VC

Good morning. I'm Kris Doyle, Vice President of Investor Relations in FP&A. Welcome to our earnings call for the first quarter of 2026. Before we begin this morning's call, I'd like to remind you that today's presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed. Please refer to the page titled "Forward-Looking Statements" in our earnings material for more detail. Presentation materials for today's call were posted this morning on the Investors section of Visteon's website. Joining us today are Sachin Lawande, President and Chief Executive Officer, and Jerome Rouquet, Senior Vice President and Chief Financial Officer.

We've scheduled the call for one hour, and we'll open the lines for questions after Sachin's and Jerome's prepared remarks. Please limit your participation to one question and one follow-up. Thank you again for joining us. Now I'll turn the call over to Sachin.

Thank you, Kris, and good morning, everyone. Visteon 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 SmartCockpit systems, reinforcing our first-mover advantage in this emerging technology, similar to our early leadership with SmartCore. Q1 was a busy quarter for operations with 20 launches across 11 automakers, including on several high-profile vehicles, underscoring our continued execution excellence in a dynamic supply chain environment. Finally, we continued 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. 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 center 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, 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. Turning to page 4. Q1 was a busy launch quarter with 20 new products launched with 11 car makers, 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 for Toyota's Lexus brand on 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'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 QX60, a mid-sized 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., and 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.

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 a center information display with Renault. Hyundai and Tata are already well-positioned in India as number 2 and number 3 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's role in automakers' go-to-market strategies worldwide. 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 car makers in China, and IM is their new brand targeting the premium car segment.

Automakers in China are rapidly adopting agentic AI to enhance in-cabin experiences, driving demand for high-performance cockpit systems capable of running LLMs and vision language models, or VLMs, using the latest silicon, such as Qualcomm's fifth generation Snapdragon chips. These high-performance systems also enable greater ECU integration, accelerating the shift towards centralized domain architectures. Importantly, Visteon has established an early mover advantage with three OEM wins in this 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 cockpit 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. 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 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, XPeng, 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 in-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 was the first Tier 1 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 as a preferred partner for car makers 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. 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 as 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 continued strength. 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'll 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.

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 double-digit outperformance. Adjusted EBITDA was $104 million, representing a margin of 10.9%. 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 balanced 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. 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 costs through short-term commercial pricing agreements while we continue to work towards longer-term recovery arrangements. We're making good progress on these longer-term agreements, and we expect that incremental costs 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, which was partially offset by the benefit of EV settlements, as I also highlighted. The remaining year-over-year decline in EBITDA of approximately $5 million was driven by lower volume and favorable FX, and slightly higher freight and logistics, partially offset by ongoing cost initiatives, including vertical integration and engineering productivity. 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. 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. Turning to capital allocation, we deployed $40 million in the quarter through share repurchases and dividends. We ended the quarter with $385 million on net cash and expect to continue deploying capital in a disciplined and balanced manner. 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-$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-$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 footprints. On free cash flow, we continue to expect adjusted free cash flow in the range of $170 million-$210 million. That said, we're 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. Turning to page 13. Visteon 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 25th in New York City.

Thank you for your time today. I would like now to open the call for your questions.

Your first question comes from Mark Delaney with Goldman Sachs.

Yes. Good morning. Thank you for taking the question. 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. Sachin, you said, though, 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 is seeing with respect to LVP? As you look into the second half, are you seeing any softening in your own customer conversations? And maybe clarify what you're trying to bake into guidance for the year and the 1H to 2H trajectory.

Yeah. Thanks, Mark. It's Jerome. Let me answer that question. We are, as you heard, we're maintaining our full-year guidance for sales and as well 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's important to make sure that we don't annualize that $20 million. Q2, even with the Middle East conflict, we do have a pretty strong setup for Q2. 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. Pretty robust first half of the year. As far as the second half is concerned, we are using S&P.

S&P revised their numbers recently and dropped the second half of the year for us by approximately 2%. A softer setup as we go into the second half. 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 than anticipated allows us to stay on guidance for the full year. I would say as well that we still have got a fairly large range this year on sales for the guidance, $100 million each way. It allows us to have some leeway as well, up and down versus the midpoint.

That's helpful, Jerome. Just to clarify, when you talk about the softening in 2H and basing it off of what S&P has projected, it doesn't sound like you've actually seen a change in your own customers' schedules. Is that correct? You're trying-

That is correct for Q2.

To be somewhat conservative.

That is correct for Q2. Indeed, yes. We have normal visibility for the next three months.

