Welcome to the Aumovio SE Pre-close call Q2 2026. The conference will be recorded. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions shortly. If you would like to ask a question, you can press star nine, followed by the pound key on your telephone keypad, or you can use the dial-in function in the webcast if you would like to ask a question by phone and raise your hand for later. Let me now turn the floor over to your host, Lutz Ackermann. Yeah. Good evening, everybody. This is Lutz Ackermann speaking. On behalf of Aumovio SE, I wish you a very warm welcome to today's pre-close call ahead of our second quarter 2026 results, which will be published on August sixth, and the quiet period, which begins tomorrow on July seventh. This call is intended for sell-side and buy-side participants. If you do not belong to either group, we kindly ask you to disconnect now. Today's call is designed to ensure all market participants have equal access to the latest publicly available information regarding Aumovio's performance. The key points we discuss are also available in our reference sheet, which has been published on the investor relations section of our website. As we approach the publication of our second quarter results, I would like to highlight the continued progress Aumovio has made since becoming an independent listed company. Over recent quarters, we have advanced our transformation, strengthened execution discipline, improved operational efficiency, and continued to sharpen our focus. We view the current phase as an important transition period that lays the foundation for sustainable value creation and future growth. According to the latest S&P Global Mobility data that you all know, global light vehicle production declined by 1.8% year-over-year in the second quarter. Production was weaker across all major automotive regions, with Europe down 3.3%, China down 3.1%, and North America 1.4%. The ongoing geopolitical tensions in the Middle East further contribute to the environment of elevated uncertainty for the global automotive industry. As Europe continues to represent around half of our sales and North America close to one quarter, our business remains exposed to market developments in these regions. At the same time, China remains an increasingly important market for Aumovio. We have recently continued to gain market share and grow with our customers in the region while maintaining an attractive profitability profile. As a result, market developments in China remain relevant for our business. Overall, second quarter market conditions therefore remained challenging and broadly in line with our assumptions for 2026. Similar to previous quarters, our sales development continues to be influenced by regional production trends, portfolio measures, the phase-out of lower return business activities, and foreign exchange movements. Foreign exchange effects remained a headwind in the second quarter, however, at a lower level than observed in the first quarter. From a sales perspective, we currently expect second quarter revenues to be broadly in line with the sales level of the first quarter, which was at EUR 4.4 billion. On the earnings side, our continued focus on sell-up measures, operational improvements, and restructuring execution continues to support profitability. As discussed previously, we continue to expect the second half of the year to be stronger than the first half. For the second quarter, we currently expect adjusted EBIT margin to show sequential improvement versus the first quarter of 2026, which stood at a margin of 2.4%. At the same time, profitability is expected to remain somewhat below the prior year second quarter margin of 3.5%. This development is primarily driven by the timing difference between cost increases and customer compensation mechanisms. During the second quarter, we experienced a larger spread between higher costs on the one hand and the realization of compensating customer recoveries on the other hand. While these cost increases are already reflected in our results, the corresponding compensations will increasingly materialize over the coming quarters. As a result, we expect reimbursement levels and cost recovery effects to increase during the second half of the year and thereby provide additional support to profitability. This is also in line with previous years, where we achieved the necessary cost compensation in the outer quarters of the year. Additionally, let me also remind you of the typical seasonality pattern for our business. Usually, profitability improves sequentially throughout the year, with each quarter showing higher margins than the previous one, and the fourth quarter being by far the strongest quarter from a profitability perspective, mainly based on R&D reimbursements. The year 2025, so the last year, represented an exception to this pattern, as the second quarter profitability exceeded third-quarter profitability due to an unusual high contribution from customer reimbursements during that period, which were predominantly coming from User Experience. The underlying trajectory, therefore, remains fully consistent with our expectations of improving profitability over the course of the year. Overall, business development in the second quarter is broadly in line with our expectations and is underpinning our current outlook for the financial year, which we reiterate On tariffs now. The impact from tariffs remains limited due to our operational footprint and the high share of regionalized production. While the situation remains dynamic, we are continuously working on sustainable solutions with our customers and expect to recoup the tariff burden over time. Where applicable, we follow refund mechanisms with the relevant authorities. Free cash flow generation remains one of the highest priority at Aumovio. While cash generation in 2026 continues to be impacted by restructuring and transformation-related payments, the underlying cash-generating profile of the business continues to improve. During the second quarter, we continued to see encouraging trends in spending discipline across the organization. Both capital expenditures and overall cash spending remained under tight control, reflecting our continuous focus on efficient resource allocation and value creation. We have also continued to make progress in managing net working capital, which remains an important lever for cash generation and financial flexibility. At the same time, it is important to remember that the second quarter