Visteon (VC) Q1 2026 Earnings Call Transcript

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DATE

Thursday, April 23, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Sachin S. Lawande
• Executive Vice President and Chief Financial Officer — Jerome J. Rouquet
• Head of Investor Relations — Chris Doyle

TAKEAWAYS

• Net Sales -- $954 million, a 2% increase year over year, driven by new product launches and customer recoveries which offset headwinds from lower battery management system (BMS) volumes and vehicle discontinuations at Ford.
• Adjusted EBITDA -- $104 million, yielding a 10.9% margin, cited as the expected low point for the year with improvements anticipated in subsequent quarters.
• Growth Over Market -- 3%, attributed to launch cadence and customer recoveries, excluding pricing and currency impacts.
• Adjusted Free Cash Flow -- Negative $23 million, impacted by typical seasonal effects, increased inventory, and incentive compensation payouts.
• Net Cash Position -- $385 million at quarter-end, described as providing strategic capital flexibility.
• Shareholder Returns -- $40 million was returned via $30 million in share repurchases and $10 million in dividends during the quarter.
• New Business Wins -- Over $1 billion, led by cockpit domain controllers, digital clusters, and a high-performance compute (HPC) win with SAIC for AI-based smart cockpit systems.
• Product Launches -- 20 new products launched across 11 automakers, including firsts with Toyota’s Lexus ES and Nissan’s Infiniti QX65.
• China Market Strategy -- Targeted premium and technology-focused segments, avoiding price-sensitive and high-competition areas to protect margins.
• Supply Chain Management -- Elevated semiconductor and memory costs noted; 10% of annual memory demand secured from new suppliers to mitigate shortages.
• Full-Year Guidance -- Reaffirmed for sales ($3.625 billion–$3.825 billion), adjusted EBITDA ($455 million–$495 million), and adjusted free cash flow ($170 million–$210 million; trending toward the lower end due to planned high inventory).
• Regional Performance -- India represented nearly 10% of total sales, supported by launches with Hyundai, Tata, and Renault, while European growth benefited from digital cockpit programs on Audi, Nissan, and Renault models.
• Pricing Dynamics -- $5 million pricing headwind and over $15 million net commercial headwind (pricing plus supplier cost reductions), both partially offset by EV program settlements and value engineering.
• EV and HPC Wins -- Three AI-capable cockpit system wins in China with cumulative value over $1 billion, positioning Visteon Corporation as an early-mover in emerging premium tech segments.

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RISKS

• Jerome J. Rouquet stated, "Production for our key customers is now expected to decline in the mid-single digits year over year," referencing the updated S&P forecast tied to the Middle East conflict.
• Jerome J. Rouquet reported, "memory remains constrained," and outlined ongoing supply-demand imbalances and pricing pressure expected to "persist through 2027 before easing as new capacity starts to come online."
• Adjusted free cash flow guidance is "currently trending towards the lower end of this range," attributed to the need for higher inventory to manage supply constraints, including semiconductors and memory components.
• A $15 million leakage in commercial recoveries occurred in Q1, with management expecting only "minimum leakage for the full year," after recovery efforts progress.

SUMMARY

Visteon Corporation (NASDAQ:VC) delivered year-over-year sales growth of 2% despite downward pressure on global light vehicle production and persistent semiconductor and memory supply challenges. The company secured over $1 billion in new business, highlighted by a major AI-capable cockpit system award in China and ongoing leadership in high-value premium tech segments. Management reaffirmed full-year revenue, profit, and free cash flow guidance, emphasizing robust first-half demand, strategic new product launches, and a proactive approach to offsetting market softness anticipated in the second half. Cost headwinds from pricing and memory inflation were partially mitigated by supplier negotiations and commercial settlements, with management targeting resolution of remaining recovery gaps by the end of the second quarter.

• Sachin S. Lawande stated, "AI will also become a competitive must-have in other parts of the world, accelerated by the international expansion of Chinese OEMs," foreshadowing a global shift in cockpit system demand.
• In China, higher-value launches such as the cockpit domain controller with Zeekr and digital clusters for Toyota contributed to stabilization amid overall production declines.
• The $20 million benefit from one-time EV program settlements in Q1 is not expected to repeat in subsequent quarters.
• Management cited stable global demand for cockpit electronics and expects India to remain a key growth driver as its market share rises within the company’s portfolio.
• Planned capital allocation remains unchanged, with $300 million reserved for M&A and up to $150 million for additional share repurchases, contingent on ongoing free cash flow performance.

INDUSTRY GLOSSARY

• BMS (Battery Management System): Electronic controls managing lithium-ion battery safety and performance in automotive applications.
• CDC (Cockpit Domain Controller): An integrated computing platform managing multiple cockpit electronics functions, including displays and infotainment.
• HPC (High-Performance Compute): In-vehicle processing units designed for AI workloads and next-generation digital cockpit applications.
• SmartCore: Visteon Corporation's proprietary automotive-grade consolidated domain controller platform supporting multifaceted cockpit integration.
• Cognito AI: Visteon Corporation’s agentic AI software framework enabling advanced in-cabin user experiences through contextual intent recognition.
• LLM (Large Language Model): AI model architecture enabling natural language understanding and generation for voice and cognitive features in vehicles.
• DRAM, NAND, eMMC, UFS, NOR: Categories of memory chips integral to automotive electronics; differ by data type, performance, and usage applications in cockpit systems.

