Ladies and gentlemen, welcome to Nexteer Automotive Group Limited 2023 third quarter investor communication call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. I would now like to turn the conference over to Investor Relations Director, Mr. Tony Wang. Please go ahead. Thank you, Jason. Hi, good day, everyone. Welcome to Nexteer Automotive's 2023 third quarter global investor call. On the call today, we have our Executive Board Director, President, CTO, and Chief Strategy Officer, Robin Milavec, Senior Vice President and COO, Hervé Boyer, Senior Vice President and CFO, Mike Bierlein. Today's call will be relatively quick, taking around 30 minutes, covering a few latest updates from company for Q3. First, we will have Robin provide an update of the company's business development, and then Mike will go through the latest operating environment status. Beyond that, we will take some questions. I would remind you of today's communication package have been posted on our company's website, and the Safe Harbor statement governs today's communication. Now, I will hand it over to Robin. Okay. Thank you, Tony, and good day to everybody joining us on the call today. So I'd like to provide a business update for the third quarter of this year. But first, let me just thank our North America team and each region for their extraordinary efforts to minimize the impact of the UAW strike in North America and a Tier 2 supplier issue that we've experienced in the second half. It has certainly been a challenging second half for us, but we continue to take the steps necessary to build robustness and resilience into our business and create a strong future. After my opening remarks, Mike will focus more on the latest operating environment we're experiencing and our observation in the near term, as well as going into 2024. So the next slide is our launch performance. So in the third quarter, we successfully launched nine new major programs, and that's on top of the 32 launches during the first half of the year. Out of the nine programs, two are in North America, one is in EMEA SA, and six in APAC. As we've shown in the past, the new business products are marked in red font, so you can see that all the Q3 launch programs are new business wins, whereas incumbent win products would have been shown in black font. In Asia Pacific, we started to supply Jiyue, a joint venture EV brand of Geely and Baidu, with our Rack EPS products. This model originally called Jidu Robo-01. We continue to see Rack EPS growth opportunities for us in Asia Pacific. In addition, Hyper is a new premium brand unveiled by GAC Aion. We're very excited to supply this first model, Hyper GT, with Column Electric Power Steering. We're expecting a strong launch season, and we'll continue to hit fourth quarter with many new nameplates built by Chinese local OEMs, especially some anticipated electric vehicles backed by new tech companies. We're continually capitalizing on the growth in that sector. We're on track to achieve over 60 launches for the full year, which will be another record launch year for us. On the next slide, I'll move to new business wins. I'd like to highlight three accomplishments in terms of new bookings secured in the third quarter. We won our first gear-based Single-Pinion EPS business with a global EV leader, which now achieves our full portfolio representation of Electric Power Steering, columns, and driveline at this customer. Our first EPS win is part of a next-generation platform, and we're focused on a strong development and launch cycle, thus enabling additional opportunities with this critical customer. Our first standalone software business win with a leading global OEM is... Was awarded to develop a standardized software plus steering and driver-assist features across vehicle platforms. This is a growth, a milestone for us, and capitalizes on the software-defined vehicle trend by leveraging our software capabilities. And lastly, we successfully secured an important next-generation incumbency business in our EMEA SA division. In the middle of this slide, it indicates our quarterly bookings, followed by our forecasted order bookings for the balance of the year. We booked $4.3 billion year to date, with nearly $1.5 billion booked in the third quarter. The significant, Q3 bookings is from this EPS win with the global EV leader. As we previously mentioned, 2023 is tracking to be another strong booking year expected for customer awards, and we're confident that we will achieve our $6 billion booking target by the year-end. The right-hand side shows the year-to-date booking composition. You can see within the year-to-date, new business bookings, Electric Power Steering accounted for 90%. Forty-four percent of the total bookings are conquest wins, driven by a second Steer-by-Wire win and the first EPS win with the global EV leader. And finally, 98% of the bookings are on electric vehicles. This strong EV exposed bookings indicate that we are fully aligned with the electric vehicle mega trend. On the next slide, I'll talk a little bit about our engineering footprint. As you may recall, in the interim earnings material, we discussed optimizing R&D development in the context of thinking global, yet acting local. Building on this effort, we're equipping our divisions with the necessary resources to drive efficient and effective business decisions, while also assessing best practices to support a thorough, strong global function alignment. To that end, we've recently renamed our technical centers to reflect this strategy and shift our internal mindset. Furthermore, we continue to rebalance our engineering resources to reflect the overall needs of our global customer base and optimize for cost and time efficiencies. As you can see, our five technical centers are now renamed according to their locations: U.S., Mexico, EMEA, SA, India, and APAC. While the India tech center will provide global support from a perspective of software production, virtual engineering, and cybersecurity and R&D, the divisional tech centers for the U.S., Mexico, EMEA, SA, and APAC will focus on the business needs of their division with a goal to enhance agility, speed, customer, and market responsiveness, as well as R&D