is seasonally affected by annual bonus payments, which represent a recurring cash outflow at this point in the year. Overall, we remain focused on working capital discipline, portfolio optimization, and improved earnings quality in order to further strengthen cash generation over time. With regard to our transformation program, execution continues according to plan. We remain focused on reducing complexity, increasing productivity, and bringing our cost structures to a competitive level. The successful sales of our German plants in Rheinböllen and Karben are further proof to our disciplined execution and continued focus on delivering the measures we have initiated. Another key objective is the ongoing R&D transformation, where we remain on track to reduce our net R&D to sales ratio to below 10% by 2027. We continue to focus our development resources on technologies with the highest value creation potential, intensify collaboration with ecosystem partners, and implement additional efficiencies across our global R&D network. While portions of the financial benefits will materialize gradually, we remain highly confident in the medium-term value creation potential of these actions. Overall, we are taking decisive steps to improve the robustness of the company's profile. We continue to streamline our portfolio, improve competitiveness, and position Aumovio for the sustainable profitability improvements. As a result, we've become a leaner, more agile, and more performance-oriented company. Now let me provide an update regarding raw materials and memory products. We continue to observe elevated volatility in a number of raw material markets. However, for most raw materials, we have sustainable solutions with our customers in place that help mitigate the impact of raw material market volatility over time. Let me now turn to another topic that has remained in focus across the automotive chain over the recent months: memories. Memories remain an important part of products across the automotive industry and therefore naturally also for Aumovio. We are one of the key purchasers of semiconductors in our industry and therefore also of memory chips. At the same time, given our portfolio profile, we are not over-indexed in memory content relative to the broader market. We maintain very strong relationships with our suppliers and have secured our supply requirements for 2026. As it is customary in our industry, we are already discussing 2027 requirements in close coordination with both customers and suppliers. We see additional challenges ahead. We remain confident in ability to navigate them successfully. We therefore, as we have done during previous raw material and semiconductor cycles, continue to working with our customers on sustainable solutions to address current memory cost developments. With some customers, agreements have already been concluded. With others, discussions are ongoing and we expect to make further progress over the coming months, as I highlighted in the beginning. Before concluding, let me briefly address capital allocation. Over the past month, we have developed a comprehensive capital allocation framework, which is now subject to ongoing discussions with our supervisory board and other relevant stakeholders. We remain committed to implementing an attractive capital allocation framework that supports long-term value creation, preserves financial flexibility, and provides a compelling framework for shareholder returns. That concludes my remarks for today, and now I'm happy to go to the Q&A with you. Please, operator, take over for the moderation of the Q&A session. Yes, thank you. Ladies and gentlemen, if you would like to ask a question, please press star-nine and the pound key on your telephone keypad. If you would like to cancel your question, press star-three and the pound key. You can also use the dial-in function in the webcast if you would like to ask a question by phone and raise your hand to ask a question. I repeat, please press star-nine and the pound key on your telephone keypad if you would like to ask a question, or you can also use the dial-in function in the webcast if you would like to ask a question by phone and raise your hand. We have the first question from Christoph Laskawi from Deutsche Bank. The floor is yours. Hey, good evening. Thank you for taking my questions. The first one will be, was there any discussion more recently in conferences or road shows that you made on the potential impact of footprint reduction and active portfolio management on Q2 revenues? Have you sized that at any opportunity? The second one would be on capital allocation. You mentioned that this is an ongoing process. Could we expect an announcement to be made with Q2 or potentially even before the Q2 results? The last question will be, I'm not sure if this is really one for today or more for the final Q2 announcement, but we've seen Ford and GM partnering with Micron, looking to direct source memory. Obviously, this would take out the sourcing risk that you have. Was there any comment of management on this potentially reducing the exposure in the future? Thank you. Thank you, Christoph, for your questions. Maybe first of all, on the phase out of projects, I think it's still in the assessment how much of projects we will phase out. It's fair to say, if you look into last year in 2025, that it was half a billion, roughly, of projects that we stopped or didn't continue. In the first quarter, it was a bit lower. Maybe second quarter, we will see a slightly higher number of projects that we phase out, but we are still into, let's say, finally collecting the numbers. Difficult to give you a ballpark number here. That remains part of our strategy to really phase out projects where we do not earn money on. It's clearly the case that we prioritize margin over volumes that do not contribute to our targets. That's the clear approach. On capital allocation, it's the plan to do that with half-year's reporting. I think we, since a while, are working on that, and I'm pretty convinced that it's a convincing framework that we can present. Nevertheless, it's important to have all stakeholders aligned, to have them on our side, so to say. I think it's important to do that in an orderly manner. This is why I cannot fully promise, but I think this is the plan to come up with that within half year's reporting. This is the plan, but I cannot fully promise. I think that's important to say. On the last one, with regard to the GM Micron announcement, difficult