Full Conference Call Transcript

Sachin S. Lawande: Thank you, Chris, and good morning, everyone. Visteon Corporation delivered a solid start to the year with first quarter sales coming ahead of our expectations. Net sales were $954 million, up 2% year over year, despite lower industry and customer vehicle production. New product launches and customer recoveries more than offset the anticipated headwinds from lower BMS volumes and vehicle discontinuations at Ford. Growth over market in the quarter was 3%. Adjusted EBITDA was $104 million, broadly in line with our expectations. During the quarter, we saw elevated semiconductor costs, while the associated recoveries from customers are expected to be weighted more to the later part of the year.

Adjusted free cash flow was negative $23 million, primarily driven by normal seasonality and higher inventory levels. We continue to maintain a strong balance sheet with net cash of $385 million, providing ample flexibility to execute our capital allocation strategy. New business wins were just over $1 billion, led by cockpit domain controllers and digital clusters. A key highlight was our high-performance compute win with SAIC in China, a third customer for AI-based smart cockpit systems, reinforcing our first-mover advantage in this emerging technology, similar to our early leadership with SmartCore. Q1 was a busy quarter for operations: 20 launches across 11 automakers, including on several high-profile vehicles, underscoring our continued execution excellence in a dynamic supply chain environment.

Finally, we continue to return capital to shareholders. During the quarter, we returned $40 million through share repurchases and dividends. Overall, the quarter reflects a good start to the year with strong execution across all parts of our business and continued progress on our strategic priorities.

Sachin S. Lawande: Turning to page three. This page shows our Q1 sales performance by region, representing a solid start to the year with balanced global customer demand. In the Americas, demand for cockpit electronics was strong, driven by ramp-up of recently launched products, including new display programs with Nissan and GM. We also benefited from one-time customer recoveries related to prior EV volume declines. Offsetting these were the anticipated headwinds from vehicle discontinuations at Ford and lower BMS volumes due to changes in EV policies and incentives. In Europe, we benefited from strong ramp-ups on several successful vehicle programs.

Key contributors included a curved panoramic display referred to as a digital stage combining a 12-inch digital cluster and a slightly larger central information display on the Audi Q3, digital clusters and displays on the Renault 4 and 5 EVs, and digital clusters on the new Nissan Qashqai and Juke. These programs supported Q1 sales growth despite a weak vehicle production environment. The engineering services acquisition from last year also contributed modestly to our sales in Europe. In Rest of Asia, India was a strong market for Visteon Corporation, with ramp-ups of a new SmartCore system for Mahindra and a digital cluster for TVS, a leading two-wheeler OEM.

We also launched new digital cluster programs with Nissan and Mitsubishi for Japan and ASEAN markets, offsetting a Mazda program roll-off. In China, policy reset and demand pull-forward late last year led to lower Q1 vehicle production, particularly in the price-sensitive segments. Our sales were in line with expectations, supported by greater exposure to higher-value segments that are less affected by policy changes. We also benefited from several recently launched programs including a new cockpit domain controller with Zeekr, an upgraded digital cluster on the Toyota Corolla, and a new digital cluster on the Toyota Frontlander. The year-over-year decline in our sales has reduced significantly versus prior quarters and is now tracking more in line with customer production volumes.

Looking ahead, we have multiple launches in the second half that are expected to drive modest growth in China this year, followed by a more meaningful step-up in 2027. In summary, we started the year very well with stable global demand for cockpit electronics and new product launches offsetting the expected headwinds, primarily from lower BMS volumes.

Sachin S. Lawande: Turning to page four. Q1 was a busy launch quarter with 20 new products launched with 11 carmakers, and on some strategically important vehicles for our customers. This page highlights a few key programs. We marked a significant milestone with our first launch with Toyota’s Lexus brand, with the fully redesigned Lexus ES, a flagship model leading the next-generation electrified lineup for Lexus. Our driver display is standard on all trims globally, reinforcing Visteon Corporation’s role in advancing premium in-cabin experiences with Toyota and contributing to our growth with this customer. We also launched a digital cluster on the first-ever Infiniti QX65, a midsized luxury SUV from Nissan for U.S. and Middle East markets.

This new vehicle is a key part of Nissan’s turnaround strategy in the U.S. Our 12-inch digital cluster comes standard in all trim lines of this vehicle. In China, we launched a driver display for the new electric Ford Bronco developed specifically for that market. The automotive market in China is evolving beyond electrification to highly specialized segments with focus on technology and lifestyle applications, and the electric Bronco is significant for Ford in China, designed to compete directly with local EV manufacturers. India is one of the fastest growing auto markets, and in Q1, we launched multiple products including a digital cluster with Hyundai, infotainment with Tata, and the center information display with Renault.

Hyundai and Tata are already well positioned in India as number two and number three players, and Renault has recently made India a cornerstone of its strategy. India today represents nearly 10% of our total sales, and these launches position us to grow alongside our customers in what will be a key growth market going forward. In summary, we had a solid start in Q1 with new launches that laid the foundation for growth in the coming quarters and underscored Visteon Corporation’s role in automakers’ go-to-market strategies worldwide.