Okay. My other question was just on memory. The company's guidance had assumed you'd substantially recover the increasing costs in your full year guidance. You spoke a bit around the progress you're making there in the first quarter, but 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 and memory costs for this year's guidance? Thanks.

That's a good point. Maybe before we even talk about recovery, we should probably talk about supply, because if supply is an issue, recovery is maybe an issue, which is not our case. Let me hand over to Sachin, and then I'll talk again about recoveries.

Thanks, Jerome. I think this is a point that we probably need to make sure that we express clearly the situation so we can understand what's happening with supply, which obviously has implications on our ability to recover as well. As you probably are aware, there are two factors that are really driving the supply situation. One is the higher than expected demand for memory, I should say, driven by AI, for data centers, for smartphones, et cetera. 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 also reduces capacity for auto. This is what has created this imbalance between supply and demand, which has lowered availability of memory for industries like auto and others as well, by the way.

I think the impression all of us should have is that there's no segment of the industry that will get enough memory in the short term, and obviously that has resulted in higher prices. Now, as the smaller suppliers look at this environment, they see this as an opportunity to enter the market for autos, so 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, will be met by some of these emerging suppliers. One more point that I would like to add is that unlike in the prior semiconductor crisis where the lead times for new capacity to come online was fairly long, 2+ years, in this case, with memories, it's shorter.

If there's clean room space available, new capacity can come online in about a year. That's helpful, and so we believe with more suppliers coming in, this situation that we have right now will probably last perhaps into middle of next year, maybe towards the end of next year, and start to get better from there. That will also help in terms of drawing the prices down as more supply comes into the market. That's the situation we're dealing with. We have done, as a team, 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 that we have in place, working closely with our current suppliers and the new ones, that we'll be able to mitigate the situation.

Although it's going to be tight, we should be in the position to meet the customer demand.

Then on the recovery, so maybe first on cost. Cost came in 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 terms of negotiations, we've done pretty well so far. Let me give you a little bit more color than on the overall impact that all this had in Q1. In Q1, we've reported an outflow of $15 million on what we call our commercial items. It's the net between our supplier savings and what we give to our customers. Overall, we had anticipated we would have some level of leakage in Q1 as we were obviously working on long-term contracts.

What we did, just for Q1, was executing very short-term commercial agreements with some of our customers, and that helped us mitigate some of these additional costs that we got, $20 million, as I just said. Overall progression is going on well with negotiations, and we are expecting most of the negotiation to be closed by end of Q2. We'll see as a result of that, some level of catch-up in the second quarter. We are expecting our commercial business equation to be neutral in the second quarter as some of the improvements that we have with our regular suppliers come online. Overall, for the full year, we're maintaining our guidance in terms of recovery, and we are still expecting to have some level of leakage, largely because of the timing issues that we'll have for the full year.

Thank you.

Your next question comes from Colin Langan with Wells Fargo.

Oh, great. Thanks for taking my questions. Just to follow up on this issue. You have over $20 million in costs, but you had $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 already in Q2 from recovery timing?

Yes, Colin, that's Jerome. Correct. We've had this $15 million leakage, and we like to combine essentially what we're giving to customers versus what we're getting from suppliers, in some cases, increases, obviously. We look at this holistically with negotiating, I would say, with customers, the full pricing package with them. That includes not only the annual price reduction, it includes as well the legacy recoveries from prior chip shortages, as well as now the new memory cost increases that we're 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 as we go in Q3 and Q4 so that we have a minimal leakage for the full year, as I indicated, and per our guidance.

Okay. I think I actually had that wrong. You have about a third is recovered in the quarter, but does that all jump back? Does that 15 become a positive in Q2? Sorry.

It does, yes. It does, absolutely. It does become positive in Q2, and it will improve even slightly better. It will improve slightly in Q3 and Q4, for a slight negative for the full year.

Got it. The guide for the year is low single digit growth over market. You made it abundantly clear that the first half was going to be really tough with roll-offs and the BMS, but you still did 3% in Q1. Is mid-single now more likely as we go through the year, given you have highlighted pretty strong second half launches?

Yes. I would say 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're expecting to hold that performance pretty much throughout the year. We're expecting all regions to perform pretty well, maybe with the exception of the Americas, largely because of the BMS situation. Overall, a pretty consistent growth over market throughout the year.

Okay. All right. Thanks for taking my questions.

Your next question comes from Emmanuel Rosner with Wolfe Research.