to say. Generally speaking, and this is what I wanted to point out earlier, that at the moment, it's not only about speaking to our suppliers and to our customers. I think it's about to speak to both parties to really find a solution for the price increases that we see. This is overall the approach to bring all the people together on one table to find a solution. If that's positive, I think neutral, maybe slightly positive, but let's see that. I would not overestimate that announcement in how far that affects us. One thing is clear, that the more alliances you have, the better a spot is. Thank you very much. If you would like to ask a question, please press star nine and the pound key on your telephone keypad. We have one question from José Asumendi from JP Morgan. The floor is yours. Thank you very much. Thanks a lot. Thanks for making the call. I had a question. When you look at the comments, conferences meetings you've done in the past weeks, were there any comments with regards to the profitability of AM or AMC, Autonomous Mobility? It's always difficult, honestly, to forecast this division. How should we think about, were there any comments with regards to Q2, with regards to maybe a sequential improvement in losses Q2 versus Q1? Do the losses remain still on a high level? Were there also any one-offs in Q1 when we think about AMC that we should bear in mind when we're thinking about the progression into the second quarter? Thanks, José, for the question. On AMC, I think, fair to say that they should have seen a slight improvement versus last year, but we have to be clear that it's from a very low base. They are not really moving the needle in terms of year-over-year progression, but I think at least there should have been a stabilization, yeah. Which is positive. As you all know, the large ramp up is coming with end of next year when the Aurora contract is picking up. For the time being, I think this is an okay second quarter from then what we can see so far. If you ask about one-offs, basically that what I tried to say earlier. I think if I go through the business areas for the second quarter, there's only User Experience. They had a slightly higher. They had a higher share of reimbursements in the second quarter of last year. Of course, this is a bit normalized in this second year's quarter. This is why we see also margins for the group to be a touch light of last year. And, yeah, it's not a real one-off, but I think sometimes you really have to look into the reimbursements, how they are allocated to the quarters, and this was a bit of the case. This is what I would highlight in terms of one-off, although it's not per definition a one-off. Were there any comments in the past weeks with regards to on a full year basis, were we tracking on the lower end or the midpoint of the high end of the margin guidance for 2026? You mean for AM or you mean for the group? For the group. Just for the whole group. Whether we are Yeah. I think there's no update to that. I think what I tried to illustrate is that the margin upside is clearly coming in the second half of the year. With regard to our outlook, we can reiterate that what we said, there's no change to that. I think it depends a bit on when the compensations will come, we fully confirm that what we said always, there's no change to the guidance that we have laid out, neither for basically all respective KPIs. Super. Thank you. If you would like to ask a question, please press star nine and the pound key on your telephone keypad, or you can also use the dial-in function in the webcast if you would like to ask a question. At the moment, we have no further questions. Now we have one more question from Ross MacDonald from Citi. The floor is yours. Yes. Thank you for doing this call. Obviously, with the caveat that Citi do not cover Aumovio at this time, just thought I would hop in, given there's no further questions. Quick one, just looking at the consensus, going back to your earlier comments around the sequential EBIT margin expansion seasonally through the year that you would typically expect. It looks like consensus has margins slightly down in Q2 versus the Q1 number. I see 2% down from 2.4% in Q1. Can you maybe remind us what's driving that? Obviously, if that assumption looks correct here, if you would expect we should see some- That's- sequential improvement in Q2. That's a fair question. When speaking about consensus, it's important that we do also compile consensus with Vara, which is disclosed on our homepage. This is where we at least look at. You have to be cautious, especially with regard to the quarters, if you look into Bloomberg or whatever consensus data you have. I can only reiterate that what I said, that we're going to improve in the second quarter versus the first quarter. However, last year's quarter, Q2 was at 3.5%, and I think we would try to get there. We did not fully say that we will be above that number, but this is the corridor in which we are. I also gave information why we are seeing the second quarter a bit of a stretch in terms of cost versus the compensation for those costs. This is clearly that where we look at, and I think you should rather look into our homepage where we provide the consensus with Vara. I think this is reflecting a better number. Very clear. Maybe one follow-up, just in terms of call-off volatility from customers. Obviously, there's been a little bit of news flow around the German OEMs, but are you seeing anything year-to-date in terms of customer activity changing, or how should we think about the last six months versus the next six months in terms of call-offs? Should we just assume the status quo into the second half as well? Are you maybe seeing some product delays, this kind of thing? It's not like things would have changed so much, I would clearly not confirm anything to the downside. It's rather trending in the right direction. We discussed sales in the beginning. I think for the second half of the year, we should see a better development in sales and for the third and fourth quarter versus the prior year. I think this is what we should see and expect. No downgrades here. Very good. Okay, thank you, and thanks for having me on. Thanks. We have no further questions. If there are no further questions, I'm happy to conclude the call. Thank you for your participation. You're going to see us or speak us on 6th of August when we have half year reporting. If there's anything in the meantime, let us know. Have a great day.