Sachin S. Lawande: Turning to page five. We secured approximately $1 billion in new business during the quarter. As expected, customer sourcing in Q1 was somewhat lighter following a strong finish to last year, and some display opportunities were shifted into the second quarter. Our product portfolio remains well aligned with key industry trends, and our new business opportunity pipeline is strong for the rest of the year. Based on current visibility, we remain on track to achieve our full-year target of $6 billion. I would like to highlight a few of the key first-quarter wins on this page. In China, we secured our third customer for an AI-capable cockpit system with SAIC Motor for its IM brand.

SAIC Motor is one of the largest carmakers in China, and IM is the new brand targeting the premium car segment. Automakers in China are rapidly adopting agentic AI-enhanced in-cabin experiences, driving demand for high-performance cockpit systems capable of running LLMs and video language models, or VLMs, using the latest silicon, such as Qualcomm’s fifth-generation Snapdragon chips. These high-performance systems also enable greater integration, accelerating the shift towards centralized domain architectures. Importantly, Visteon Corporation has established an early-mover advantage with three OEM wins in the space, more than any other tier-one supplier, positioning us very well to take advantage of this emerging trend.

Mainstream vehicles will continue to use conventional cockpit domain controllers for affordability reasons, with premium vehicles transitioning to AI-based cockpits. In India, we secured a SmartCore domain controller win with a European OEM for their vehicles for India and other emerging markets, our first SmartCore win with this customer. The system will power three cockpit displays and support advanced infotainment and entertainment features. Similar to recent SmartCore launches in China and India, beyond strong product-market fit of SmartCore, speed was a key competitive differentiator and the main reason for this win, as the start of production of the vehicle is under 12 months.

We also expanded our commercial vehicle business by adding a new customer for digital clusters with a U.S. manufacturer of purpose-built vehicles for defense, delivery, and fire and emergency markets. The 12-inch cluster will feature on their next-generation delivery vehicles, with production starting in early 2028, reflecting the growing adoption of digital cockpits in all kinds of commercial vehicles and not just for heavy-duty trucks. In two-wheelers, we expanded our digital cluster program with Honda to additional models representing an incremental $100 million of lifetime sales, further strengthening our engagement with the world’s largest two-wheeler OEM.

In summary, our Q1 performance was highlighted by strategic wins in key markets, reinforcing our technology leadership and supporting a strong pipeline that keeps us on track for our $6 billion full-year target.

Sachin S. Lawande: Turning to page six. China, the world’s largest auto market, is also the most competitive, with intense pricing pressure in budget and mainstream segments, which Visteon Corporation has strategically avoided to protect profitability. Above mainstream, the market is now evolving beyond electrification into more specialized segments centered on intelligence, luxury, and lifestyle. A key area of growth is the emerging premium tech segment, as traditional OEMs compete with tech-first players such as Tesla, Xiaopeng, and Li Auto with vehicles that combine luxury with advanced technology. OEMs such as Geely, Chery, and SAIC, who are among the largest in China, are defining their premium brands around the convergence of premium design, immersive digital experiences, and, most importantly, artificial intelligence.

The cockpit is at the center of differentiation, with agentic AI enabling a new level of in-cabin intelligence. Unlike traditional command-based systems, AI-powered smart cabins can understand user intent, reason through complex tasks, and act proactively on behalf of the user. For example, instead of manually entering a destination, the system can anticipate and suggest it based on context or what it hears from conversation. It can also translate incoming messages in real time, draft responses with minimal input, and answer open-ended questions about surroundings—what the driver may be seeing outside the window, for example—delivering a far more intuitive and personalized cabin experience.

This level of intelligence requires a step-change in computing power to run AI workloads far beyond what current cockpit domain controllers can provide. Visteon Corporation was the first tier-one supplier to develop a high-performance version of SmartCore using the newest fifth-generation chip from Qualcomm. We also developed the first cockpit-specific agentic AI software framework, Cognito AI, to enable the development of use cases like I just mentioned. Our early investments in AI helped establish Visteon Corporation as a preferred partner for carmakers in China for their AI-enabled cockpit systems. These next-generation systems carry significantly higher content value, and the business booked with the three OEMs thus far is already over $1 billion in value.

We expect more vehicles to be added to the programs after the initial launches, which are happening this year. While China is leading adoption of AI, we see this as a global inflection point. AI will also become a competitive must-have in other parts of the world, accelerated by the international expansion of Chinese OEMs, and drive the next phase of growth for Visteon Corporation.

Sachin S. Lawande: Turning to page seven. Before wrapping up, let me briefly discuss our outlook for the remainder of the year. Since issuing our guidance, S&P has lowered its global light vehicle production forecast for our customers by approximately 1.5 percentage points, with most of the impact in the second half of the year, the main reason being the Middle East conflict, and there could be further downside if the hostilities persist for longer than anticipated. Production for our key customers is now expected to decline in the mid-single digits year over year. On the supply side, memory remains constrained. Strong demand from AI and data centers limits availability for automotive.

