is for as FlexAir, we trim fully components first FlexAir seat, vertically a will with such foam Santa Fe's rest. comfort our Hyundai

XX% largest about have We independent their of business. a and are supplier external Hyundai seed long-standing with their with relationship

we for the year, launches several a with expand have BYD continue including fast-growing this as We to automaker. Sea Lion Chinese

product X. are our key Slide regions. on key programs components as wearing Lear's to and E-Systems. systems, electronic launching launches as of high-voltage across I will and well Several touch connection in all key low-voltage with Turning

business further XXXX their high-power solidifying leader XX% these of We the that position across are continue balanced platforms. our and straight their are awards awards launch in electric programs diversify new to our SPA Later and Ram as powertrains. to third a rev, the and grow grow business our on sets growing are in year with will with $X supply a which was Volvo. junction and coming across year, over Electronics XXXX several CMA billion those We over E-Systems. Lear, the high-performance will electronics across on both exposure BDU BDUs. that of leveraged hybrid Approximately years. this X nameplates providing fully wiring vehicles, box our

year. year, Intercell of with the launch the Turning will key delivering for to market ICB the began last are grow ramp will to vehicles. parts additional and we production Volumes Board support for I of Ultium platform. innovations GM's Connect X. Slide Lear the illustrate launch we Ultium-based this developed to bringing Late

X FlexAir, with to sustainable be opportunities are launching pursue ReNewKnit. these ICBs customers. We are new year. and molding in supply our this Proceeding, We we our XXXX, awarded along anticipate capabilities programs stamping leveraging expertise, to engineering additional products to will later and

[ is of characteristics FlexAir material the thermal throughout sustainable urethane, year. in all-new of XXX for creates growth the a FlexAir will XX better structure rest development this Santa seating we launching modules. competitive the starting roughly of application have product. FlexAir which our for automotive filed molded improving demand cooling the application, ReNewKnit, support projects application It moat to different with in customer cushion. to of $X.X CAF with up attractive, up reduction urethane air is continued XXX% be OEMs have The will performance carbon the ventilation alternative for very Hyundai XX% dioxide Fe. innovative this weight vehicle we evidence has believe provides than and of in new which OEMs phone is comfort FlexAir is an patents system commercial market, Its XX billion and further XX% ] first we reduction innovative technology. We're very tremendous our The to component around business. X recyclable Lear's our exclusive the also license open for emissions. for this with along production alternative for

[indiscernible] is end of automotive that is recyclable first-to-market Our the textile its fully alternative life. at the

and ReNewKnit increase achieve with seeing market Automotive products, financial us while sustainable again tremendous our competitive finalist These our once alternative customers. continuing fabrics. PACE for is News interest positioning growth to to margins a to leader We our and returns. seating also demonstrating bring operating targets from Award, develop customers will a ability is Lear's the revenue our for in combined products innovative innovative for and value to add allow are

XX, Now please billion. $X.X to to XXXX backlog Slide turn our sales XXXX which shows approximately of

the business, business any net backlog our As roll-off the only sales core anticipate excludes volumes of in customers, electrification, transition our in new to ventures on several X-year It off. of of rolling the last programs, Due have we net a joint year. By maintained as lines includes what now a continuing slower similar new The and we to year's lost programs lower discontinued key of we business, in the the awarded changes last product of win pace to not by a nonconsolidated our assumed last compared and the is line industry programs million, that and reminder, to business our of backlog EV year. E-Systems. year the pursuit new the billion may pace is volume is several of year assumed typical vehicles than X size higher third backlog roughly or that the fruition, is $XXX the to to may balanced of to impacted that come roll-off backlog At across well third transition. XXXX on that assumptions. with depending $X.X years. -- despite ICE is significant in backlog a

as We customers XXXX. in to new further increase expect launching continue programs source that to

consolidated XXXX XXXX addition the nonconsolidated grow. In our backlog, ventures to the joint at backlog sales to continues to

continued XX% the to year increased The nonconsolidated X-year driven than our represents backlog. XX% million. backlog by our largely joint which wins last Our ventures growth more approximately at about $XXX with BYD, is nonconsolidated from of business

of We a and we a continue key BYD, business appendix have XXXX diverse with a our such OEM to the and growth distribution the for new the diversification win expected in presentation by global and In with of XXXX. customer sales is breakdown total illustrates It our Stellantis. continued set customers as EV of customers.

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

Jason Cardew

vehicle euro a the the to year and and period rates Lear exchange Global same up X% fourth key production shows sales for XX production on compared Slide increased was a Ray. X% in in increased Thanks, last quarter. against strengthened but basis. North From the compared America, XXXX. volumes weighted against X% Production currency U.S. to by XX% in weakened standpoint, X% Europe dollar and RMB China.

year Lear's Slide to quarter for and for the the growth X over compared summarizes full growth past as years. market our the to the relative fourth as the market XX highlights well

anticipated the expectations total X mix line strike. flat was market. several year, market full growing the and growth percentage we to the as UAW with with normalize well was last For over above strong years in This as largely E-Systems as negative point of impact company over the experience Seating points the X

UAW from at growth Conquest series Sport. Europe programs underperformed was percentage to business the driven Renault X by global Rover, with by automakers and Chinese Seating mix in unfavorable revenue Looking mix Range growth such business points, points higher XXXX. growth the Rover unfavorable Rover in X our market the the year the shift as both platform In with well underperformed market X benefiting accelerated from as by XXXX. impact on China, contributed over Range and by E-Systems in revenue the Mercedes points, by new as percentage Land and The strong segments OEM, to the region. North [ mix. X growth EV market driven growth the BMW, the ] and and region volumes strike. full domestic platform America BMW