and innovation. Speaking of thinking globally and acting local, I'd like to give you an update on the accumulative global impact, thanks to the efforts of our local production sites. This time last year, we communicated a global production milestone of 90 million EPS units. Just one year later, we've achieved another production milestone, over 100 million EPS systems sold globally. The 100 million milestone reinforces our global EPS leadership, and I sincerely appreciate the Nexteer team as they tirelessly supported over 60 customers around the world with outstanding products that enable fuel efficiency, advanced safety, and performance features. With that, I'll turn it over to Mike. Thanks, Robin, and good day to everyone. I will start with an update on a couple of key issues impacting our second half 2023 results. The first topic is the UAW strike that began on September 15th, impacting General Motors, Stellantis, and Ford's production facilities. All three OEMs reached tentative agreements with the UAW by the end of October, and the agreements are currently being voted on by the UAW membership. The operating exposure for Nexteer during the strike was significant, as the North America region represents 55% of our global revenue, and the majority of our North America revenue is with these three OEMs impacted by the strike. Our team has taken measures to mitigate the financial impact of the strike, including employee layoffs, reduced discretionary spending, and other cost reduction initiatives. Through October, the UAW strike negatively impacted our North America revenue by approximately $55 million and EBITDA by $15 million. Our team has executed well to smoothly ramp up production to support our customers as they return to producing vehicles. The second topic is a supplier issue that caused production downtime for our customer. The issue was a result of a supplier's poor execution on a production line move between their facilities. The main causes were lack of an adequate inventory bank to facilitate the move, insufficient training, and poor equipment maintenance. Nexteer has done everything possible to limit the impact on our customer. We deployed resources to oversee that production was stabilized, supported the troubled supplier by paying additional costs, including premium freight and labor costs, and working closely with the impacted customer to resource alternative suppliers capable of a quick production ramp-up. Production at the supplier is currently stabilized. However, we are still incurring premium freight and labor costs related to this issue. We are on track to resource this supplier by the end of the year and do not expect costs related to this supplier issue in 2024. We are currently working with our customers to discuss costs they may have incurred related to this issue. At this point, we are unable to estimate the potential impact of our customers' costs. Moving forward to Q4 and 2024 considerations. From a headwind perspective, we are closely monitoring customer demand that may be impacted by high interest rates in slowing economies. Inflation has improved, however, remains above historic levels and continues to impact our input costs. We do see significant tailwinds that will lead to improved profitability. We are well on track to achieve record revenue, surpassing $4 billion in 2023, resulting from strong bookings over the past years, now translating into strong revenue... 2024 will be another record year for revenue, with further above market revenue growth led by continued strong performance from Asia Pacific. This revenue growth will provide further leverage on our cost structure, improving operating margins. Commodity and freight costs continue to improve compared to 2022. We have also implemented fixed cost reduction and footprint initiatives that will improve our profit margins, including an early retirement program completed in the second half of 2023. A balanced and optimized global engineering footprint plan that Robin presented. Consolidating the U.S. driveline operations from two plants to one plant, and transitioning columns and I-Shaft production from the U.S. to our Mexico facility. With these initiatives, we are well on track and focused on improving our profit margins. Our strategy for profitable growth is the key enabler to our success at driving the business forward with above market revenue growth and increasing profit margins. This concludes our Q3 business update. I'll turn the call back to Jason for Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Rebecca Wen from JP Morgan. Please go ahead. Hi, thank you for taking my question. My first question is regarding the GM or our supplier issue, because I heard from our auto analyst in the U.S. saying that he's hearing that GM's supply chain had been impacted in the third quarter by some cross-border issue, because the customs needed to redirect staff and resources away from the commercial truck and rail inspection. Just want to confirm, is this the same issue that we're facing with our supplier that you explained earlier? It's actually a different topic. Thanks for the question, Rebecca. This issue is related to a supplier that they moved production from facility to facility and weren't able to, let's say, ramp up production in time to meet our customer volume requirements. This issue around the Mexico border and the congestion that we saw there that was a separate topic impacting some of our customers in North America. Hmm, I see. Because, like, the GM supplier issue that I'm hearing from our auto analysts is that they're saying that this had also impacted the level of production and steadiness in the third quarter, aside from the UAW strike. So just, like, any ballpark thinking about how much this GM supplier issue may cost or may impact our revenue or EBITDA? Yeah, so in total, the supplier issue that we've noted, we expect the cost associated with ramping up production and keeping that production steady during the second half, that's going to impact our financials by $40 million for the second half. Now, there is some volume component included in that for $2 million, as we did see some reduced volume from the customer during the second half, caused by this reduced