Great. Thank you so much. I appreciate all the color on the memory supply and discussion and trying to de-risk the outlook. Just curious, as we sort of start looking into next year and you speak to OEMs about trying to mitigate the risk of disruptions, are there any conversations around potential de-contenting or using essentially less memory or solutions that use less of it? I'm also curious on the pricing side or the recovery side, the nature of the longer term agreements that you're working on with the OEMs, would those essentially allow ongoing passthrough even into next year if the DRAM costs keep rising?

Yeah. Let me take that, Emmanuel. On the first topic, we are not actually seeing any interest in de-contenting. The discussions have been mostly around how do we secure enough supply for 2027. Now, as you can imagine, most of the time thus far has been gone into securing supply for this year, and there's still a lot of activity, as I've just mentioned on my previous comment. As we start to think about 2027, we are working with all of our suppliers, the ones traditional suppliers, plus the new ones that we are bringing online. As I mentioned, I think the supply next year will largely depend on our ability to secure enough quantity of parts from these newer suppliers that are emerging, largely because of the fact that 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's what we are focused on. We expect that over the course of this year and maybe towards Q3, we should be in a position to have our supply secured for next year. In terms of pricing negotiations that we are currently having, I think they are kind of different by different customers. Some of them are signing up for a multi-year pricing agreement, so it's going into the piece price, essentially, and some are preferring to have annual pricing negotiations. It will depend on each customer in terms of how they address it.

Understood. Can you talk a little bit more about the expected ramp-up in launches in the second half?

Yeah

... the growth of a market holding on, but how should we think about this in relation to your comments about, or I guess, S&P's outlook about weaker volume is? Do you have a good sense that this should not really affect ramp curves?

Yeah. I think so because this was also evident in Q1. A lot of our performance was driven by new launches, not so much the underlying vehicle production environment of the car makers. A lot of our launches this year are the high-value ones, are in the second half, and in fact, they're 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 than last year. There are some that are very consequential, especially the ones with Toyota and the HPC launches that we spent quite a bit of time on in our prepared remarks.

Those are pretty high value, although their real ramp-up begins in Q4, so contribution this year is still relatively small but meaningful, and this is what is helping us offset what we have seen thus far as the reduction in vehicle production. I do believe, if the environment hopefully stabilizes, especially in the Middle East, that if we go forward from here, there may be a potential benefit to us if the underlying vehicle production holds up. At this point in time, it's too early to say whether this growth over market will improve from here, but it's been a really good start to the year. Q2 looks pretty strong, and so the second half, considering where we're at the beginning of the year, we'll have to wait and see as we proceed here how that develops.

Perfect. Thank you.

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

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, I guess, color on whether this is a typical seasonality, or whether you're seeing any sort of pushout or positioning in terms of wins? 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 there that we can look forward to. Thank you.

Yeah. The first quarter was expected to be a little lighter given that we had a fairly strong finish to last year. We also had, as I mentioned, a few display opportunities that got pushed out into Q2, about $300 million-$400 million worth. I would say even with that, it might be considered a little light, but pretty, I would say normal for first quarter in terms of seasonality of new business wins. Now, if you look at the pipeline for the remainder of the year, I would say again, much like the new product launches, new business wins also look very similar to 2025 in aggregate, but the mix is different. The product mix and the regional mix are both different.

In 2025, we had, I would say, even number and value of wins for displays in cockpit electronics. This year we are seeing more of opportunities for cockpit electronics and also more in Asia. The display opportunities this year are more evenly spread between Europe as well as Americas. Overall, we are pretty 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 in terms of the value of new business wins.

To your second question, we do want to leave something for our investor day to share with you, but I think that the main drivers that you are referring to there are going to be the new products that we have won and that we are launching, that we have been discussing quite a bit in our earnings calls over the last few quarters. Displays obviously will have a very big role to play in our growth given the high wins that we've had in the last few quarters, which will be coming into production here very soon. HPC, simply because of the very high content value, will also have a very meaningful impact. The other growth drivers that we have talked about, Toyota as targeted customers, and then two-wheelers and commercial vehicles.

What's interesting about our growth profile here is that we are not relying on just one or two things for us to be able to make our numbers. We have a number of things that are in play that are all growing. We have a lot more of confidence that we will be able to achieve that given the diversification that we have.

Thank you so much for the color. Thanks.

Your next question comes from Joe Spak with UBS.

Thanks, everyone. Sachin, sorry to go back to memory, but just one more point on this. My understanding is some of that additional supply that's coming online is from China. I just want to make sure your customers are okay with that. 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 or if not better for next year?

Yeah. To answer your second question first, absolutely. We don't see that it should not be better than that. We absolutely 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, I would say 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. Not to confuse you, but just the point is that there are many different types of memories in different densities that we need. Typically, very few of these suppliers are able to offer you all of the parts that you need.

