Core Viewpoint - Adient plc is positioned to benefit from its diverse customer base and international presence, despite facing challenges such as high restructuring costs in Europe and uncertainty regarding year-end customer recoveries [1] Group 1: Market Position and Business Wins - Adient has established a strong market position through a broad range of products and a diverse customer base, which is expected to strengthen further [2] - In fiscal 2024, Adient secured new and renewal contracts totaling approximately $1 billion in annual revenues, with around 90% of these agreements involving local OEMs, many set to launch in fiscal years 2026 and 2027 [3] Group 2: Regional Performance and Strategy - The company is gaining momentum in the EMEA region, driven by restructuring benefits and securing key programs with European customers, while also developing opportunities with China-based OEMs [4] - Adient is focusing on enhancing efficiency by phasing out lower-performing segments and launching higher-margin programs expected to positively impact results in 2026 [4] Group 3: Innovations and Automation - Adient's initiatives in automation and modularity are yielding positive results, with automation reducing labor costs and improving quality, speed, and safety [5] - The implementation of AI-powered welding inspection and partnerships for 3D sewing automation are enhancing precision and reducing labor needs, differentiating Adient in supporting China OEMs expanding internationally [5] Group 4: Challenges and Financial Outlook - Sales in China are lagging, with revenues expected to remain stable or slightly decline in fiscal 2025 due to an unfavorable production mix [6] - Adient anticipates higher European restructuring costs and has revised its free cash flow outlook to $150-$170 million from a previous estimate of $180 million [6]

