Adient plc Ordinary Shares 2026 Q3 Earnings Call

Thank you, Shirley. Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the investors section of our website at adient.com. This morning, I'm joined by Jerome Dorlack, Adient's President and Chief Executive Officer, and Mark Oswald, our Executive Vice President and Chief Financial Officer. On today's call, Jerome will provide an update on the business. Mark will then review our Q3 financial results and our outlook for the remainder of our fiscal year. After the prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome and Mark, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore involve risks and uncertainties.

I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to slide two of the presentation for our complete safe harbor statement. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. With that, it is my pleasure to turn the call over to Jerome.

Thanks, Linda. Good morning, everyone, and thank you for joining us today. I'll begin with a business update on our third quarter performance, as well as provide an update on how we are managing through the current operating environment and why we remain confident in the strength of Adient's operating model. Before that, though, I want to take a moment to recognize our global team. Their unrelenting focus on execution, launch discipline, customer responsiveness, and operational performance is what reinforces Adient's position as a supplier of choice. Our strong relationships with our customers continue to drive new business awards and support the durability of our revenue base. I would also like to thank our customers for their continued trust and partnership. Their confidence in Adient and their willingness to rely on us on some of their most important vehicle programs is something that we never take for granted.

We remain committed to earning that trust every day through flawless execution, innovation, and operational excellence. With that, let's turn to the Q3 summary page. Our third quarter performance aligned with our internal expectations, even as external conditions pressured near-term results. Consolidated revenue was approximately $3.9 billion, up 5% year-over-year, while the adjusted EBITDA was $225 million, flat compared with prior year. The point I want to highlight is that the pressure we are seeing this year has been largely external and, in our view, temporary. Vehicle production remained relatively stable overall, but certain customer programs have faced headwinds, and the Middle East conflict drove macro-related pressure, including elevated commodity and freight costs and lower exports into the Middle East, primarily from Asia outside of China. In commodities and freight, specifically, costs remain elevated, but we are beginning to see signs of stabilization.

Overall, we see these headwinds as manageable. Most importantly, our business performance remains solid. The operating model is delivering, our book of business remains strong, and we believe Adient is well-positioned to capitalize on top-line growth as the external environment normalizes. We also demonstrated our disciplined approach to capital allocation during this quarter. We returned $30 million to shareholders through share repurchases in Q3, bringing year-to-date repurchases to $55 million, and we remain committed to our balanced capital allocation strategy as we move through four. Stepping back, Q3 was another quarter where the team executed well through volatility. The near-term headwinds put downward pressure on reported results, but the underlying performance of the business remained solid, and our operating model continues to position us well for future growth and shareholder value creation. Moving now to the regional update on slide five.

As we look across the business this quarter, what stands out is the resilience of our regions to deliver, even as conditions remain mixed across the global automotive industry. Each of our regions is managing through a combination of external pressures, customer-specific volume fluctuations, and ongoing geopolitical impacts. At the same time, we are seeing encouraging evidence the actions we've taken to strengthen the business are translating into resilient performance and positioning us well for the future. Starting with the Americas. The region delivered a solid quarter supported by strong operational execution, favorable customer mix, and disciplined cost management. We achieved sales growth and margin expansion despite temporary operational inefficiencies and customer-driven interruptions. The team remains focused on controlling what we can control, including managing through elevated commodity and freight costs related to the Middle East conflict.

At the same time, we are engaged in constructive discussions with customers around onshoring opportunities. While we have nothing new to announce today, we believe Adient is well-positioned to benefit from these trends over time, given our North America manufacturing footprint, engineering capabilities, and strong embedded and durable customer relationships. Moving now to EMEA. The environment remains challenging. Lower customer production levels and ongoing market softness are pressuring volumes and profitability. That said, we are seeing the benefits of the restructuring and operational actions we've implemented over the past several years take hold. Business performance is improving. Cost discipline remains strong, and we are working closely with customers to navigate the current environment. We also have line of sight on the roll-off of our underperforming metals business, which we view as a positive contributor as we move into fiscal year 2027.

