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].

Market Overview - The molded foam market is valued at $16.4 billion in 2023 and is projected to reach $26.3 billion by 2033, growing at a CAGR of 4.9% from 2024 to 2033 [2][5] - The market is driven by demand in automotive, packaging, and furniture industries due to the lightweight, cushioning, and thermal insulation properties of molded foams [1][3] Key Drivers - Rising demand for sustainable and biodegradable foams is boosting market adoption [1] - Global economic growth, urbanization, and the need for lightweight and durable materials are contributing to market expansion [3] - The automotive industry is a significant driver, with molded foam used in various applications such as seating and insulation [9][10] Challenges - Fluctuating raw material prices, particularly for polyurethane and polystyrene, pose a challenge to the market [14] - Environmental concerns regarding petroleum-based foams are leading to increased demand for eco-friendly alternatives [1][15] Opportunities - Innovations in bio-based foams and expanding applications in medical and aerospace industries present growth opportunities [1] - The shift towards recycled and biodegradable foams is being driven by regulatory policies and sustainability initiatives [3][15] Regional Insights - Asia-Pacific is the highest revenue contributor, growing at a CAGR of 5.2%, driven by urbanization and government initiatives promoting sustainability [11][12] - The region's focus on energy-efficient buildings is significantly boosting the demand for polyurethane foam in insulation applications [13] Material and Application Segments - The Polyurethane (PU) foam segment is expected to lead the market with a CAGR of 4.9% [7] - The Rigid segment is projected to grow at a CAGR of 4.8%, driven by demand in construction and automotive sectors [8] - The Automotive segment is anticipated to grow at a CAGR of 4.4%, with molded foam enhancing vehicle ergonomics and fuel efficiency [9][10] Industry Innovations - Companies like BASF and Dow Chemical are leading innovations in closed-loop production and recycling technologies for polyurethane foams [4][18] - The collaboration between Adient, Jaguar Land Rover, and Dow to develop closed-loop PU foam seats represents a significant advancement in sustainable automotive manufacturing [17][18]

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]

Summary of Key Points Core Viewpoint - Three stocks have been added to the Zacks Rank 5 (Strong Sell) List due to downward revisions in earnings estimates for the current year Company-Specific Summaries - ASGN Incorporated (ASGN) provides IT services, with the Zacks Consensus Estimate for its current year earnings revised downward by 6.1% over the last 60 days [1] - Adecco Group AG (AHEXY) is a human resources services company, with the Zacks Consensus Estimate for its current year earnings revised downward by 5% over the last 60 days [1] - Adient plc (ADNT) is an automotive seating supplier, with the Zacks Consensus Estimate for its current year earnings revised downward by 13.7% over the last 60 days [2]

Core Viewpoint - The article emphasizes the need for Adient plc to continue deleveraging its balance sheet to prevent significant impairment charges in the future [1]. Group 1: Company Analysis - Adient plc was previously discussed in November, highlighting the importance of sustained deleveraging [1]. - The company is positioned in a market where individual investors seek undervalued, profitable stocks with strong balance sheets and minimal debt [1]. Group 2: Investment Strategy - The investment strategy involves buying undervalued stocks and, when possible, writing calls against positions to generate additional income [1]. - Risk management is emphasized through position sizing and the use of trailing stop losses over time [1].

Debt Offering Details - Adient's wholly-owned subsidiary, Adient Global Holdings Ltd, priced a private offering of $795 million in aggregate principal amount of 7.50% senior unsecured notes due 2033, issued at par value [1] - The notes offering is expected to close on February 3, 2025, subject to customary closing conditions [1] Use of Proceeds - The net proceeds from the offering, along with cash on hand, will be used to redeem Adient's existing 4.875% senior unsecured notes due 2026 and to pay related fees and expenses [2] Offering Structure - The notes will be offered in private transactions to qualified institutional buyers under Rule 144A and to non-U.S. persons outside the United States under Regulation S of the Securities Act [3] Company Overview - Adient is a global leader in automotive seating with over 70,000 employees across 29 countries and more than 200 manufacturing/assembly plants worldwide [5] - The company produces and delivers automotive seating for all major OEMs, offering complete seating systems and individual components [5] - Adient's integrated capabilities span the entire automotive seat-making process, from research and design to engineering and manufacturing [5]

Bond Offering and Use of Proceeds - Adient's subsidiary, Adient Global Holdings Ltd, plans to offer $795 million in new senior unsecured notes due 2033 in a private offering [1] - The net proceeds from the offering, along with cash on hand, will be used to redeem the company's existing 4.875% senior unsecured notes due 2026 and to pay related fees and expenses [2] - The offering will be made in private transactions to qualified institutional buyers under Rule 144A and to non-U.S. persons under Regulation S [3] Company Overview - Adient is a global leader in automotive seating with over 70,000 employees across 29 countries [5] - The company operates more than 200 manufacturing/assembly plants worldwide and supplies automotive seating to all major OEMs [5] - Adient's expertise covers the entire automotive seat-making process, from research and design to engineering and manufacturing [5] Legal and Regulatory Information - The press release does not constitute an offer to sell or solicit the purchase of the Notes or any other securities [4] - The Notes and related guarantees have not been and will not be registered under the Securities Act or any state securities laws [4] - The Notes may not be offered or sold in the United States without registration or an applicable exemption [4]

Core Insights - Adient reported adjusted earnings per share (EPS) of 27 cents for Q1 fiscal 2025, down from 31 cents year-over-year but above the Zacks Consensus Estimate of 24 cents [1] - The company generated net sales of $3.5 billion, a 5% decrease year-over-year, yet exceeded the Zacks Consensus Estimate of $3.43 billion [1] Segmental Performance - The Americas segment recorded revenues of $1.61 billion, a decline of 2.2% year-over-year, slightly missing the Zacks Consensus Estimate of $1.62 billion. Adjusted EBITDA for this segment was $85 million, up from $80 million in the prior-year quarter but below the consensus estimate of $86 million [3] - The EMEA segment reported revenues of $1.13 billion, down 10.9% year-over-year, missing the Zacks Consensus Estimate of $1.15 billion. Adjusted EBITDA fell to $22 million from $45 million in the previous year, also missing the consensus estimate of $29.2 million [4] - The Asia segment's revenues were $772 million, a slight increase from $770 million year-over-year, surpassing the Zacks Consensus Estimate of $722 million. Adjusted EBITDA decreased to $111 million from $114 million in the prior year but exceeded the consensus estimate of $108 million [5] Financial Position - As of December 31, 2024, Adient had cash and cash equivalents of $860 million, down from $945 million as of September 30, 2024. Long-term debt stood at $2.4 billion, and capital expenditures totaled $64 million compared to $55 million in the prior-year quarter. The company repurchased shares worth $25 million during the quarter [6] Revised Guidance for FY25 - Adient revised its fiscal 2025 revenue guidance to $13.9 billion, down from the previous estimate of $14.1-$14.4 billion. Adjusted EBITDA is now estimated at $850 million, compared to the prior range of $850-$900 million. Equity income is projected to be $80 million [7] Cash Flow and Expenses - Free cash flow is anticipated to be $180 million, reduced from the previous estimate of $200 million. Capital expenditures are estimated at $285 million, with cash tax expected to be $105 million and interest expenses projected at $185 million [8]