Financial Performance - Adient recorded net sales of $3,611 million for Q2 2025, a decrease of $139 million or 3.7% compared to Q2 2024, primarily due to lower production volumes in EMEA and China [114]. - Gross profit for Q2 2025 was $261 million, representing 7.2% of net sales, an increase from $230 million or 6.1% of net sales in Q2 2024, driven by favorable pricing adjustments [118]. - Net loss attributable to Adient was $335 million in Q2 2025, compared to a net loss of $70 million in Q2 2024, largely due to a non-cash goodwill impairment charge [133]. - Comprehensive loss attributable to Adient was $229 million in Q2 2025, an increase from $168 million in Q2 2024, primarily due to a higher net loss from the goodwill impairment [137]. - For the first six months of fiscal 2025, net loss attributable to Adient was $335 million, compared to a net loss of $50 million in the same period of fiscal 2024 [136]. - Comprehensive loss attributable to Adient was $454 million in the first six months of fiscal 2025, a significant increase from a loss of $10 million in the same period of fiscal 2024, primarily due to a non-cash goodwill impairment of $284 million in the EMEA reporting unit [138]. Segment Performance - Net sales for the Americas segment increased by 2% to $1,699 million in Q2 2025 compared to $1,660 million in Q2 2024, driven by favorable pricing adjustments and higher production volumes [150]. - Adjusted EBITDA for the Americas segment rose by 18% to $94 million in Q2 2025, up from $80 million in Q2 2024, reflecting improved pricing and production performance [150]. - EMEA segment net sales decreased by 10% to $1,231 million in Q2 2025, down from $1,370 million in Q2 2024, primarily due to lower production volumes and unfavorable currency impacts [154]. - Adjusted EBITDA for the EMEA segment fell by 12% to $50 million in Q2 2025, compared to $57 million in Q2 2024, impacted by lower production volumes and unfavorable product mix [154]. - Asia segment net sales decreased by 5% to $707 million in Q2 2025, down from $742 million in Q2 2024, due to lower production volumes in China [158]. - Adjusted EBITDA for the Asia segment declined by 2% to $110 million in Q2 2025, compared to $112 million in Q2 2024, affected by unfavorable production volumes and mix [158]. Costs and Expenses - Selling, general and administrative expenses rose by 25% to $144 million in Q2 2025, compared to $115 million in Q2 2024, largely due to third-party consulting costs [116]. - Cost of sales decreased by $170 million, or 5%, while gross profit increased by $31 million, or 13%, in Q2 2025 compared to Q2 2024 [120]. - For the first six months of fiscal 2025, cost of sales decreased by $305 million, or 4%, and gross profit increased by $1 million, less than 1%, compared to the same period in fiscal 2024 [121]. - SG&A expenses increased by $29 million, or 25%, in Q2 2025 compared to Q2 2024, primarily due to higher net engineering and administrative spending [122]. - Restructuring and impairment costs rose by $226 million in Q2 2025, mainly due to a $333 million impairment charge related to EMEA's goodwill [124]. Impairment and Goodwill - A non-cash goodwill impairment charge of $333 million was recognized in EMEA as of March 31, 2025, significantly impacting net loss attributable to Adient, which totaled $335 million for Q2 2025 [111][118]. - Adient recorded a non-cash goodwill impairment of $333 million in the EMEA reporting unit as of March 31, 2025, with no goodwill remaining in that unit [181]. - The Americas and Asia reporting units maintained goodwill of $604 million and $1,180 million, respectively, as of March 31, 2025 [182]. - The fair value of reporting units showed significant declines, with differences between fair values and carrying values exceeding 10% [181]. - An impairment charge of $10 million was recorded for the investment in Adient Aerospace during the first six months of fiscal 2025 [186]. Cash Flow and Financing - Cash provided by operating activities was $64 million for the six months ended March 31, 2025, a decrease from $122 million in the same period of 2024 [167]. - Working capital decreased by $25 million to $383 million as of March 31, 2025, primarily due to a decrease in cash and cash equivalents [171]. - The ABL Credit Facility provides a revolving line of credit up to $1,250 million, with $843 million available as of March 31, 2025 [163]. - Adient's Term Loan B Agreement had an outstanding balance of $629 million as of March 31, 2025, with a reduced applicable margin of 2.25% [164]. - During the first six months of fiscal 2025, Adient repurchased 1,227,329 ordinary shares at an average price of $20.37, totaling $25 million [175]. - Cash used by investing activities was $78 million for the six months ended March 31, 2025, down from $113 million in the same period of 2024 [168]. Market Conditions and Outlook - The company faces uncertainties in the automotive industry, including weakening consumer demand and tariff impacts, which may affect future production volumes [110]. - The company continues to face uncertainties in the automotive industry, including weakening consumer demand and pricing pressures due to overcapacity in the EMEA region [141]. - Adient's results for Q2 fiscal 2025 were in line with internal expectations, but uncertainties remain regarding future vehicle production [183]. - The company expects enhanced profitability and cash flows driven by efficiency actions and strategic portfolio reviews [183]. - Adient continues to monitor economic conditions and will test for impairment annually or upon identifying triggering events [182].

Group 1 - Adient reported $3.61 billion in revenue for the quarter ended March 2025, a year-over-year decline of 3.7% [1] - The EPS for the same period was $0.69, compared to $0.54 a year ago, indicating a significant increase [1] - The reported revenue exceeded the Zacks Consensus Estimate of $3.47 billion, resulting in a surprise of +4.07% [1] Group 2 - Adient's EPS surprise was +91.67%, with the consensus EPS estimate being $0.36 [1] - The company's shares returned +22.2% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - Adient currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3] Group 3 - Net Sales in the Americas reached $1.70 billion, exceeding the average estimate of $1.59 billion, representing a +2.4% change year-over-year [4] - Net Sales in Asia were reported at $707 million, below the average estimate of $735.50 million, reflecting a -4.7% change year-over-year [4] - Net Sales in EMEA amounted to $1.23 billion, surpassing the average estimate of $1.16 billion, but showing a -10.2% change year-over-year [4]