Automotive continues to rely on older memory technologies that suppliers are phasing out in favor of newer nodes, creating a structural supply-demand imbalance and driving pricing pressure and tightness in supply. We expect this environment to persist through 2027 before easing as new capacity starts to come online. In this environment, we are proactively managing supply by working closely with existing suppliers and qualifying additional sources. We were able to secure sufficient supply in Q1 through proactive actions, ensuring no impact on our customers. We expect supply to remain tight throughout the rest of the year, with incremental supply from new sources starting to become more meaningful in the second half of the year.

On the positive side, customer demand has remained resilient, with Q1 coming in ahead of expectations and Q2 schedules indicating a continued trend. Importantly, our key launches remain on track. Taking all this into account and based on current data, we are reaffirming our full-year sales guidance despite incremental headwinds in the broader market. We will continue to closely monitor macro and supply conditions and provide updates as the year progresses. Now I will hand it over to Jerome to discuss financials in more detail.

Jerome J. Rouquet: Thank you, Sachin, and good morning, everyone. We delivered in Q1 a balanced set of financial results in what continues to be a dynamic operating environment. For the quarter, sales were $954 million, a 2% increase from the prior year. We continue to see strong growth with new product launches and benefit from solid commercial execution, partially offset by lower customer production and expected headwinds, including lower BMS sales with GM and the discontinuation of several car lines at Ford. Growth over market was 3%, in line with our full-year expectations of low single-digit outperformance. Adjusted EBITDA was $104 million, representing a margin of 10.9%.

As we indicated on the prior call, we expected Q1 to be the low point for EBITDA, with improvement throughout the year as we make progress on customer recovery agreements and cost initiatives. In the quarter, we were impacted by elevated semiconductor costs and the timing mismatch of customer recoveries. Adjusted free cash flow was negative in the quarter, primarily driven by an increase in working capital, particularly inventory, and a 2025 incentive compensation, which was paid in Q1. We continue to execute on our capital allocation strategy, returning $40 million to shareholders, with $30 million in share repurchases and $10 million in dividends.

We ended the quarter with a strong balance sheet and net cash of $385 million, providing flexibility to deploy capital while navigating the current market environment.

Jerome J. Rouquet: Turning to page 10. Sales for the quarter were $954 million, an increase of $20 million year over year. Customer production volumes were down 4%, while growth over market was 3% when excluding pricing and currency. Compared to our internal expectations a couple of months ago, we benefited from higher customer volumes, better pricing dynamics, and additional benefits from EV program commercial settlements. As Sachin already provided details on customer volumes in the quarter, let me provide some additional color on pricing and EV commercial settlements and how they impacted both sales and EBITDA. First, pricing was a headwind of $5 million in the quarter, which was lower than what we typically see.

As a reminder, pricing in this environment is influenced by several moving pieces. These include annual and discrete price changes with customers, the unwinding or maintaining of surcharges put in place during the prior semiconductor shortage, and, more recently, customer recoveries related to memory cost increases. During the first quarter, we were able to mitigate a portion of the elevated semiconductor cost through short-term commercial pricing agreements, while we continue to work towards longer-term recovery arrangements. We are making good progress on these longer-term agreements, and we expect that incremental cost will be offset by more permanent recoveries as we move throughout 2026, consistent with the assumptions embedded in our guidance.

From an EBITDA perspective, the lower pricing we achieved with customers in the first quarter, combined with supplier cost reductions and value engineering activities, allowed us to partially mitigate the elevated cost from memory and resourcing actions. The net impact of these commercial activities was a headwind of just over $15 million. Second, the additional benefit to sales from one-time settlements primarily related to EV programs was approximately $20 million, while the EBITDA was approximately $10 million, as we closed out supplier settlements as well. As a reminder, our full-year guidance included $10 million of expected one-timers from program settlements, which was achieved in Q1. With this context, let me provide more color on our year-over-year Q1 EBITDA bridge.

First, let me remind everyone that prior-year results included approximately $15 million of one-time items, which impacts the year-over-year comparison. Second, as just mentioned, the negative impact from all commercial activities, including customer and supplier pricing, was a headwind of $15 million. This was partially offset by the benefit of EV settlements that I also highlighted. The remaining year-over-year decline in EBITDA of approximately $5 million was driven by lower volume and unfavorable FX and slightly higher freight and logistics, partially offset by ongoing cost initiatives, including vertical integration and engineering productivity.

Jerome J. Rouquet: Turning to page 11. Adjusted free cash flow for the quarter was negative $23 million, reflecting the typical seasonality of our business, with Q1 generally being one of the lower quarters for cash flow. In 2026, this dynamic was more pronounced for a few reasons. First, EBITDA in the quarter was at the low point for the year, as expected. Second, we increased inventory levels during the quarter due to normal seasonality, inflation, and as a deliberate action to manage supply chain risk and market volatility. And third, the annual incentive compensation payout is in Q1, reflective of the strong performance last year, and is reported in the line Other Changes.

As it relates to the remainder of cash flow items, cash taxes were slightly lower year over year, primarily due to lower profitability in the quarter and timing of payments last year. Interest income continued to offset interest expense. Capital expenditures were in line with the prior year and continue to support new program launches.

Jerome J. Rouquet: Turning to capital allocation. We deployed $40 million in the quarter through share repurchases and dividends. We ended the quarter with $385 million in net cash and expect to continue deploying capital in a disciplined and balanced manner.