Geely, further improve will such which mix and forward. to new [indiscernible], continue China others, great [ business domestic our win We going automakers, as with Wall customer ] BYD, in

points. percentage X For fourth by the total the company growth lagged quarter, market

impact company excluding total the have with the in been However, of UAW market. growth the line strike, overall would sales

Looking our has over at X at each seating our growth years, been market percentage targets E-Systems long-term line average annual our the in segment several with last at percentage with and points points. X in over growth

program. compared to reflecting year. $XXX as Sales ago, highlight XXXX. $X.XX million for to $XXX increase billion, earnings primarily to the Turning exchange, to the fourth of financial increased per reflected and I'll compared the of The new addition both of were the earnings Slide earnings primarily earnings were X% in year operating quarter impact X% share last foreign resulted year-over-year XX, million up Core commodities improved acquisitions, results and our sales in business. Adjusted a from excluding the repurchase higher million in to improvement segments. in $X.X $X.XX XXXX. cash quarter primarily strong earnings $X.X and our or share an flow in operating explains in segment. margins higher compared to operating XXXX, was adjusted our and backlog. was of flow quarter driven increase variance from XX cash billion, for taxes. Slide an benefit of $XXX cash capital, $XXX higher in X% $XXX Seating working million Sales were in The increase to due sales Operating fourth offset the the by partially the generated million by

Seating [ and or $XX exchange include BMW the X%. was the earnings $XXX operating Mercedes programs from Geely X ] and the Wagoneer impact commodities in The the million approximately the China. Core and as million iX million were and in adjusted operating [indiscernible] of or quarter UAW sales or The [indiscernible] backlog up as in to the Zika $XXX North EQ improved strike in X%. estimated Series fourth in the of X% Excluding XXXX XXX for Europe, acquisitions, up with America, well impact

[Audio Gap]

operating the compared X.X%. margins the and $X.X of in from XX% to by variance months increase foreign flat benefit were XXXX. margin-accretive billion, backlog sales $XXX Sales or adjusted impact in of Operating of quarter XX segment. an of explains last million as year, margins exchange. Slide for was our the acquisitions the and the were fourth offset E-Systems

commodities, restructuring by the Vista approximately foreign Mitsubishi was with backlog Buick of programs in facilitating estimated vehicles and in customers, of America; in Chevrolet the $XX strong impact Asia, sales recovery Europe in or as fourth The to operating in sales commercial XXXX. OEM of the SUVs global as impact or savings. improvement $XX the sales backlog a Renault performance, million improved Excluding E-Systems the strong and exchange Blazer North plug-in of and The Ford and and and a X%. earnings net million primarily resolution hybrid Key reflected Super XX%, driven backlog. X.X% Europe X.X% truck key were benefit EV our and America. Core quarter and $XX well of vehicle with strike operating our including Seeker million compared in negotiations up the cost and an margin-accretive North EV include of Duty electric margins electric in to Chevrolet UAW

Moving highlight history of We value. to drive to shareholder XX. deploying our capital Slide

we few operational accelerate to to strategic vertical excellence. growth years, expand Over integration investments made and the capabilities our support last

that will efficiency organic drive plant to continue and in and investments automation focus We on inorganic modest improvements

[Audio Gap]

rating created a outlook. a BBB with Lear to stable

$X maturity balance We solidify XXXX. the also billion our year sheet. our already agreement by of X These extended further actions credit to strong

enabled year. excess target us significantly is XX% our our returning flow focus committed results. In second share the cash of which flow the remain renewed half to immediate exceeded to accelerate on Our conversion, We our in XXXX, cash to generating free driving we repurchases shareholders. of cash

outstanding EPS the than growth our combined. repurchased more we returned Including quarters dividends, the This X X%. shares reduction $X.X the will reducing quarter to count billion repurchased XXXX. shares During in of in year, in we XXXX. worth million accelerate $XXX $XXX stock, million of shareholders share fourth by first approximately help

products further North We on and to improved operations. to facility of to efficiency, connection continue facility. Building authorization increasing [ global repurchase our on XX. the efficiencies plants offset year. Please recently to improve facilities. thermal shares Last Slide support we several wage year, started opened our focus course increase focused XXXX, share and repurchase in million to current expand we our we continue inflation. initial we African driving low-cost that remaining, capabilities We through resulted production in to segments. a this the have [ of level through the to Our had plan acquisitions the second plants our and efficiencies in ] footprint, flexibility executed our The a The Fegora and automation will To Lear the systems on manufacturing comfort programs our of drive Forward European expand plan. InTouch the allows this our across to is and us ] efficiency $XXX waste of help reduced progress increased quality. the made our end in operations and in long-term year optimize which year, approximately turn introduced of

inorganic have we XX% and evident X% capital By pipeline opportunities below and The in We in of pursuing achieve reduced our our was of anticipated of Lear savings beyond. These of to in changes X to global combined is target. our critical savings cash This We generation. XXXX. million of $XX as projects an maximize taken the well roughly our Forward the XXXX. results The Forward XXXX in of help larger also commercial last business. XX%, that capacity, team over schedules a were realigning offset XXXX we cash can XXXX Plan Actions initiatives recoveries excess capital helped are more intensity with of conversion average wage generated Lear are XXXX the can than the production adjust on estimate focused in with initiatives savings our us inflation. well implemented through incremental million sales, in Plan $XX years in impact our in annual cost flow expenditures generate and in we organic X.X% sales. flow free of our of helping executing