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q2 was $233 million, up 3% year-on-year, with EBITDA margins expanding by 40 basis points to 6.5% [29][30] - Consolidated sales decreased to approximately $3.6 billion, a decline of $139 million compared to Q2 FY2024, primarily due to lower customer volumes and foreign exchange impacts [31][32] - Free cash flow for Q2 was an outflow of $90 million, consistent with internal expectations reflecting normal seasonality [39] Business Line Data and Key Metrics Changes - In the Americas, sales increased due to favorable comparisons with the previous year, driven by key customer programs reaching full run rates [31][32] - EMEA experienced lower production volumes but began to see improvements from restructuring benefits, with a recorded non-cash goodwill impairment of $333 million due to market value declines [20][29] - Asia's performance was flat year-on-year, with expectations of temporary pressure on China revenue, but new business with local OEMs is anticipated to drive growth [21][32] Market Data and Key Metrics Changes - The Americas outperformed industry volumes, while EMEA faced headwinds from weaker market demand [31][32] - In Asia, sales in China underperformed due to lower volumes from traditional luxury OEM customers, but the company continues to outperform the industry outside of China [32] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts through resourcefulness and leveraging its global footprint to create value for customers [12][16] - Adient aims to drive operational excellence and invest in innovation, automation, and efficiency measures to enhance profitability [8][10] - The company is committed to maintaining a strong balance sheet and liquidity while navigating macroeconomic challenges [41][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage tariff exposures and emphasized the importance of customer relationships and operational flexibility [12][16] - The outlook for the second half of FY2025 remains positive, with expectations of continued strong business performance despite potential volume headwinds from tariffs [43][45] - Management reiterated guidance for FY2025 revenue and adjusted EBITDA, assuming no significant changes in tariff policies [44][45] Other Important Information - The company received multiple awards for supplier excellence, including recognition from GM and Toyota for quality and performance [10] - Adient's strong cash position includes $754 million in cash and $1.6 billion in total liquidity as of March 31, 2025 [41][42] Q&A Session Summary Question: Progress on tariff resolution and roadmap - Management indicated that the 75% resolved portion includes agreements for price recoveries, while the roadmap involves ongoing negotiations and cost offsets [57][58] Question: EMEA performance and expectations - Management noted that while EMEA showed positive performance, it is still subject to variability and should not be seen as a trend [60][62] Question: Direct tariff exposure and compliance - Management clarified that 95% of parts produced in Mexico and Canada are USMCA compliant, thus not subject to tariffs, and discussed the implications of Annex One [66][67] Question: Margin outlook and efficiency actions - Management expressed confidence in achieving higher margins through ongoing efficiency improvements and restructuring efforts [71][72] Question: Capital allocation strategy - Management reiterated a measured approach to capital allocation, focusing on investments in the business and potential share repurchases based on cash generation and market clarity [81][84]

Important Information FY2025 Second Quarter Earnings Call May 7, 2025 Adient – PUBLIC Adient has made statements in this document that are forward-looking and, therefore, are subject to risks and uncertainties. All statements in this document other than statements of historical fact are statements that are, or could be, deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In this document, statements regarding Adient's expectations for its deleverag ...