production level that we were able to provide the customer. Now, we do expect that these costs will be behind us, say, a one-time issue in the second half of 2023, and we're well on track to put this topic behind us as we transition then into 2024. Okay, so you don't see another supplier issue from GM, right? So, like, this is what we are seeing so far, like, there's no other additional impact from GM's specific supplier, like, on top of this? No, I would just. Hi, Rebecca, this is Robin. I would disconnect what you're talking about, the GM supplier issue, with the issue that we're having with our Tier 1, Tier 2 supplier. And you know, this supplier issue that we had began late summer, and that has been resolved now. We've been able to restore production for several weeks now. There are not any remaining supplier disruptions as a result of this supplier, yet we are still you know, finishing up the resourcing of this supplier and continuing to have a premium cost associated with maintaining production at our current supplier until we transition by the end of the year. So I would disconnect what you're saying between other GM supplier issues and the specific case we're having with our supplier. Okay, sure. Thank you. And then another question is, you mentioned we had a first EPS win with a global EV leading OEM. Is it possible to share a little bit more details, like, is this EPS win with a new model that they are launching in the future or an existing model that is already selling in the market? And if possible, if you can share, like, is it like in the North America, Europe or China region for this EPS win? Yes. So thanks again for the question, Rebecca. So you know, this is a customer that's relatively new for us in our portfolio. As I mentioned in my initial remarks, we have two prior business wins, one with our driveline product line and one with our column product line, and this has been in the China region. This business win with the customer with the EPS is on a new platform. It will launch first in North America. And I would say our focus is really on this development process that we're in with the steering system with this customer. We've got about a two-year development process, and we're really focused on excellence in this development process and a perfect launch so that we're well positioned to continue to grow and expand with this customer. It's something we're very excited about, but we're also very focused on our execution right now. Yep. Okay, thank you very much. Just my very last question from me, if that, if that's okay. What's our assessment for 2024 industry growth, like, market outlook? Yes. So at this point, we're seeing the market being just slightly increasing in production volumes next year, probably led more so by some increase in North America, considering that the OEMs will likely look to make up for this volume lost during the strike. China, we still see as being strong, slightly up, and then basically flat everywhere else that we operate. So slight volume increases. I'd say that, you know, from our revenue perspective, we are continuing to see the benefits of our strong strong bookings over the past several years. I'd anticipate that we continue to outperform the market, probably around, say, 5% above the market levels, is what we're currently thinking. Okay, thank you. Again, if you have a question, please press star, then one. There are no questions in the queue. Thank you so much for all of the questions and today's participation. If there are any further queries- Hi, Jason. Hi, Jason. Hi, Jason. Hi, Jason. Hello? We have one more question. Uh- Hi, Jason. I think we have one more question. Got it. We have a question from Yiming Liu from Haitong Securities. Please go ahead. Hello. Hello, thank you, management. This is Yiming from Haitong Securities. I'm just a little bit curious about your Steer-by-Wire system. So I'm wondering if there's any new booking during Q3 on the system, and what is the quantity that you are expecting to launch, and how many parts you will produce, do you expect in next year, in, like, 2024 or 2025, 2025? Thank you. Hi, thank you for the question. So Steer-by-Wire is a technology that, you know, we've been developing for many years now. Right. We, we see this as a new technology that will have higher levels of adoption, probably starting in 2030 and beyond, as there's more mass production adoption of Steer-by-Wire. It's really a technology that enables a lot of additional steering functionality, steering features, and helps with the transition between manual driving vehicles and fully autonomous vehicles. So it is a technology that will transform our steering industry, and we expect it to be a, a large product offering going forward. We are currently in development phase with a number of different customers, and so far we've had two major business awards with two large global OEMs. Our second business award happened this year, and for that second business award, it is a fully integrated, Steer-by-Wire system, so includes a hand wheel actuator, a road wheel actuator, and all of the software that integrates, the steering system into the vehicle and all the functionality, and communication to the vehicle. So, those programs will launch later in this decade. You can think about 2027 and beyond. Mm-hmm. There won't be any near-term revenue in 2024 or 2025 for Steer-by-Wire. Okay. It will begin towards the end of this decade, and I do see it ramping up maybe between 10%-20% of the market as we go into 2030 and beyond. Okay. Thank you. I'm sorry, just another question, a little bit. So what of the new bookings compared to the profitability of your current production? Because we actually did see some reduction on your profitability on either gross margin or the net net profit. And we do know that there are some disruptions on your operation. We are actually very curious about what is the future. Thank you. ... Yeah, so, yeah, as you noted, thanks for the question. We have experienced some margin contraction over the past couple of years, largely related to these inflationary pressures that we've been experiencing. So we're working through a number of initiatives. I talked about in my comments, I talked