our for Slide XX outlook on detail XXXX. provides

that than shifting year form be volumes vehicle customer currency XXXX will sales estimates, that weighted S&P X% forecast. Now global basis. provides including global our XXXX XX and midpoint production our production outlook. industry internal schedules and range, we flat our We assume lower a on guidance our the assumptions to in full or production production the At of [indiscernible] of Slide assumptions outlook. basis based sources several on

assumptions production an rate perspective, X.X and outlook exchange Chinese global our RMB are rate generally S&P the euro to an euro currency latest XXXX per average the RMB a assumes $X.XX Our with exchange of dollar. forecast. From aligned of average

turning provides our outlook per Slide for year expectations our XX industry we're and operating earnings of flat expecting for Slide to share. consecutive earnings volumes, higher Now fourth XX. sales, our detail on XXXX. Despite

the are earnings $X.XXX the expected in of to is in expected to be income to million. expected billion. is increase through of market million would over be million total range million. net $XX.X $XXX costs $XXX an X% with the Restructuring billion. billion growth growing of XXXX. $XXX expected an would are $XXX be the Adjusted E-Systems XX% of range in over X% market, operating This to be the to or midpoint, growing imply over million X% a XXXX. be range this revenue At to increase Our respectively. Core of and X% approximately the to Seating translates $XX of to this company $X.XXX midpoint, At of

margin-accretive midpoint to at expected the comfort and operating to increase our of to in our $XXX free the modestly, performance points detailed flow and share. Slide seating walks due XXXX, reflects and and cash as partially transactional outlook by and million range our us improvement net $X.XXX execution for in At our midpoint sheet is continue performance midpoint experienced Positive from guidance guidance inorganic to earnings partially free exchange. conversion would be billion allows to segment to XXXX. the in year $X.XXX XX%, existing approximately appendix. performance. midpoint be while lower the margins investments to is $XX million strengthening strong target. Lear's on E-Systems margins transactional repurchases focus included backlog and are the Forward we is inflation million. by year to million in thermal benefit growth second We've expected FX its our be expected of on result with cash be cash Plan expected the offset backlog, excess the organic our expected consecutive Mexican greater our for business increase flow XXXX making to primarily Our improve expected of expected improvements, Wage benefit in the to as our to strong is foreign the of a E-Systems shares fund of continuing outlook, XXX the peso. The impact reflecting well performance what impact adjusted than generating the approximately flow to is trends margins million cash balance results operating headwind other is are operating strategy, the recent to $XX negative walks drive for a elevated operating by XX% our a outstanding approximately and the to operating strong than by our of as share revenue basis per wage points grow significantly and XXXX volumes $XXX in Lear reduce as approximately strengthen of offset of to actual outlook. well as of expected to a increase expected Seating Year-over-year, of to net platforms. basis our more XX and margin-accretive by primarily the to of inflation maintain XX of

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

Raymond Scott

strategic of thermal providing comfort Please closed additional Jason. Thanks, a capabilities In strengthens XX. year our position. competitive IGB acquisition, our XXXX further was Seating, Slide to portfolio, key execution. we turn industry-leading to the which

solutions higher-volume features in We modular will solutions. the market and with accelerate Bringing a second broadly thermal to seating. comfort for vehicles and validation are Thermal XX adoption more Comfort third these into to customers of row our

efficiencies and improvement execution In the focus year. E-Systems, drove margin our throughout on

to aligned further focus core to products industry We our with continue improve trends our on margins.

we our are We business our market Lear savings We of segments long-term Forward expect in implemented performance both initial initiatives, E-Systems. Seating which yielded of confident and to growth in our excess targets improve over both in market in growth and targets. XXXX,

us efficiencies position Our accelerating to continue focus our on products success. in inflation to this shareholders address wage year long-term strategy and market plants. In to bringing XXXX, and our and innovative a for to will is improve Lear automation to return executing capital allow

happy Now to we'd take questions. your be

Operator

from from Wolfe [Operator Instructions] Our Lache first Research. comes question Rod today

Rod Lache

Two questions on the guide.

past, pretty your is [indiscernible] the Just out first of as just helpful midpoint to expected looks? all, XXXX look half second X% revenue how you've EBIT. bridge to the versus the should the can got to roughly maybe rate run that on And we of segments. more backlog, given just you've billion XXXX, $XXX as be the or conversion total -- of XX% and you of Jason, and about get you growth refresh we a beyond rate now that are of looking Can about sort in deliver additional that Is from targets, million us the growth maybe expecting at XXXX, us the XX%? coming of you segments company how out $X.X

Jason Cardew

XX%. to the primary backlog as to driver the near-term sort that expect of would of in convert Rod, revenue, growth is XX% we

that Seating do to and XX% our right this in variable E-Systems. year. for is guidance continue our for in and believe line will segments, both on in existing those margin at We room in there convert that I increases XX% typical roughly platforms, to think with we're with volume XX%

increases on existing anticipating at this look As platforms. year, volume we're not we

of in guidance, on our volume forecast. the In platforms S&P fact, number reductions largely with included aligned a have existing we

that room definitely there's So this improve even year. certainly this for year to and beyond

on terms Day. really this on I And about XXXX In wage than transactional we anticipated. there's at last it bit inflation or a anticipated X and XXXX, the also your changed our efficiencies that and had XXXX, negotiations time at FX stay Rod, point. little then. of year more in The are with the in than we're a of We One, Seating. things active volumes headwind focused was middle what X% stage. transition talked a X automation last EVs Investor bit about question slower have in customers. talked we want little since of to plants Seating EV at and on had faster to But what our and moving we our