Jerome J. Rouquet: Turning to page 12. Turning to our outlook. We are reaffirming our full-year guidance across all key financial metrics, as the strong start of the year will help us offset a softer-than-expected market setup in the second half of the year. Starting with sales, we continue to expect revenue in the range of $3.625 billion to $3.825 billion, which represents a low single-digit growth over market. This reflects the strength of our product portfolio, strong customer demand in the first half of the year, and the continued ramp of recent launches, despite the softer-than-anticipated second-half production environment Sachin outlined.

Moving to profitability, we continue to expect adjusted EBITDA in the range of $455 million to $495 million, which corresponds to a margin of approximately 12.8% at the midpoint. Compared to the first quarter, we expect margins to improve as the year progresses. This is primarily driven by higher customer recoveries as well as the continued impact of our cost initiatives, including product costing actions, vertical integration, engineering productivity, as well as resource rebalancing across our global footprint. On free cash flow, we continue to expect adjusted free cash flow in the range of $170 million to $210 million. That said, we are currently trending towards the lower end of this range.

This reflects our plan to maintain higher levels of inventory as we proactively manage supply constraints, especially around certain semiconductor and memory components. Importantly, our strong balance sheet provides us with significant flexibility to navigate these dynamics. Maintaining financial strength continues to be a core pillar of our capital allocation philosophy, enabling us to invest in the business and return cash to shareholders while managing near-term volatility. We plan to provide a more comprehensive update on our longer-term capital allocation priorities at our upcoming Investor Day.

Jerome J. Rouquet: Turning to page 13. Visteon Corporation continues to be a compelling long-term investment opportunity. We have spent the last couple of years rebuilding our growth algorithm while executing operationally and commercially throughout a dynamic environment. We remain confident in our long-term opportunity, and we look forward to sharing more with you at our upcoming Investor Day on June 25 in New York City. Thank you for your time today. We would like now to open the call for your questions.

Operator: At this time, if you would like to ask an audio question, please press star then the number one on your telephone keypad. Again, that is star and the number one. Your first question comes from Mark Trevor Delaney with Goldman Sachs.

Mark Trevor Delaney: I was hoping to start with a question on the demand and production environment. The company spoke in its prepared remarks about S&P lowering its forecast for 2026 driven by the Middle East conflict, and Sachin, you said that at least for the first half, customer schedules have actually been solid, if not even a bit better than expected. Could you speak a bit more on what Visteon Corporation is seeing with respect to LVP? And as you look into the second half, are you seeing any softening in your own customer conversations? And maybe clarify what you are trying to bake into guidance for the year and the 1H to 2H trajectory?

Jerome J. Rouquet: Thanks, Mark. Let me take that question. We are maintaining our full-year guidance for sales and for EBITDA. Let me give you a little bit of color by quarter. Q1 came in a little stronger than what we had anticipated. We were also positively impacted by some EV settlements, about $20 million. It is important to make sure that we do not annualize that $20 million. Q2, even with the Middle East conflict, has a pretty strong setup. We have good visibility on our orders, and I would say that Q2 looks similar to what we had in Q1 from an order standpoint—so a pretty robust first half of the year.

As far as the second half is concerned, we are using S&P revised numbers and dropped the second half of the year for us by approximately 2%. So a softer setup as we go into the second half, but we do have strong launches that are supposed to come in line in Q3 and Q4, mostly around Toyota as well as the HPC launches. Overall, a strong H1 with a little bit of a softer H2, which allows us to stay on guidance for the full year. We still have got a fairly large range this year on sales for the guidance—$100 million each way—so it allows us to have some leeway up and down versus the midpoint.

Mark Trevor Delaney: That is helpful, Jerome. And just to clarify, when you talk about the softening in 2H and basing it off of what S&P has projected, it does not sound like you have actually seen a change in your own customer schedule. Is that correct? You are deriving it from market data?

Jerome J. Rouquet: That is correct for Q2. We have normal visibility for the next three months.

Mark Trevor Delaney: And then another question on memory. The company’s guidance had assumed you would substantially recover the increasing cost in your full-year guidance. You spoke a bit around progress you are making there in the first quarter. Maybe talk about how far along you are in securing those recoveries. And are you still expecting to substantially recover all of the higher semiconductor memory costs for this year?

Jerome J. Rouquet: That is a good point. Maybe before we even talk about recovery, we should probably talk about supply because if supply is an issue, recovery may be an issue, which is not our case. I will hand over to Sachin, and then I will talk again about recoveries.

Sachin S. Lawande: Thanks, Jerome. I think this is a point that we need to make sure we express clearly. The situation with supply has implications on our ability to recover as well. There are two factors really driving the supply situation. One is the higher-than-expected demand for memory driven by AI—data centers, smartphones, etc. But, very importantly, many of our traditional large memory suppliers are shifting away from the older tech nodes that have been used by automotive to newer tech nodes, which reduces capacity for auto. This has created an imbalance between supply and demand, which has lowered availability of memory for industries like auto and others as well.

The impression we should have is that there is no segment of the industry that is going to get enough memory in the short term, and that has resulted in higher prices. As smaller suppliers look at this environment, they see an opportunity to enter the market for auto—smaller fabs in particular. We are working with some of them to bring them into our supply base and, in fact, have managed to secure some supply already for this year. About 10% of our total full-year demand this year, for the first time, would be met by some of these emerging suppliers.