Financial Performance - Q2 FY2025 revenue was $3.611 billion, a decrease of 4% compared to Q2 FY2024, primarily due to lower customer volume in Europe[2] - Adjusted EBITDA for Q2 FY2025 was $233 million, up 3% year-over-year, with an adjusted EBITDA margin of 6.5%, an increase of 40 basis points from Q2 FY2024[3] - The company reported a GAAP net loss of $335 million for Q2 FY2025, including a $333 million non-cash goodwill impairment[7] - In Q2 FY2025, adjusted EPS was $0.69, reflecting an 18% increase compared to the prior year[2] - Net loss attributable to Adient for Q1 2025 was $335 million, compared to a net loss of $70 million in Q1 2024, indicating a significant decline in profitability[21] - The company’s diluted loss per share for Q1 2025 was $(3.99), compared to $(0.77) in Q1 2024, reflecting worsening financial performance[30] - Net loss for Q1 2025 was $313 million, compared to a net loss of $49 million in Q1 2024, representing a significant increase in losses[33] - Adjusted net income attributable to Adient was $58 million in Q1 2025, compared to $49 million in Q1 2024, showing an 18.4% increase[34] Revenue Outlook - Adient maintains its FY2025 revenue outlook at approximately $13.9 billion and adjusted EBITDA at around $850 million, with no changes from previous guidance[14] Cash Flow and Debt - Adient's cash and cash equivalents totaled $754 million as of March 31, 2025, with gross debt at approximately $2.4 billion[11] - Cash provided by operating activities was negative at $(45) million for Q1 2025, a decline from positive cash flow of $81 million in Q1 2024[25] - Cash and cash equivalents decreased to $754 million as of March 31, 2025, down from $945 million as of September 30, 2024[23] - Net debt as of March 31, 2025, was $1,642 million, an increase from $1,460 million as of September 30, 2024[40] - The net leverage ratio increased to 1.90 as of March 31, 2025, compared to 1.66 as of September 30, 2024[40] Segment Performance - The Americas segment reported adjusted EBITDA of $94 million in Q2 FY2025, up from $80 million in Q2 FY2024, driven by positive volume and mix[8] - The Americas segment reported net sales of $1,699 million, while EMEA and Asia reported $1,231 million and $707 million, respectively[28] Operational Challenges - Restructuring and impairment costs surged to $351 million in Q1 2025, compared to $125 million in Q1 2024, highlighting increased operational challenges[21] - The company recorded a goodwill impairment charge of $333 million during the three months ended March 31, 2025[41] Investments and Awards - Adient's China Technical Center expansion in Chongqing represents a significant investment in long-term growth and product innovation[4] - The company received multiple awards, including the Best Supplier Award for ESG Management from Hyundai Motor Group, highlighting its commitment to operational excellence[6]

Core Viewpoint - Adient reported its second quarter 2025 financial results, highlighting a significant net loss primarily due to a non-cash goodwill impairment, while maintaining its revenue and adjusted EBITDA outlook for the fiscal year [6]. Financial Performance - The company recorded a GAAP net loss of $335 million and a diluted EPS of $(3.99), which included a non-cash goodwill impairment of $333 million [6]. - Adjusted EPS for the quarter was $0.69, with an adjusted EBITDA of $233 million, showing year-over-year improvement despite revenue challenges [6]. - As of March 31, 2025, gross debt and net debt were approximately $2.4 billion and $1.6 billion, respectively, with cash and cash equivalents amounting to $754 million [6]. Debt Management - Adient successfully refinanced $795 million of senior unsecured notes due in 2026 during the quarter, extending its average maturity profile from 4.0 years to 6.1 years, eliminating near-term maturities [6]. Outlook - The company maintains its fiscal year 2025 revenue and adjusted EBITDA outlook, expecting positive momentum from the first half to carry into the second half, excluding potential impacts from tariffs [6]. Company Overview - Adient is a global leader in automotive seating, employing over 70,000 people across 29 countries and operating more than 200 manufacturing and assembly plants worldwide [4]. - The company produces automotive seating for all major OEMs, covering the entire seat-making process from research and design to engineering and manufacturing [4].

Company Overview - Adient is a global leader in automotive seating with over 70,000 employees across 29 countries [3] - The company operates more than 200 manufacturing and assembly plants worldwide [3] - Adient produces and delivers automotive seating for all major original equipment manufacturers (OEMs) [3] Upcoming Financial Event - Adient will host a conference call on May 7, 2025, at 8:30 a.m. (ET) to discuss its second quarter fiscal 2025 financial results [1] - A live webcast of the call and presentation materials will be available on the Adient Investor Relations website [1] - A replay of the conference call will also be accessible on the same site [1]

