Financial Data and Key Metrics Changes - The company reported sales of over $3.6 billion, which was relatively flat year over year, excluding foreign exchange impacts [23] - Adjusted operating margin was strong at 10.3%, despite a 40 basis point headwind from tariffs [24][26] - Free cash flow increased by 71% year over year, reaching $507 million [24][26] - The company increased its full year sales guidance to a range of $14 billion to $14.4 billion, up from previous guidance of $13.6 billion to $14.2 billion [27] Business Line Data and Key Metrics Changes - Light vehicle e product sales increased by 31% year over year, significantly outpacing the overall market growth [6][23] - Organic sales were relatively flat year over year, but excluding the decline in the commercial vehicle battery and charging systems segment, organic sales were up modestly [7][23] - The company secured multiple new business awards across its product lines, indicating strong demand for efficient powertrain technology [21][22] Market Data and Key Metrics Changes - The company expects a market production decline of 0.5% to 2.5% for the year, an improvement from previous estimates of a decline of 2% to 4% [29] - The full year sales outgrowth is projected to be approximately 100 to 150 basis points above market production [29] Company Strategy and Development Direction - The company is focused on a balanced capital allocation strategy, returning over $130 million to shareholders through dividends and share repurchases [8][21] - A 55% increase in the quarterly cash dividend and an increase in share repurchase authorization to $1 billion were approved, reflecting confidence in long-term cash generation [8][33] - The company aims to continue investing both organically and inorganically to support growth, with a disciplined approach to M&A opportunities [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term earnings power of the business, citing strong operational performance and cost controls [21][33] - The company anticipates continued strong performance in the second half of the year, with expectations for margin stability despite tariff headwinds [34][35] - Management highlighted the importance of outgrowing market production by 100 to 150 basis points and maintaining a focus on improving long-term positioning [35] Other Important Information - The company has returned over $3.5 billion of capital to shareholders since 2020 [16] - The management emphasized the importance of leveraging core competencies in evaluating M&A opportunities [19][90] Q&A Session Summary Question: Organic growth outlook and tariff impacts - Management noted that organic sales increased modestly when excluding the battery segment, with a headwind from lower battery sales primarily in North America [40] - For the full year, the battery segment is expected to contribute a 100 basis point headwind to overall growth [41] Question: Capital allocation and cash levels - The company maintains a liquidity target of 20% of sales and is currently above that level, allowing for consistent cash returns to shareholders [46] Question: Margin conversion and guidance - Management explained that the strong conversion of sales to income is due to effective cost controls and productivity improvements [58] Question: Performance of foundational segments - Management acknowledged the challenges in the combustion market but expressed optimism about future growth opportunities in hybrid and electric segments [62][63] Question: Battery business outlook - The battery business is currently slightly EBITDA positive and cash flow breakeven, with management confident in its long-term growth potential despite current headwinds [103] Question: RFQ activity and hybrid market - There has been a significant increase in RFQ activity for advanced hybrids, indicating strong future demand [106]

Financial Data and Key Metrics Changes - The company reported organic sales of just over $3.5 billion, which was relatively flat despite a decline in market production [7][21] - Adjusted operating margin performance was strong at 10%, reflecting a 60 basis point increase despite a 20 basis point headwind from tariffs [8][22] - Free cash flow improved significantly, increasing by over $270 million or 89% year over year [22] Business Line Data and Key Metrics Changes - Light vehicle e product sales increased by 47%, significantly outpacing the 25% increase in global hybrid and BEV production [8][19] - The company secured multiple new product awards across its portfolio, indicating strong future growth potential [19][11] Market Data and Key Metrics Changes - Market production in the quarter was down approximately 3.6%, while the company achieved sales outgrowth of approximately 3.7% [21][22] - The company noted modest positive growth in China, with light vehicle e product growth exceeding 60% year over year across all major regions [48][49] Company Strategy and Development Direction - The company made the strategic decision to exit its charging business, which was not expected to create shareholder value [9][14] - Capacity consolidation actions were initiated within the North American battery systems business to adjust the cost structure to current market dynamics [16][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through a challenging and uncertain environment, emphasizing the strength of the product portfolio and operational performance [19][30] - The company expects full-year sales in the range of $13.6 billion to $14.2 billion, reflecting stronger foreign currencies and anticipated tariff cost recoveries [26][30] Other Important Information - The company anticipates a $30 million headwind to sales from the exit of the charging business but expects a $15 million increase to operating income [15] - The company is actively reviewing its M&A pipeline, looking for opportunities that align with its core competencies and financial criteria [117][120] Q&A Session Summary Question: Insights on foundational product extensions and e product awards - Management highlighted the strength and stickiness of the portfolio, expecting continued strong margins and clarity from OEMs regarding hybrid product plans [36][38] Question: Growth outlook in China - Management noted strong demand for competitive technology in China, with significant growth in light vehicle e products and positive feedback from recent auto shows [49][50] Question: Tariff impacts and recovery negotiations - Management clarified that tariff impacts are manageable, with ongoing negotiations for recovery from customers [66][100] Question: Cash deployment strategy - The company plans to use its strong cash position for shareholder value creation through dividends, buybacks, or inorganic investments [73][120] Question: M&A strategy in the current environment - Management remains active in reviewing M&A opportunities, focusing on targets that provide industrial logic and near-term accretion [117][120]