We have to have a mix of suppliers that tend to have their strengths in specific categories, and that's the sort of process that we have been going through, identifying these suppliers, building relationships, and starting supply so that we can test their parts, qualify them, and then introduce them in our customers' production. That's the current situation with supply. I believe that, going back to your first part of the question, do you mind repeating your first part?

Just if customers are okay with some of the new sources coming online from China and other places.

In this environment where there is shortage of parts, there's absolutely no problem with that. The first thing is to make sure that we have the production secured. Obviously, they would like it to be non-China based if there is availability, but in this environment, we do not see that as a problem.

Okay. I guess the second question, Jerome, just on capital allocation. I know you said more details on the long-term plan at the Analyst Day. You did buy back $30 million this quarter. I think that means you've got $45 million left on authorization. I know you said last quarter you could do about $100 million, and you also earmarked about $300 million for M&A. I guess I'm just wondering if there's any sort of change to that thinking, with some of the comments you made about free cash flow or the pipeline or even really the current share price and could we expect an increase in authorization? Because it does seem like you're coming to the end there.

Right. Generally, no, nothing has changed. We had highlighted that it was up to $300 million for M&A, up to $150 million for share repurchases. With the cash balance that we have at the end of Q1, even with potentially tracking towards the low end of the range for adjusted free cash flow for this year, we could still do everything. We're still very focused on M&A, and we'll continue as well to return, in an opportunistic manner, cash to shareholders with share repurchases as well as continue on our dividends. Overall, nothing has fundamentally changed in terms of our philosophy.

Okay. Thank you.

Your next question is from Dan Levy with Barclays.

Hi. Good morning. Thanks for taking the question. I wanted to just first double-click on the growth dynamics. We saw negative growth in China in the first quarter. Maybe you could just unpack some of the mix dynamics where I would've assumed that with the lower end of the market underperforming, the higher end outperforming, that would've helped you. Is the view that you can still get that positive growth for the full year with the launches in 2H enough to sort of bring you up to the positive growth?

Yeah. Let me take that. If you see what has happened in China, as you mentioned, lower growth in vehicle production in the more price-sensitive segments and I would say a better performance, but not necessarily a lot of growth in the upper end of the market. That is certainly more helpful to us. I do want to also mention at the same time, there is the headwind of the market share loss of the global OEMs that is still ongoing. It's not all good news, necessarily. The new launches, so far, have been largely offsetting what we saw as declines with our traditional global OEMs. Therefore, for Q1, it was kind of even in terms of our performance and vehicle production.

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

Okay, great. Thank you. As a follow-up, sorry, I know we keep on getting questions on the DRAM here. On a longer-term basis, is there any ability for you to transition your products to be using DDR5 to address some of the supply issues? Is your point that these newer Chinese suppliers are going to be more than enough to offset some of the large suppliers that are eventually phasing out DDR4, and so longer term, this issue will be addressed by these other smaller suppliers?

No, that's a great question, and let me just also take a step back. When you look at a technology like DDR4 versus DDR5, the five is not backwards compatible with four. These memories typically are interfaced to a micro or a SoC or a system on a chip. That micro or SoC needs to have the capability to be able to be interfaced to a DDR5 for us to move to DDR5. Now, the majority of the micros used in the industry for the cockpit are not capable of being interfaced to DDR5. That's one point, right? That transition has to happen. The evolution of the micros and SoCs that are used for cockpit, which come from suppliers such as Qualcomm or NXP and others, they have to be able to provide these SoCs.

There has to be then other changes because they're not going to just introduce a single change like moving from DDR4 to DDR5. It's a bigger change, and a bigger change typically requires longer time for automotive. That's one dynamic. Now, what we are seeing, though, is the higher-end CDCs and HPCs already use DDR5. What this might do is to push the industry faster towards HPCs, upper-end CDCs, and HPCs simply because of the shift in the underlying technologies. Now, DDR5 will come at a density that is fundamentally a step higher than DDR4. We'll be able to do more with this processing power and the memory that's going to be available, which I think will accelerate the trend towards more integrated cockpit domain controllers, and eventually central domain controllers like the HPC.

We believe that this trend, in some ways, is going to push the industry to adopt more content simply because it'll be cheaper to do it that way than to stay with older technologies with more function-specific, feature-specific implementations.

Great. Thank you.

Your next question is from Luke Junk with Baird.