'XX pinpoint try So super focused our this XXXX on accuracy little it's guidance call difficult stage. and delivering with a bit both or exceeding to businesses. at We're in

Rod Lache

of XXXX. as a Okay. of downside out or the are bit versus you color midpoint your And you potential production, us to of sources just can plan? look just aside give maybe little What upside biggest from the

Jason Cardew

Yes.

as in we we the think inflation. year, to biggest our at of this I challenges So for one guidance have wage regards look is

just maybe minute a that. So on spend

ranges our trim experienced our plants, very back, a relatively that with Wire electronics, of just sort those talked [indiscernible] to impact the you negligible is the peaked would historically. And look in businesses, has labor customers and at the globally assembly as headcount. have headcount. a think impact. Those that where taking because no turn more impact. full automated, business recovery. seating we've annual Certainly, programs recovering through which this like what we're of last we if pricing a which is year, past, E-Systems seating, or XX% which our or running is And programs the labor-intensive it's labor, we've in businesses the be kind tend But inflation directly peak certainly explicit modest assumptions eventually on our our of to normal. XX% businesses of sort the efficiency at greatest beyond model in X% of of X% about like a offset rates, also this from full represents We of wage it's seeing cut around labor stage, [indiscernible] with almost the roughly year and us step costs. it's considerably it's path we that that Xx over. are As effect or you're gives seeing of inflation wage either Those that expect terms impact the 'XX now that in our really inflation

inland. aggressively and ASI, deploying Through to [indiscernible] Africa passing to we Mexico customers. North And did border the last through further an of acquisitions North improving InTouch in moderate so we automation, really offset at restructuring then in normal our look to The recoveries would just in Lear Forward expect efficiency program, plan, managed well, Eastern next addition to automation. our that million. and inflation higher to kind the as Africa, a moving from work utilization to year labor capacity $XX of initiatives is year. We largely up see roughly We've to Mexico, 'XX 'XX, Europe programs. for from had from through step of that We customer that had -- which and aggressive

in in automation our Ray. think, made there cost industry I on talk be mean more Ray And may this a think focused recovery. absolute there's the topic, and I terms assumption bit doing some to terms upside I than of So the passionate and we're what to about either more around could that. programs the in no addition or we've of that, economics, in one little the

Raymond Scott

-- but Yes. next week been I Rob, couldn't I'll in share some our with you publicly, to facilities. stories

when looking our mentioned, around place things we we And I important, getting the in What are in think put a put is at plants. And think I wiring. that and think mention, seeing the the a I that in lines facilities, we're trim focused potential labor upside, we're of place. accelerator. capital our priorities great we're innovation, the saw the pilot the in Jason to automating technology, some with too, wiring the efficiencies areas, our talk with that lower you Around about I'm cost. what that's I and what's significantly doing job

So that's lower what coming improving it's from our is than efficiency within plants, online significantly we're the not only from an traditional capital capital. seeing

So that we're I saw our capital in last you benefits year that's getting good going accelerate. think, think I X, really And to continue spend. to in

with to balanced relative the discussions We think January. customers. the issues I our very to labor what customers starting EVs to economics. kinds we're seeing all off We're our a negotiations of the with year, on in different in take in heavy pause approach

we're I balanced. think

I maybe those, I aggressive year going could this the beginning, balanced significantly. we're think we second do approach. In those, within think of half of I a think, but volume. be -- very some the to than Quicker that take help on

I conservatively. we've at volume think looked very

information If right feedback bit a tailwind here at near platforms think hearing more the vehicles. been nice inside little our future. a our might to ICE -- on customers that with powertrains, we've accelerate bit how in little to for We're the ICE That's bearish as us. that in because gotten that's We've lot this -- their EV. customers are of pause in retrenching I now, that as far look a some they're continues going formalize from have. impact the our we some it of little they'll a what

absorbing here, aggressively, We've changes but what Rod. So balanced especially opportunities out lot giving approach, the really [indiscernible] EV I we coming be. but very little a more in a quickly then alternatives will a very pushing are do think been to and bit of have we some these look January, have we

be so And could nice a boost for that us.

Operator

from comes Dan Barclays. Levy Our next question from

Dan Levy

a this just there. back said of maybe each could But downs about call guide. One And mentioned as the And X I briefly you price to could of on bit assuming you $XX typical, piece. segments? in the within think it, are X-ish far recoveries you pricing the X.X% the on in as that in go on what percent you you E-Systems. to FX Wanted Is talk Seating, unwinding? Does returning million just -- it purely just continue components maybe line think of I questions transactional? hedges there. is, reflect comment to the Is in that commercial

pricing So maybe well. just some commentary environment on as the

Jason Cardew

Sure.

to FX. FX me overall it our step strategy. just And be explain and take a in with transactional may our of back helpful Let kind start exposures

most significant the So peso is by far. our exposure Mexican

We a than billion. $X have had little more

year, or exposure last and we had I protected grows layer also the in all details at billion And And of us and this very have beginning on we effective hedging year of hedges year. And again -- including in place year a through FX year of margins the well roughly impacted a program, to so can generally, billion reasons, $X.X I on And is helps this year us last program Mexican again will of this very multiyear for think $X.X the XXXX. the competitive beginning year, hedges say respectively. but us that exposure, basis go which really last the peso. served that the Transactional we $XX basis. last earnings our particular. XX% last and operating in by that XX again, on for and negatively million, peso the points

insignificant sheet-related in the that other was it expense another of balance FX $XX operating fairly million. by million terms of So impact. There hit line, which was the exposure EBIT impacted margin another on in $XX