One more point I would like to add is that, unlike in the prior semiconductor crisis where the lead times for new capacity to come online were fairly long—two-plus years—in this case, with memories, it is shorter. If there is clean room space available, new capacity can come online in about a year, which is helpful. We believe with more suppliers coming in, this situation will probably last into the middle of next year, maybe towards the end of next year, and start to get better from there. That can also help in terms of driving the prices down as more supply comes into the market.

We have done a very good job of ensuring that none of our customers are impacted in terms of their production for Q1, and we anticipate with all of the measures we have in place, working closely with our current suppliers and the new ones, we will be able to mitigate the situation. Although it is going to be tight, we should be in a position to meet customer demand.

Jerome J. Rouquet: On the recovery, costs came in line with expectation in Q1, slightly higher than $20 million, as we had indicated during our last call. In terms of progressing with customers in negotiations, we have done pretty well so far. In Q1, we reported an outflow of $15 million on what we call our commercial items—the net between our supplier savings and what we give to our customers. We had anticipated some level of leakage in Q1 as we were working on long-term contracts. For Q1, we executed very short-term commercial agreements with some of our customers that helped us mitigate some of these additional costs.

Overall, progression is going well with negotiations, and we are expecting most of the negotiations to be closed by Q2. We will see as a result some level of catch-up in the second quarter, and we are expecting our commercial business equation to be neutral in the second quarter, as some of the improvement that we have with some suppliers comes online. Overall, for the full year, we are maintaining our guidance in terms of recovery. We are still expecting to have some level of leakage, largely because of the timing issues for the full year.

Operator: Thank you. Your next question comes from Colin M. Langan with Wells Fargo.

Colin M. Langan: Thanks for taking my questions. Just to follow up on this issue: you have a bit over $20 million in costs but $15 million of recoveries. You got something close to 75% recoveries already, and then you expect to have that caught up in Q2. Does that mean we get a little additional boost in Q2 from recovery timing?

Jerome J. Rouquet: Correct. We have had this $15 million leakage, and we like to combine what we are giving to customers versus what we are getting from suppliers. We look at this holistically. We are negotiating with customers the full pricing package, which includes not only the annual price reduction; it includes the legacy recoveries from prior chip shortages as well as the new memory cost increases that we are passing on to customers. We are expecting this leakage of $15 million to be neutral in the second half of the year and then slightly improve in Q3 and Q4 so that we have a minimum leakage for the full year, per our guidance.

Colin M. Langan: I think I had that wrong. So it is $15 million leakage—you have about a third recovered in the quarter—but you expect that all to jump back? Does that $15 million become a positive in Q2?

Jerome J. Rouquet: It does. It becomes positive in Q2, and it will improve slightly in Q3 and Q4 for a slight negative for the full year.

Colin M. Langan: Got it. And then the guide for the year is low single-digit growth over market. You made it clear that the first half was going to be really tough with roll-offs and the BMS, but you still did 3% in Q1. Why not mid-single now as we go through the year, given you have highlighted pretty strong second-half launches?

Jerome J. Rouquet: Q1 came in pretty close to our expectations. We had not given guidance per quarter, so 3% was generally in line with the low single digit for the full year. We are expecting to hold that performance throughout the year, and we are expecting all regions to perform well, maybe with the exception of the Americas, largely because of the BMS situation. Overall, a pretty consistent growth over market throughout the year.

Operator: Your next question comes from Emmanuel Rosner with Wolfe Research.

Emmanuel Rosner: Thank you. I appreciate all the color on the memory supply and trying to derisk the outlook. As we start looking into next year and you speak to OEMs about trying to mitigate the risk of disruptions, are there any conversations around potential decontenting or using solutions that use less memory? And on the pricing side or the recovery side, would the longer-term agreements you are working on with the OEMs allow ongoing pass-through even into next year if DRAM costs keep rising?

Sachin S. Lawande: Let me take that. We are not seeing any interest in decontenting. The discussions have been mostly around how we secure enough supply for 2027. Most of the time thus far has gone into securing supply for this year, and there is still a lot of activity. As we start to think about 2027, we are working with all of our suppliers—traditional suppliers plus the new ones we are bringing online. Supply next year will largely depend on our ability to secure enough quantity of parts from these newer suppliers that are emerging, largely because many of the existing larger suppliers to automotive are shifting their technologies to newer technologies.

That dynamic has to be managed first and foremost, and that is what we are focused on. We expect that over the course of this year, maybe towards Q3, we should be in a position to have supply secured for next year. In terms of pricing negotiations, they are different by customer. Some are signing up for a multiyear pricing agreement, so it goes into the piece price essentially, and some prefer to have annual pricing negotiations. It varies by customer.

Emmanuel Rosner: Understood. And then can you talk a little bit more about the expected ramp-up in launches in the second half? How should we think about this in relation to S&P’s outlook for weaker volume? Do you have a good sense this should not really affect your revenue curve?

Sachin S. Lawande: I think so, because—as was evident in Q1—a lot of our performance was driven by new launches, not so much the underlying vehicle production environment. A lot of our high-value launches this year are in the second half and are ramping up in Q4. In terms of the total number of launches, this year looks a lot like last year—I would say even a few more launches this year. But there are some that are very consequential, especially the ones with Toyota and the HPC launches we discussed in our prepared remarks. Those are high value, although their real ramp-up begins in Q4, so contribution this year is still relatively small but meaningful.

