Welcome to the Adient Third Quarter Financial Results Conference Call. Participants are in a listen-only mode until the question and answer session. This call is recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Oswald. Sir, you may begin. Thank you, Christine. Good morning, and thank you for joining us as we review Adient's results for the third quarter fiscal 2023. The press release and presentation slides for our call today have been posted to the Investors section of our website at adient.com. This morning, I'm joined by Doug Del Grosso, Adient's President and Chief Executive Officer, and Jerome Dorlack, our Executive Vice President and Chief Financial Officer. On today's call, Doug will provide an update of the business, followed by Jerome, who will review our Q3 financial results and outlook for the remainder of the year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Doug and Jerome, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to slide two of the presentation for our complete safe harbor statement. In addition to financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. This concludes my comments. I'll now turn the call over to Doug. Doug? Great. Thanks, Mark. Good morning, thank you to our investors, prospective investors, and analysts joining the call this morning as we review our third quarter results for fiscal 2023. Turning to slide four, let me begin with a few comments related to the quarter. You can see Adient's financial performance as highlighted by certain key financial metrics in the box on the right-hand side of the slide. Adient delivered strong and improved year-over-year earnings growth in Q3 fiscal, underpinned by a relentless focus on execution, operational excellence, and better-than-expected production volumes versus internal expectations at the beginning of the quarter. Adient's third quarter continued to build on a positive momentum established earlier this year. For the most recent quarter, revenue, which totaled $4.1 billion, was up $570 million compared to third quarter last year. Adjusted EBITDA totaled $276 million, up $133 million year-over-year. Important to point out, a non-recurring insurance settlement related to prior period operational losses provided an approximate $20 million benefit to the quarter. Finally, Adient ended the quarter with a strong cash balance and total liquidity of $908 million and $1.9 billion, respectively. Adient's Q3 financial performance, combined with its healthy balance sheet, enabled the company to return $37 million to its shareholders in the third quarter via share repurchases. Year-to-date through June, share repurchased and cash deployed totaled $1.8 million and $65 million, respectively, leaving roughly $535 million available for future repurchases via the current authorization. In addition to delivering strong financial performance, the company continues to execute actions to position itself for sustained success. A few of these actions include the team's intense focus on launch execution, operational improvement, and cost control. Think of this as overall business performance, which continues to trend in a positive direction. Winning new business across various regions, customers, and platforms is expected over time to strengthen our leading market position, not to mention support improved margins and earnings. The team also continues to provide value add to Adient's shareholders every day, whether it's to our customers, suppliers, or employees. These efforts have been validated repeatedly with numerous industry and customer recognition awards, including, most recently, Supplier Excellence Award from JLR, Supplier Sustainability Award from Honda, and multiple awards from Toyota: Supplier Diversity Award, Best Supplier Performance Award for our South American operations, and Toyota's Special Recognition Quality Award for our Georgetown plant. Looking at the big picture for the quarter, goes well through the first nine months of the year, which encompasses Adient's financial performance, operational excellence, business wins, provides you a glimpse at the strengthening marketing position and the earnings power of the company going forward. That's why we're excited about the future. Turning to slide 5, a key ingredient of the company's current and future success involves Adient's operations in China. The past quarter, Jerome and James took the opportunity to meet with several investors and potential investors in Shanghai to provide an update on Adient's China business, which we continue to see as a growth engine for the company. No doubt, there's been a lot of headlines reminding everyone that the environment in China has become trickier to navigate, given certain geopolitical risks and growing rebalancing. However, expanding new consumption, industrial upgrading, and the speed of innovation presents new opportunities and growth for the market that shouldn't be ignored. For Adient, we continue to have the leading market position, and our recipe for success is deeply rooted and underpinned by an optimal nationwide footprint, strong in-house engineering capability, in-depth understanding of China and what's required for a successful seating business, and a highly recognized organization led by a very capable and experienced management team. The structure of the team enables Adient to be agile and operate at the same speed as our Chinese customers. Applying this recipe for success positions us well to capture future growth in the market. Just a few stats for consideration. Adient China has achieved more than $4.6 billion of new business bookings based on program lifetimes in fiscal 2023. We forecast Adient's volume growth over the next five years to exceed market growth by 2x. We've been awarded business from approximately 10 new customers since fiscal 2022. Speaking of customers, we expect our current mix of customers to be about 60% local China manufacturers within the next five years. That's up from 40% today. Bottom line, we believe our formula or recipe for success, positions us well to capture future growth in the market. If you've not had a chance to review the presentation, I encourage you to take a look. It's available for download on the investor section of our website. Turning to slides six and seven. Let's take a look at business wins and launch performance. As you can see, slide six highlights a few of Adient's in-process and upcoming launches. Adient continues to execute at a high level of launch performance. The programs highlighted represent a good mix of wins across EV powertrains and ICE powertrains, and are diversified across a number of segments, including SUVs, luxury, and mass market. Contain a high level of vertical integration across complete seat, foam, trim, and metals. I'd also like to point out, these launches include a number of Adient's innovative technologies that are being well-received by our customers, including Adient's new trim styling, sustainable synthetic leather, and various safety and comfort features on the Mitsubishi Triton. Our zero-gravity seat, which increases ergonomic comfort and body pressure distribution on XPeng's MPV, and our proprietary four-way headrest on FAW's Hongqi HS5. Flipping to slide seven, the strong operational execution and launch performance, as well as innovation I just talked about, are the foundations for new business wins. It's noteworthy that these programs include a high level of vertical integration of foam, trim, and metals components, as well as JIT business. We continue to secure a replacement