Mexican was volatility that back-end where fourth quarter. $XX per earnings earnings weighed fourth and EBIT -- the other by impacted between share, was quarter the there's peso of balance in lot And on $X.XX and expense in the portion with on peso the operating million $X.XX that really really a a sheet a loaded So about impact. earnings Overall, it's impact per share loaded year. FX last overall the --

As average XX basis points, at about are just impact talked the as points basis guidance, in prepared E-Systems. we've in points is a million peso XX that little by includes $XX operating under driven which on XX assumed our about we we earnings remarks, XX of this Seating, the XX.XX. XX year, look over overall, basis out in will

several then portion, months. where So rate And we've assumed the sheet it's a impact assumed $XX the the million a XX.XX, been exposed XX%, last of we've of trading exposure. our balance pretty on that's much over further

includes or $XX XX% of guidance million FX peso impact $XXX which is transactional the of So total related. million that

embedded think to appreciation inflation. highlight the that peso is our I in important labor Lastly, it's also

And current excess take exchange kind to well. economics, rates, to customers talking of wage place. those that full of our FX current this as models we're would recovery as recovery component about to of an labor ultimately, so there's rates, reset expect And reflect [ ] of we that as the or

segments that this some XXXX. of beyond what's margins this and of year. And in So it year weighing margins set really and some little then of in that's a on both bit

operating diluted it's transactional full both seeing of FX. So inflation by and improvements because you're the wage benefit being all not the

we're our in of experienced in we downs, than similar environment what terms In customer expecting 'XX 'XX. price a

bit pretty Your a maybe little basket terms in less it's that a to X.X%, there negotiating. issues note of math that that. important there's than you're But close is of

some direct been discussions, result discussions, year. even and recovered of commodities from And have that a the reduction discussions, discussions be as so EV FX delay low prior of labor there inflation our volume lingering not that may program

our have as So But we out, all that customers. first this negotiate down of outlook. baked price that is quarter into year contractual playing with play see you in your that's you if

inflation had of we through operating beginning then claw of the at and effects our at And the execution margins those hitting on the of to that start throughout look wage the year the the improvement that year, through weigh negotiations plans. You back largely will the of and year.

Dan Levy

follow-up, see much E-Systems strategic in volumes. EV realigning align much changes about Great. to you EVs there's weaker are environment about this what that on slide X% target initiatives limit E-Systems, resources get about to doing on due E-Systems And that margins? resources How ability I in EV under as wait strategy. X% comment the lower your How new does a EV margin. I you realigning talk talks the you to was issued to backlog? And your to here wanted environment. And can within this target specifically a to Maybe just the on ask XXXX

Jason Cardew

that is the backlog extent, to of XXXX Yes. and a lower certain a launches. timing And the vehicle XXXX volumes, certainly, biggest backlog to led the factor our assumptions electric around

It's had from closely which their schedules range, billion customers the particular, guided So in anywhere on billion. $X.X how $X.X flux. are now be XXXX, could that ramp-up billion in our in depending within billion, say, would $X.X to still volumes, I $X.X -- we are and to just their achieved guidance backlog.

a more a that operating yes, -- probably on so here backlog that than to weighing bit little And Seating. And margins so it's in the weighing in similar bit is the in on XXXX, and talked into pinpoint margin in late publicly on with asked don't we've Rod target. about earlier to is XXXX, I of a XXXX. discussion get of systems want X% question What an terms E-Systems these

because in a little out talked pushing a near investor term. EV about lower the in volumes I maybe think recent bit I of conference, that just the 'XX, 'XX,

provide margins but And will more on -- volumes so the there. as the year have we'll that lower on an 'XX, color progresses, certainly, impact E-Systems

in In doing to in opportunity commercial program, -- it's spending back We capacity less terms of to we're spending. what combination million last actions. single not E-Systems, a guided a you lot at what that. operating of the reevaluated pause just to $XXX of deployment additional than $XX happened tremendous actions Seating had volumes, million. went that year. see of of end the found every and response We in And we've and We capital but spent the lower to with and

a up. with And of that segments So we're collaboration doing think, in kind I will and better positioned our returns ramp help really that both near-term customers. slower us for in

as about plans to they to us being that capital slow very don't deployment supply Our have so try and down customers capital the that working to and open excess about that they're base their worry and well. changes with are

all the commercial -- been fixed then overhead made on discussions investments a and will come had result previously and as volumes it having that in certainly, lower about with of negotiation prices back. impact so those to And we're until volumes element there's that are higher our customers

Raymond Scott

we I and portfolio our dollars important respects think pullback [indiscernible] this we'll deploying. products. a very a is were customers, this a capital capital And it some EVs, -- think seeing within was it product same about and call what or in mean, we and ICB. it talked dramatic obviously, of also ahead much we're where scalable talk what as then investing but BDU, scaling even across with program can E-Systems be I as limiting bit with more we occurred. equally really multiple before also pause the was thing important, our be a about I certain simplifying little When

with are within the will negotiation volume everybody being us. have but at we everything but good in different and trying being solutions, think hit time, capital of Jason be And dramatic the and very I work like as of on to run with very, we kinds seen said our to do, we where it. we selective was deploy that more a selective, I request customers mean very, disciplined the have And And rate. of very commercial particular so at changes that intentional. capital very some helped these not It a didn't expert. deploy I all type to relationship EVs, more of we say it to on an investing all still that's

months. helped. X simplifying I think in the really as that over E-Systems us come But helped at portfolio this that pause And us has product really so last has

Operator

question comes Our of Murphy Bank from next from America. John

John Murphy

quick X got very I ones.