about these fixed cost reduction and footprint initiatives that we've been implementing. I think those will be certainly helping us drive improvement in our margins, as well as we have a significant backlog of business that we're implementing, and as our revenue continues to grow, we do see our profit margins continuing to improve. Now, it is gonna take some time to continue to work through this inflationary environment, but, you know, I'm confident that we can make continued sequential progress on improving our margins, you know, over the next several years. In terms of the backlog of business and the profitability, you know, we certainly see the EV transition as being something that is a benefit to our profit margins moving forward. With a lot of these electric vehicles, were being heavier and require some of our, say, more higher-end technology, as well as this transition to Steer-by-Wire. We also see those new business wins as being improvements, say, from our current profitability levels, and will also help to expand our margins as we implement those new programs. Okay. Okay, I see. Thank you so very much. Yeah. As a reminder, if you have a question, please press star, then one. The next question comes from Jia Lou, from BOCI. Please go ahead. Yeah. Good evening, management. Yeah, I have two questions. One is regarding our Q3 financial profile. As I just mentioned that Asia Pacific witnessed a robust growth. What about our revenue positions in U.S. and Europe? And also, could management give us some a detailed guidance for Nexteer 's growth? This is the first question. And the second question is, could we have preliminary guidance for Nexteer 's GP margin guidance? Thanks for the question, Zhao. So starting out on the revenue front. So we continue to see strong revenue in Q3. Despite this UAW strike starting in mid-September, we are still well on track to exceed $4 billion in revenue this year, and to exceed that by a healthy margin as well. So that's the first time as a company that we're crossing this $4 billion mark. I'd say all regions currently performing quite well in Q3—and we've seen in Q4 volumes continuing to be strong. In terms of 2024, I'm expecting that, as I mentioned, the industry volumes to be slightly up at this point, year-over-year. Then our revenue, we're anticipating, given the significant backlog of bookings that we've had, to be around, say, 5% above that market level of growth. So see continued strong revenue for the company. In terms of profit margin, so, recall that in 2022, we had EBITDA margins of 9.5%. This management team is focused on continuing to expand our margins from that level. I will have to note that given the supplier issue that we've seen, as well as the UAW strike impact and some costs relative to this fixed cost reduction initiatives, if we exclude those items from our 2023 results, I'm confident we will see a slight improvement in the margins from the 2022 level. And then as we work forward into 2024, we plan to continue to expand on those margins. Yeah, just a quick follow-up. As we see that if we look at the EBITDA margin breakdown, actually, the EBITDA margin in Asia Pacific and Europe seems okay, and there is a continuous downturn for the North America EBITDA margin. So how, when shall we see the North American margin recovery, say, to recover to, yeah, the mid-teens level? In 2018 or 2019? Yes, it's so, as you noted correctly, that we have seen very strong performance from our Asia Pacific division. And, you know, we're just executing well. We're crossing $1 billion of revenue for the first time in Asia Pacific, and margins are holding quite strong. We do need to continue to focus on improving margins in EMEA SA as well as North America. And I'd say if we think about the challenges on the profit margins in those regions, that's where we've seen the most significant impacts related to these inflationary pressures over the past couple of years. So we need to continue to work through those issues. You know, I'm confident we have a plan in place, including some of these fixed cost reductions and footprint initiatives that I mentioned. You know, most of those are, in fact, impacting us in our North America operations and will continue to drive this improved profitability. And then also quite exciting, a new business win that we've had in North America will also help us to further diversify our customer base in the North America region, as well as work to improve our profit margins. Yeah, I would just build on what Mike said. A lot of the restructuring initiatives that we're focused on is targeting our North America operations. So Mike mentioned it, but I'll just highlight again. We've been going through a consolidation in our U.S. operations for driveline. We're consolidating our operations from two plants into one. That will be completed this year, and we will expect to see some stabilization of that product line's margins as we go forward. Our column and the steering shaft production, we're in the process of transitioning that and moving it from our U.S. manufacturing locations to our Mexico manufacturing locations. One program has already been relocated, and the remaining programs will continue to be relocated over the next couple of years. In the engineering footprint that I discussed, we are transitioning a lot of our engineering resources into Mexico. We've now identified a new Mexico technical center, which we will begin increasing our technical resources in Mexico to better serve the needs of the Mexico region. Then, as Mike also mentioned, and I mentioned before, we're focused on customer diversity. We've added this new EV leader to our portfolio, and as that program launches, that will give us additional revenue and additional diversity from a customer base. So the actions that we're taking is, are really targeted at improving the margin performance of our North American business and ensuring it's robust and stable going forward. Got it. Thank you. You're welcome. This ends the question and answer session. Thank you so much for all the questions and today's participation. If there are any further queries, please contact us at investors@nexteer.com. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.