While there is still work to do, the team remains focused on improving the quality of the business and driving further operational progress. Moving to Asia. China remains a dynamic market. While the broader market has softened, our business once again outperformed and continues to benefit from strong positions with many of the customers gaining share in the market today. Customers such as NIO and Leapmotor, supported by new launches, premium content programs, and continued customer confidence in Adient's capabilities. In addition, our mix is rapidly moving closer to the industry profile, where approximately 70% of production is represented by local OEMs. While that shift has created some expected margin pressure, the impact is occurring more gradually than we initially anticipated. As a result, we do expect some additional margin compression as we move into fiscal year 2027.

While attention is typically focused on China, it's also important to highlight the strength of our business across the rest of Asia, which generates nearly $2 billion in annual revenue. We are a leading seating supplier in the region, and our combination of scale, customer diversity, and disciplined execution provides a solid foundation for continued profitable growth. For additional context, we have included an overview of this business in the appendix that we would encourage you to review. The strength of our Asia business outside of China, combined with our strong competitive position within China, continues to support attractive earnings and cash flow generation. Asia remains an accretive region for Adient and will continue to be an important contributor to our long-term growth, profitability, and shareholder value creation. When we step back and look across the portfolio, we see a business that is executing well. The Americas is building momentum.

EMEA is making measurable progress despite a challenging environment. Asia is selectively growing with market leaders while maintaining profitability and supporting our long-term growth strategy. These regional trends reinforce our confidence in the strength of our operating model, the quality of our customer relationships, and our ability to create sustainable shareholder value over the long term. Moving to slide six, I would like to spend a moment on what sits behind these results, because our performance is not accidental, it is intentional. It is the direct product of Adient's position as a supplier of choice, and that status is earned every day across four dimensions. It starts with launch execution. Consistent, flawless launches are the foundation for everything else. Our proven ability to deliver complex programs on time with strong quality and responsiveness is what earns the confidence of our customers. This is reinforced by our engineering and innovation.

We are involved in early vehicle development, bringing innovative products that support content growth and partnering with customers to take cost out of the value stream. We strengthen that foundation further with our world-class footprint, which allows us to support customers globally. Collectively, this is what allows us to execute on programs consistently across regions with the scale and operational flexibility our customers need. Supplier of choice status matters. It converts directly into tangible business wins, deeper customer relationships, and long-term shareholder value. Nowhere is that clearer than in customer recognition, and this quarter gave us several standouts.

We were recently honored by both Toyota and Mitsubishi for being an outstanding supplier. We are especially proud of the Adient team in the Americas for once again being named GM Supplier of the Year for the fifth consecutive year, which reinforces the strength of our relationship and the confidence customers have in Adient's execution. That same trust supported the recent Chevrolet Equinox conquest and onshoring win we announced last quarter. Furthermore, in China, Adient recently received NIO's highest supplier recognition, the Guardianship Award. This reflects more than a decade of mutual trust and collaboration with NIO. Adient was also named to NIO's primary and preferred partner list, recognizing us as NIO's primary seating supplier. Adient also received Chery's highest supplier recognition, the Excellent Supplier Award, in recognition of our outstanding launch execution and support for the KP31 pickup export program.

That award ties directly back to the importance of launch execution already mentioned. Customer recognition is the leading indicator. Being a trusted partner ultimately results in new business awards. On the next slide, we will walk you through a few of those, as well as a few premium program launches. Slide seven highlights several proof points that supports Adient's future growth and durable revenue visibility. They reflect the strength of our customer relationships, our engineering capabilities, and our ability to launch complex seating programs across regions. We are winning business where our customers need a partner that can support them from design and engineering through launch and production. There are a couple themes here worth calling out. First, our platform wins reinforce the long cycle nature of our revenue.