This helps offset what we have seen thus far as the reduction in vehicle production. If the environment stabilizes, especially in the Middle East, and the underlying vehicle production holds up, that could be a potential benefit to us. It has been a really good start to the year; Q2 looks pretty strong. For the second half, we will have to wait and see how it develops.

Operator: Your next question comes from the line of Winnie Dong with Deutsche Bank.

Winnie Dong: Hi. Thanks so much for taking my question. My first one is on the new business win of $1 billion for the quarter. For context, would you mind giving us some color on whether this is typical of seasonality or whether you are seeing any sort of pushout of decisions in terms of wins? And secondly, in terms of the growth drivers in 2027 and beyond, perhaps you can tease your Investor Day in June a little bit and outline some big buckets of drivers we can look forward to. Thank you.

Sachin S. Lawande: The first quarter was expected to be a little lighter given that we had a very strong finish to last year, and we also had a few display opportunities pushed out into Q2, about $300 million to $400 million worth. Even with that, it might be considered a little light but pretty normal for a first quarter in terms of seasonality of new business wins. Looking at the pipeline for the remainder of the year, much like new product launches, new business wins also look very similar to 2025 in aggregate, but with a different product mix and regional mix. In 2025, we had an even number and value of events for displays and cockpit electronics.

This year, we are seeing more opportunities for cockpit electronics and also more in Asia, and the display opportunities this year are more evenly spread between Europe and the Americas. Overall, we are pleased with what we see as new business opportunities in this environment, and we expect this year to look similar to last year in total value of business wins.

On your second question, the main drivers are going to be the new products that we have won and are launching—displays will have a very big role to play in our growth given the high wins in the last few quarters; HPCs, simply because of the very high content value, will also have a meaningful impact; and then other growth drivers we have talked about—Toyota as a targeted customer, and then two-wheelers and commercial vehicles. Our growth profile is not relying on just one or two things; we have a number of areas that are all growing, which gives us confidence.

Operator: Thank you. Your next question comes from Joseph Robert Spak with UBS.

Joseph Robert Spak: Thanks, everyone. Sachin, sorry to go back to memory, but one more point on this. My understanding is some of that additional supply that is coming online is from China. I want to make sure your customers are okay with that. And I thought I heard you mention that you already secured about 10% of this year’s supply from these new sources. Why would it not be at least at that level, if not better, for next year?

Sachin S. Lawande: To answer your second question first—absolutely, we expect it to be better, and the question is by how much and to what extent. To give you some sense of the number of different memory chips that we buy: we buy about 60 different types of chips that go into the DRAM category. Then there are also NAND flash, eMMC, and UFS, as well as NOR. There are many different types of memories and different densities that we need. Typically, very few of these suppliers are able to offer all of the parts we need, so we have to have a mix of suppliers. They tend to have their strengths in specific categories.

We have been identifying these suppliers, building relationships, starting supply so that we can test their parts, qualify them, and then introduce them in our customers’ production. Regarding your first part of the question—customers’ views on new sources coming online from China and other places—in this environment, where there is a shortage of parts, there is absolutely no problem with that. The first priority is to make sure we have production secured. Obviously, customers would like it to be non–China based if there is availability, but in this environment, we do not see that as a problem.

Joseph Robert Spak: Second question, Jerome, on capital allocation. I know you said more details on the long-term plan at the Analyst Day. You bought back $30 million this quarter. I think that means you have about $45 million left on the authorization. You said last quarter you could do about $100 million, and you also earmarked about $300 million for M&A. Is there any change to that thinking with comments you made about free cash flow or the pipeline or the current share price? Could we expect an increase in authorization because it seems like you are coming to the end there?

Jerome J. Rouquet: Generally, no—nothing has changed. We had highlighted up to $300 million for M&A and up to $150 million for share repurchases. With the cash balance we have at the end of Q1, even with potentially tracking towards the low end of the range for adjusted free cash flow this year, we could still do everything. We are still very focused on M&A and will continue to return cash to shareholders in a non-linear manner with share repurchases, as well as continue our dividends. Nothing has fundamentally changed in terms of our philosophy.

Operator: Your next question is from Dan Levy with Barclays.

Dan Levy: Hi, good morning. Thanks for taking the question. First, on growth dynamics—we saw negative growth in China in the first quarter. Maybe you could unpack some of the mix dynamics, where I would have assumed that with the lower end of the market underperforming, the higher end outperforming, that would help you. And is the view that you can still get positive growth for the full year with the launches ramping and bringing you up to positive growth?

Sachin S. Lawande: In China, as you mentioned, there was lower growth in vehicle production in the more price-sensitive segments, and a better performance, but not necessarily a lot of growth, in the upper end of the market. That is more helpful to us. I also want to mention the headwind of market share loss of the global OEMs that is still ongoing—so it is not all good news. The new launches so far have largely offset what we saw as declines with our traditional global OEMs. Therefore, for Q1, it was even in terms of outperformance versus vehicle production.

As we go forward, especially with the HPC launches, I believe we will start to see growth relative to production in China, with more of a step function next year as those launches ramp.