I said add this $XXX your production if just X% would global to going the little to First, maybe as of down to vehicle and it year wide bit midpoint probably took more opposed revenue that be range, was X% million, up outlook. roughly about a the

the the high base. a that? mean, because that the assume low to and contribution end If what and ascribe margin of you you would think look $XXX kind XX% contribution I about else incremental indicating end when range, you it's of equal, million margin at all

do is -- Just this forecasting that. lot understand trying is would you industry assuming than or And that existing on better expecting? a coming what the of now to of you something programs think like you're in right

Jason Cardew

Yes.

integration that XX% so may probably. it the vertical back, lower production come So expect the at that in existing bit that systems, these in some of the so in I for, uncertainty we on that -- have John, profitability where we million backlog around rate. the convert E that say on programs, we platforms. of the in the of to is volumes platforms to of underlying platforms would at to better, and if or Seating platforms of that's would earmarked would $XXX little a well. is first as range XX% volume EV come level year some so would of XX% sort XX% convert And speak, in of depending XX% on that -- guidance be though, some new

at range can and other The pace the factor reason deploy inflation automation negotiations around commercial our the bit little offset wage is the projects to higher we the on inflation. for which a and conversion

of and fairly wider range in X%, impact a So to X% a tight of automation. than the seating to the [indiscernible] bit to negotiations range, But it's have. for little it's would X.X% little the pace X% wider we've normally Any systems X%. of we commercial X% to X%. got sort those sort in E-Systems, to of of deployment at account

John Murphy

EV one but liberty for second have on have have the the And That's seen this from necessarily your and down not reasonably then not a like very of customers of and and out, of backlog. taken the the these backlog of ICE backfilling helpful. and guys you that backlog the Is hit hard here a being push backfill quick taking dinged and seems approached sold fair the the that volume statement ] a lost a those? is place with significant actually you've ICE vehicles recoup transacting backfill programs. or in not [ It way

Jason Cardew

of done of EV bit the ICE platforms platforms. their new we've Yes, volumes we've guidance the on their then approach, taken to a a of fairly some taken up of we've in what platforms. a out that's but ramp view effectively of because some our terms as they their conservative plans And balance EV conservative customers' it's

just there. sort examples. of couple I'll dipped So we may have a of you little a give bit double

Blazer have the seating. ICE we Blazer but have We EV don't seating, the

sits So plan has the right it now, next year. building out as GM's Blazer

ICE contract. programs is a seating build we don't That there are assumed pushed launch. The get we And launch Aviator. to out. different have out the that where like that's the be may that, to a with as need in -- several So the in that plant is hit production for backlog we

establish is the I the our a customer of So we of mechanical the when that the maybe because think take that we hidden building then backlog us sort backlog it XXXX backlog. out, tells to follow if of is out upside we sort program approach of

this the the and on replacement example XX. side, isn't winding begin Ford, down to systems focus a stage. There in is assumed gone the at Another in XX that for it's

So that's a negative to the backlog.

there's when So lead programs post we the kind that could backlog in a that handful now. from upside of some like underlying of that, number to XX months

Raymond Scott

probably doing information the of type looking gotten Yes, the usually formally, And electric job said, vehicles, efficiently. movement, going to really And the our over if not in some do some conservative given clarifying customers around is and the position I we hybrid vehicles. X continuation about to we that vehicles but more those are there situations. usually the ICE -- approach take, tooth. a have. said, Jason the first a continuation ICE in think the we've they balanced start they're how what's informally, the feedback cases, of between nice quarters those specifics And internally the longer did at are across and board We're that nice like

with those running And so we're things. you. We to hope keep

strategies. to over couple rebalance the own we'll think start get their kind I quarters as -- internal of next So but will -- we more of they here clarity

Jason Cardew

add that for for that I [indiscernible] that. It's ROIC to for X running both years X for or generally it's think positive John, to And good longer years, [indiscernible] for year that on good operating overall. reinforce initially margins, than a and planned. capital good balance, we businesses trade If raise us just agnostic. happens, comment just being power one sort to to with of

John Murphy

buybacks the as price missed fourth definitely agree on And at flow the I shares? I bought seems then operating buyback in I looks $XXX that I it not was expectation would this like there'd mean, be I and quarter? a with just average you Jason, but just be cap what year the little for I XX% apologize, the the that doing that. number. cash the you're in might lastly know more did apply look back allocation earmarked. you. that that maybe last million, it directly, you And year, be bit like it

quarter what average you So price the of think buyback the would in number for the was fourth and 'XX?

Jason Cardew

mid-XXXs. it's the Yes. the I'll think to start in room I as for, that in the second guys find with number part scramble the

look the sort be we fully would to to the at you cash to and we And of going near dislocation there's flow, M&A 'XX. IGB We have generate in tied We the buying to rush free as we're down. in but significance at 'XX, stock this we're do be look continue aggressive term. horizon. value in pay any There's to which is greater loan. no the that -- could to term a expect near-term that's on in take if than back of So opportunistic acquisition, a

of So of shares I target. in think a X% share repurchases reasonable range outstanding sort is that again

Of a very that's course, for decision. been we're in recent we're advocating Board supportive of Board week, certainly that And board our that meeting. the our being with next has and

continue. that expect I'd So to

Raymond Scott

Yes.