Core Insights - Proposed tariffs by President Trump on goods from Mexico and Canada are expected to impact automotive suppliers more severely than automakers, potentially leading to broader industry disruptions [1][4] - Compliance with the USMCA is crucial for avoiding tariffs, with a significant portion of vehicle parts not meeting the stringent standards [2][3] Industry Impact - The automotive supply chain is already fragile post-COVID, facing challenges such as high interest rates, labor shortages, and declining profits, which could be exacerbated by new tariffs [4][5] - Major publicly traded suppliers have seen stock declines, with companies like American Axle & Manufacturing Holdings and Magna International down by double digits this year [5] Compliance Statistics - In 2024, only 63% of motor vehicle parts imported from Mexico were compliant with USMCA standards, compared to 92.1% of motor vehicles [6][12] - For Canada, 74.6% of motor vehicle parts and 96.9% of vehicles were imported tariff-free under USMCA in 2024 [6] Tariff Effects - The proposed tariffs could lead to a 25% increase in costs for non-compliant parts, which suppliers are unlikely to absorb, potentially leading to higher consumer prices for vehicles [13][17] - A survey indicated that 97% of parts makers expressed concerns about financial distress due to tariffs, particularly affecting smaller suppliers [15] Supply Chain Resilience - The supply chain is described as resilient yet fragile, with significant challenges in quickly adapting to major policy shifts [8][9] - Executives from various companies, including Forvia, have indicated that the industry cannot sustain the proposed tariffs without passing costs onto consumers [17]

Core Viewpoint - The Zacks Automotive - Original Equipment Industry faces significant uncertainty due to tariffs imposed by the Trump administration and an expected decline in light vehicle production, which is likely to reduce demand for auto equipment. However, companies like American Axle & Manufacturing Holdings, Inc., Allison Transmission Holdings, Inc., and Adient plc are leveraging international presence, acquisitions, and technological advancements to navigate these challenges [1][4]. Industry Description - The Zacks Automotive - Original Equipment Industry includes companies that design and produce passive safety systems, driveline, and metal forming technologies for electric, hybrid, and internal combustion vehicles. The industry also provides equipment to the U.S. government and major car manufacturers, and some companies offer equipment financing and leasing solutions [2]. Factors Shaping Industry Prospects - **Import Tariffs**: The Trump administration's protectionist policies impose tariffs of up to 25% on non-U.S.-based auto equipment manufacturers, which could negatively impact their profits and encourage investment in U.S.-based manufacturing [3]. - **Decline in Light Vehicle Production**: Light vehicle output is projected to decline by 1.8% year-over-year in Q1 2025 and 0.5% for the full year, which is expected to reduce demand for auto equipment and affect companies' revenues [4]. - **Technological Advancements**: Automation is enhancing efficiency and reducing labor costs in manufacturing, allowing companies to remain competitive and respond quickly to market changes [5]. Industry Performance - The Zacks Automotive - Original Equipment Industry ranks 148, placing it in the bottom 40% of over 250 Zacks industries, indicating dim near-term prospects [6][7]. - The industry's earnings estimates for 2025 and 2026 have decreased by 26.40% and 19.80%, respectively, over the past year, reflecting a negative outlook [8]. Market Performance - The industry has underperformed the S&P 500, declining by 11.7% over the past year compared to the S&P 500's growth of 15.1% and the broader sector's decline of 1.4% [11]. Current Valuation - The industry is currently trading at an EV/EBITDA ratio of 19.25X, higher than the S&P 500's 17.27X and the sector's 18.69X. Over the past five years, the industry has traded between 4X and 22.09X, with a median of 12.69X [13][14]. Notable Companies - **American Axle & Manufacturing Holdings, Inc. (AXL)**: A leading supplier of driveline systems, focusing on electrification and optimizing its portfolio through acquisitions. The Zacks Consensus Estimate for 2025 EPS implies a year-over-year growth of 13.92% [18][19]. - **Allison Transmission Holdings, Inc. (ALSN)**: A manufacturer of automatic transmissions, expanding into new markets and focusing on advanced technology. The Zacks Consensus Estimate for 2025 sales and EPS implies year-over-year growth of 1.53% and 6.26%, respectively [21][22]. - **Adient plc (ADNT)**: A major automotive seating supplier, focusing on automation and modularity to enhance efficiency. The Zacks Consensus Estimate for 2026 sales and EPS implies year-over-year growth of 1.71% and 43.08%, respectively [23][24].