Dan Levy: As a follow-up on DRAM: is there any ability for you to transition your products to DDR5 to address some of the supply issues, or will the newer suppliers be enough to offset the large suppliers that are phasing out DDR4 so that, longer term, this issue will be addressed by these other smaller suppliers?

Sachin S. Lawande: DDR5 is not backwards compatible with DDR4. These memories are interfaced to a micro or an SoC, and that micro or SoC needs to have the capability to be interfaced to DDR5. The majority of the micros used in the industry for the cockpit are not capable of being interfaced with DDR5. The evolution of the micros and SoCs used for cockpit—which come from suppliers such as Qualcomm or NXP and others—has to occur before we can move. That typically requires a bigger change and longer time in automotive. What we are seeing is that the higher-end CDCs and HPCs already use DDR5.

This may push the industry faster towards higher-end CDCs and HPCs simply because of the shift in the underlying technologies. DDR5 will come at a density that is fundamentally a step higher than DDR4, enabling more processing and memory, which I think will accelerate the trend towards more integrated cockpit domain controllers and eventually central domain controllers like the HPC. We believe this trend will push the industry to adopt more content simply because it will be cheaper to do it that way than to stay with older technologies with more function-specific implementations.

Operator: Your next question is from Luke L. Junk with Baird.

Luke L. Junk: First question, Sachin, on your early-mover advantage in HPC/AI. I think you said your three wins are more than any other tier-one supplier. Could you double click on the competitive landscape on a relative basis, and then, given the award this morning launching within about 12 months, the near-term pipeline for adding additional awards, including additional vehicles with your current customers?

Sachin S. Lawande: We have three customers launching this, and they are all launching initially on their flagship vehicles, but at the same time lining up vehicles following that initial launch, which will extend this business. One of the new learnings for us is that we initially thought it was more limited to just the top-end flagship vehicles, but the competitive dynamics in China—especially with the emerging premium tech segment—are driving more volume to adopt AI as a key foundational capability of the cockpit. We see the market growing rapidly starting in China, and because of exports, we expect that technology to start to make an impact in other regions, probably starting with Europe before it comes to other parts of the world.

Luke L. Junk: Jerome, hoping to calibrate the launch cadence in the back half. First, for the high-compute launches, any initial demand indications? And then you made the comment about the fourth-quarter inflection. Was that mainly a Toyota-related comment, or is there some China color as well?

Jerome J. Rouquet: We are using IHS for the HPC launches, and these have been holding pretty well compared to what we initially guided to—no major changes.

Sachin S. Lawande: In general, there has been no change in the launch plans or the volumes. We have been very focused on ensuring we have supply of components because the lead times, especially with this third win, have been extremely short. For now, the focus is on ensuring we can launch and achieve the ramp of volume we have for this year, which has remained steady. If anything, depending on availability of supply, there may be the ability to increase, but given lead times, that would be a challenge.

Operator: Next question is from Tom Narion with RBC.

Tom Narion: Two quick follow-ups. First, on the $300 million M&A, in the past you have said this is likely tuck-ins. Is there a reason why this is being prioritized now? Is it because you are seeing deals at attractive pricing? Is it something that works well with what you are trying to achieve now versus later? And then I have a follow-up.

Sachin S. Lawande: Yes, in some parts, but it is really more driven by how we see trends emerge in the industry. There is a big trend towards software-driven, more integrated domain controllers for vehicles, which requires that you have all of the software capabilities to implement those features. That is the primary driver of trying to secure those capabilities, which would allow us to offer more integrated domain controllers. Eventually, we see a certain level of ADAS also getting integrated with cockpit as features like AEB become mandated in all jurisdictions. It is already a mandate in Europe; in 2028 and 2029, China and the U.S. will follow.

As standard requirements, OEMs will not be able to price for them; they will be part of standard equipment. We expect more features to get standardized or required and therefore integrated, and cost will be a prime driver that will drive greater levels of integration. Second, all of these technologies are emerging rapidly from mainstream tech industries and impacting automotive faster than ever before. We see opportunity for offering services—outsourced R&D services, expert services—to help OEMs define how to use those technologies in their vehicles. We are finding companies that have a lot of depth of expertise but do not necessarily have the scale.

We believe we can provide that scaling ability to these companies, help the OEMs, and in turn help make our platform more future proof. Engaging in advanced technologies with OEMs helps us understand how to keep our platforms competitive and in time for market introduction. Third, vertical integration has always been a driver of our M&A.

We have been successful with that so far, and we want to continue to take it forward as we see opportunities to bring more of the manufacturing value content into our plants, rather than relying on an extended supply chain, which also helps us address customer requests to be less dependent on China and other parts of the world where we are perhaps more exposed today.

Tom Narion: Thanks for the robust answer. And then, Jerome, to clarify, guidance is maintained despite the S&P cutting. Was Q1 coming in ahead of your expectations the main driver of being able to do that?

Jerome J. Rouquet: Correct—along with good visibility and robust orders we see for the second quarter. But you are absolutely correct.

Chris Doyle: Thank you. This concludes our earnings call for 2026. Thank you for participating in today’s call and your ongoing interest in Visteon Corporation.

Operator: This concludes Visteon Corporation’s first quarter 2026 results earnings call. You may now disconnect.

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