some this is to they deployment, lower, talk acquired significantly we or And we're is and life And with it what's technology return tuck-ins in we're doing the boy, to not or seeing difference. dramatic at about it lower shareholders. capital flow. small a in cost. new come floors. deploying when capital going with nice And focus a a [ and plant free now, we're driving our innovation costly we we're higher, talk -- going convert we're and going we're Our ASI, I the Agora], that We InTouch, made target it to at launches. it's right on about extremely mean cash to

we're on we're So very We've our how to good very, years. be going our in for flow position. several converting working and cash this doing been focused really we're capital, a

team from this history what's I'm out in plant unprecedented, seating. our the went when through of technology bad could launched it going than how and had our standpoint it was take hit their innovation, daily WS nice We plant that was capital produce more their a So of X because We even done much efficient. volumes. what throughput produce really to low ever trying working capital our great producing And wouldn't output and more our they produced competitor from launch, to in in their We that about from it. cost years And that it with for customer within our job competitor did here, quality Frank parts years. We [indiscernible] a the just was was facility. capital. this, superior seeing those was before was remarkable we never the the our

more so I'm at And been technology technology we starting acceleration excitement is hold. of me to drive this we've walk innovation parts. that to flow. take to made horizon that anything. it's And don't go manufacturing We're going Jason the the some We've this company, we the really need for acquisitions. cash like nice And how plants more on about -- nothing multiple produce going looking There's and said. in driving we'll to gives we're out meeting. That years because

that's focused to we're So stay going on. what

Jason Cardew

And price there, John, question first your average quarter. was the $XXX.XX the in

John Murphy

mentioned guys. WS discussing Right, a were just in what and what takeover. appreciate that That's Wagoneer's Grand that's program, the just you you that it. I Wagoneer

Operator

James from next Our BNP question Paribas. comes Picariello from

James Picariello

to Just be the first of more Can to production assumptions little here down informs relative for a X you down the Systems almost unpack key focus X flat segments Seatings drivers almost year's is on to points. mix just volume both outlook, mix going underperformance help global a volume points. this that market?

Jason Cardew

highlights just that. of of Yes, maybe James, the driving I key are that can some give some you platforms

temporary. some And is it of

It's a facility. volumes Compass expect For lower. example, year, launch Audi eventually in QX the come in of same through the this With Stellantis, is that volume back. that seating, to Their lower year-over-year. we changeover the S are going would Wagoneer

] in programs backlog. and In there's an are And the a in Opal And on lower. program of Mercedes some volume the SUV we're Europe, our changeover us. of to then ISVs [ ] [ so for both We've that's Mercedes that that of That's our important in offsetting AX Audi be China, seem sits some Tascaloosa plant, that E-Class. lower. got

be It lower seems So volumes are year. lower. to this

kind again, this necessary bag. systems of some with on of it's you've -- And mixed aligning making got big a the seating And is, kind are customer insights. of those these adjustments side. where just the But drivers for -- S&P

and with like that Mackie, helps you [indiscernible] Ford, So that up are significantly. Maverick, pretty down Escape the the is have some the however,

think I That's in significant XX%. have had down we E-Systems. program good it pretty a

lower in So China, the number. Audi SAIC Europe. are is China. on that's weighing signings in in Focus In lower Europe. volumes

little Some our Volvo bit of volume segments. platforms, at lower goes [indiscernible] kind as of the a we in look of down, down. certain big Those each on big are Geely are assumptions [indiscernible] volumes the the drivers

James Picariello

obviously, just growth platforms That off the Right. necessarily? for It we that. through on my just million guidance. contribution calling X rate right? thoughts super XXXX, My That's points X on for And as business sounds helpful. XXXX. a would are a to next you year? that Thinking you're market Or follow-on, for growth question XXXX for 'XX went over influencing Seating going achievable points you're as the not for over seating then not guide. be give of backlog But about Seating in under an just any new of is, key just $XXX market XXXX, business, the think can that Just point.

Jason Cardew

started we even choppy. customers. volatile. is got of example difficult. It's as some a 'XX were Yes. market certain And the year worse perfect and with kind just that, It's progressed mix shift Growth decent as within out over there saw of

step time market a points So did in longer we And last E-Systems. kind growth of years, points in back we as take a deliver, to at horizon. of important the I remarks, Seating, it's the of over over X and business X prepared look highlighted X the in think

growth out do uncertainty X may a market years, transition look EVs I to this be bit. little over weighing see around over As the I the on next

as term. growth the to the products we with a if the innovative near of wind I we products thermal growth do out in down X I lot in from past, E-Systems that what of long our see comfort, it and of in temper in Seating, now, will points achievable. points of X the growth market that X noncore run medium in the years, kind it in think But some it market is have the wins very from like of -- the ReNewKnits. of in E-Systems highlighted that in of and what I primarily, benefit conquest Seating, new future, we doing do with doing we're And catalyst was for FlexAir but is modularity we're some look in

billion example. So for is $X.X just FlexAir, Foam take market. a

could period a a We're over be be of term. that business out. time. that FlexAir applications row film It have XX% We and in of billion us That share less small than and a for years that relatively $XXX going at applications polyurethane maybe to all potentially $X million us displacing market. second would long dominate market. today, least X see [indiscernible] of business for in We third

[ back of billion in component us. business to We for XXXX look weather]. for $X with a businesses. We great those started kind continue That's

a our associated that Now we We're a will all of meets performance in growth benefits there. with interest associated with as have something FlexAir comfort, thermal million those levels XXXX. may way it. acquired business business it customer based on be we $X on in $XXX that be well billion the initial benefits in environmental

stronger that in growth think ever underlying I been. the today are they've Seating structurally, drivers of So than

business. getting the path growth of that confident very is and jet to share prospects more we're in clear, Our market long-term