Good morning. Thanks for taking the questions. First question, Sachin, just curious to get some perspective on what you mentioned as the early mover advantage in HPC. I think you said your three wins are more than any other tier one supplier. Just hoping we could double-click maybe on the competitive landscape on a relative basis, and then given the award this morning that you announced that's launching within a year or so, I think you said within 12 months, just the near-term pipeline for maybe adding additional awards, including on maybe additional vehicles with your current customers. Thank you.

Yeah. No. Thanks, Luke. We have three customers that are launching this year, as I mentioned, and they're all launching initially on their flagship vehicles. At the same time, they're lining up vehicles following that initial launch that we are in discussions with them on, which will extend this business. That has been one of the sort of new learnings for us as well. When we were first discussing AI and HPC, let's say about a year ago, our thought was that it was more limited in application to perhaps just the very top-end, the flagship vehicles. The competitive dynamics now in the China market with what's happening, especially with the emerging premium tech segment that I discussed, that's really driving more volume to adopt AI as one of the key foundational capabilities of the cockpit of those vehicles.

We actually see that market grow quite rapidly starting in China. Because of exports, we expect that technology to start to make impact in other regions, probably starting with Europe, initially, before it comes to other parts of the world.

Helpful. Then Jerome, maybe, just hoping to make sure we're calibrating the launch cadence right in the back half of the year. I guess two specific things in that. First would be in terms of the high compute launches, any initial demand indications? I know there's a level of variability just on the demand for the vehicles themselves. Then you also made the comment about the foreign exchange fluctuation. Was that mainly a Toyota-related comment, or is there some China color that we need to understand there as well? Thank you.

You got it. I was about to say, we are using IHS for the HPC launches, and these have been holding pretty well compared to what we had initially guided to. No major changes. Sachin, do you want to take the second?

Yeah. In general, on the cadence itself, what I would say is that there has been no change on the launch plans and in terms of the volumes as well. We have been very focused on ensuring that we have supply of components because the lead times, as you can imagine, especially with this third win, has been extremely short. So I would say for now, Luke, the focus is on ensuring that we can launch and achieve the ramp of volume that we have for this year, which has remained pretty steady. There's been no change. If anything, depending upon availability of supply, that there may be the ability to increase it, but given where we stand with lead times and so on, I would think that would be a fairly big challenge for us to accomplish.

I've got it. I'll leave it there. Thank you.

Our next question is from Tom Narayan with RBC.

Thanks. Sticking to the question. Just two quick follow-ups. The first one on the $300 million M&A. I know in the past you've said this is likely tuck-ins, but just curious, is there a reason why this is being prioritized now? Is it because you're seeing deals kind of at attractive pricing? Is it something that you see that works well with what you're trying to achieve now versus later? A follow-up.

Yeah. Yes, in some parts, but it's really more driven by how we see the trends emerge in the industry. There's a very big trend towards a software-driven, more integrated domain controller approach for these vehicles. That requires that you have all of the software capabilities to implement those features. That's the primary driver of trying to secure those capabilities that would allow us to offer more and 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, right? It's already a mandate in Europe. In 2028 and 2029, China and U.S. will follow. As standard requirements, OEMs will not be able to price for them. They will be essentially part of the standard equipment. We expect more and more features to get standardized or de facto Required and therefore integrated. The cost is going to be a prime driver, and that will drive greater levels of integration. That's one thing. The second thing that's driving our M&A strategy is the fact that with all of these technologies that are emerging very rapidly, coming from mainstream tech industries and impacting automotive at a pace that's been 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. What we're finding, now your question, we're finding these opportunities, these companies that have a lot of depth of expertise, but they don't necessarily have the scale. We believe that we can provide that scaling ability to these companies, help the OEMs, and in turn, that helps us make our platform more future-proof.

It's got that virtuous cycle where us engaging in advanced technologies activities with OEMs helps us understand how to keep our platforms competitive and in time for the market introduction. That's the second. The third driver of M&A has always been vertical integration. We have been very 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 to rely on an extended supply chain. Which eventually also helps us counter this request that we get from customers to be less dependent on China and other parts of the world, where we are today perhaps more exposed than we should be.

Got it. Thanks for a very robust answer. Jerome, just to clarify, the guidance being maintained despite the S&P cutting, was it that the Q1 coming in ahead of your expectations, was that the main driver of being able to do that?

Correct, yes. Along as well with some good visibility and robust orders that we see for the second quarter. You're absolutely correct, yes.

Okay, got it. Thanks.

Thank you.

Thank you. This concludes our earnings call for the first quarter of 2026. Thank you for participating in today's call and your ongoing interest in Visteon.

This concludes Visteon's first quarter 2026 results earnings call. You may now disconnect.