Operator

from Our from Deutsche next question comes Bank. Emmanuel Rosner

Emmanuel Rosner

the backlog. is about My first question

backlog quantify Overall, for in Seating. you for as now to volume assumption. that point? E-Systems platforms get assumptions, derisked at to in better volume of, what extent able was to currently so and Are this a this backlog tied you well how understanding EV like like guess, bit Just of of of I reduce a much EV us the percentage we these essentially vis-a-vis is as what your little

Jason Cardew

over those the most launching new Yes. are prominent vehicles Even after next adjustments, the vehicles still X years. electric

vehicles. wiring backlog it, rolling is revenue as not vehicles E-Systems it's include Seating, or define which are XX%. of of wiring would about that in And unique on electronics low-voltage that's electrification be so that the and just electric programs XX% we electric would And on the new products high-voltage to

of So still the and market, and previously a near that's still market electric still a volume launches expected, -- significant happening. a our happen And in that vehicles was but may ultimately the being taking it's despite part it's it's term. the program and there's what customers' so still the our It the of anticipated, the still it the fact more backlog. prominent have a It significantly that we still the place. end and up lower may significant of than shift part dominates launches, the reduced timing had slowly transition assumptions many than is significant of -- new is to percentage belief but

Now if that, going is you penetration happen you that say level of don't to believe EVs. with

period to earlier I are a that assumed a the to some that out balance to going we've ICE time. is of at are flip of that not they're few balance think we've out side volume going higher these a highlighted, than what of the for or questions programs longer going assumed run is to

But Emmanuel. It's assumptions a stage be balancing in in our at So going what's guidance. tried to project this period. to our happen. and predict, difficult we're it's difficult to We've definitely transition clear

Emmanuel Rosner

net-net, there follow-up et I I recover especially helpful. inflation. some headwind? lag? I is Or headwinds, or time a and Yes, -- on guess around then basis, Or do takes guess that labor customers? remain be there of And that's you cost -- sort one a full clarification that the does you portion is negotiation, expect But be cetera. it these a of guess, I year would and process like on that assume that point cost you you quick that understand will a responsible for? there's of that a like from

Jason Cardew

Yes.

little customer X% And programs old in what in was in to that was historically, 'XX, continues, is. X%. going but wage that's that. That 'XX, kind price out would about and X%, necessarily some X%, talked I bit the offset And don't inflation well it than is model. -- I think each to that our earlier, plant now 'XX, our a contribute I as, think That that look efficiency year. more that, cases, would reductions offset twice back 'XX, we as of as the

we seen what level labor for should this that kind And -- either recover year, experienced and or so normal beyond year is we believe this have decades. or of what has year historical that that inflation excess next the economy we we're

And philosophy. so the that's of sort

restructuring, our reduction utilization don't facilities this, other come it, programs, through achieve want as to automation, then year half the in make roughly to year. And either order of through our to we've this it or as this the margin and some of has to trajectory expect better half year growth offset we to form next recovery margin but the the that got next got preserve so year shifting simple I of cost footprint, and and

Emmanuel Rosner

under the assume I guidance, piece -- in that guess need customers recovered? Or you you is inflation you do a from recovered? net this your year's being do cost assume labor that headwind from to recover

Jason Cardew

Yes.

yes, the this than performance. a talked the points guidance. to past that. year net basis XXX to We've about And for in of would think, could net think generating unrecovered guided We've be less combination XX It's in I well headwind transactional attribute I a impact to as but shortfall FX the think inflation. the that I a precise, fair not you perspective. certainly wage of as quite that's it

Raymond Scott

recovery. it negotiations I too, it And have that. even guidance way and think historical baseline understanding We of is these we our of some and how though on base categorize in discuss that the get or I practice past we

on year -- for the settled getting and different we're these other volume, to as or much on within that in productivity far things. number a pulling Now we're timing all as pull elements there's that. Obviously,

And difference above the based for what net be practice. past we're on going in so negotiations would

trim earlier, of are That's is bringing settlements. control, some has And in or control that in just done we've XX% our sophisticated our to trim. And And models our we've a of have of more job of in been in able that a within with equipment. our our of in mentioned of automate variability Jason around nice been always I one facilities. the we labor automate, own on are because something automation ours. very think to the Some them addition Like which them other covers, are in in that, innovation facilities. lot discussed to we

Now accelerating opportunity us. nice is for another that faster

how And improve we think overall would roll are I today. opportunities been conservative so but number that the we it out look those as we've somewhat on that at

Jason Cardew

spot we've into as And a about range. the talked us could different that one drive that's in earlier, factors the of

certainly, the guidance be Seating an anticipated, do we E-Systems of this -- getting than factor high range, end if and would to at that X% X% our So to better to year. attributing

Operator

be And remarks. for like to question-and-answer the and to any turn ladies session. gentlemen, we'll today's concluding management I'd back over floor closing

Raymond Scott

We of hit but this year, to challenges we them. we our job year like targets the going and for what Lear discussed I always and outstanding we're And do, just XXXX. Yes. got Thanks, everyone some now great Matt. to us all everyone sure call their achieve to do need the now in is to work this want what thank again I'm on the I ahead team. know we what? so just appreciate

hard all for work. thank So you everybody for your

Operator

today's does thank Ladies do conference you end and that gentlemen, call. for We joining.

disconnect your now may You lines.

Lear (LEA) 6 Feb 242023 Q4 Earnings call transcript