bench business. We're winning our fair share of new business and leveraging our existing footprint. We're having success winning business while navigating the difficult macro conditions and related commercial discussions. Before handing the call over to Jerome, let's look at slide eight, and let me continue with a few comments related to our progress in 2023 and initial thoughts on 2024. To begin, Adient's focus strategy continues to drive the business forward. Our most recent financial and operational results, in addition to our year-over-year results, provide a positive proof point. Despite a number of unplanned obstacles and challenges that surfaced in 2023, Adient's focus strategy enabled the team to navigate through these external speed bumps and further position the company for sustained success. Although we're solidly on track to deliver on our 2023 commitments, both operational and financial, we're not resting on our laurels, and we're working hard to finish the year strong. It's imperative we enter 2024 from a position of strength. Speaking of 2024, the team is currently developing the company's plan, including key planning assumptions that will support the plan, such as global production forecasts, FX, et cetera. Although it's premature to comment on specifics, we do expect Adient's positive business performance and momentum to continue into the new year, enabling further earnings, margin, and free cash flow growth and returns to our shareholders. Similar to prior years, the team will continue to develop next year's plan in the coming months, with the intent of sharing those details with you when we report our Q4 and full year 2023 results in November. With that, I'll turn the call over to Jerome to take you through Adient's third quarter 2023 financial performance and outlook for the remainder of the year. Thanks, Doug. Let's jump into the financials on slide 10. Adhering to our typical format, the page is formatted with our reported results on the left and our adjusted results on the right side. I'll focus my commentary on the adjusted results, which exclude special items that we view as either one-time in nature or otherwise skew important trends and underlying performance. For the quarter, the biggest drivers of the difference between our reported and adjusted results relate to restructuring and impairment costs and purchasing accounting amortization. Details of all adjustments for the quarter are in the appendix of the presentation. High level for the quarter, sales were approximately $4.1 billion, up 16% compared to our third quarter results last year. Improving vehicle production in the Americas, Europe, and Asia, excluding China, was the primary driver of the year-over-year increase. Adjusted EBITDA for the quarter was $276 million, up $133 million year-over-year. The increase is primarily attributed to the benefits associated with higher volume and mix, improved business performance, which included a $20 million non-reoccurring insurance settlement related to prior period operational losses and higher equity income. These benefits were partially offset by the adverse impact of net commodities driven by recovery timing, primarily in EMEA. I'll expand on these key drivers in a minute. Finally, at the bottom line, Adient reported an adjusted net income of $93 million or $0.98 per share. Let's break down our third quarter results in more detail. I'll cover the next few slides rather quickly, as the detail for the results are included on the slides, and this should ensure we have adequate amount for the time for the Q&A portion of the call. Starting with revenue on Slide 11, we reported consolidated sales of approximately $4.1 billion, an increase of $570 million compared with Q3 FY 2022. The primary drivers of the year-over-year increase were higher volumes and pricing, call it just under $600 million. The negative impact of FX movements between the two periods impacted the quarter by $26 million. Focusing on the table on the right of the slide, Adient's consolidated sales for each of the major regions demonstrated strong year-over-year gains. The Americas generally performed in line with the broader market when adjusting for certain non-recurring material econ recoveries last year. EMEA demonstrated outperformance versus the overall market, aided by favorable customer and program mix, and both China and Asia, outside of China, significantly outpaced the overall markets, driven by Adient's strong customer mix and new programs that launched in late FY 2022 and early FY 2023 that are now running at rate. With regard to Adient's unconsolidated seating revenue, year-over-year results were up about 5%, adjusted for FX. Increased production volume at our unconsolidated joint ventures, primarily in China, supported this increase. Moving to Slide 12, we provided a bridge of Adjusted EBITDA to show the performance of our segments between periods. The bucket labeled corporate represents central costs that are not allocated back to the operation, such as executive office, communications, corporate finance, and legal. Big picture, Adjusted EBITDA was $276 million in the current quarter versus $143 million reported a year ago. The primary drivers of the year-on-year comparison are detailed on the page. Positive influences include $96 million associated with increased volume and mix. Improved business performance also benefited the quarter by $82 million. The business performance bucket consists of ongoing operation efficiencies, lower year-over-year input costs, such as freight, a $20 million non-recurring insurance settlement related to prior period operational losses, which should be backed out of Adient's normalized 2023 earnings on a go-forward basis, and a slight uptick in SG&A, primarily reflecting the non-repeat of austerity measures taken last year and certain costs supporting Adient's future growth and innovation. Other factors that influenced the year-on-year comparison included a higher level of equity income, driven by the improved volumes at Adient's unconsolidated joint ventures, primarily in China, which more than offset the impact of the company's restructured pricing agreement within our KEIPER joint venture. A commodity headwind of $55 million, largely driven by the timing of contractual true-ups and a modest FX headwind, call it $1 million. I'd point out that Adient's Q3 results came in better than internal expectations as we began the quarter. The outperformance was largely driven by better than expected production volumes and the benefit of our very strong business performance. Within business performance, results can be quite lumpy between quarters as the timing of anticipated settlements, lower spending driven by customer launch delays, and unexpected non-reoccurring items, to name a few, can have significant impact on performance quarter to quarter. This is essentially what happened in Adient's most recent quarter, backing out the non-recurring insurance settlement. Q3 not only benefited from better than expected volume, but also certain factors timed for Q4 that were ultimately executed in Q3. Obviously, this shifts expectations for Q4. Full year results are not adversely impacted since Adient's better-than-expected Q3 performance flows through and supports our increased guidance for 2023. More on that in a few minutes. Similar to past quarters, we've provided our detailed segment performance in the appendix of the presentation. High level, for the Americas, year-on-year earnings increase was primarily driven by improved volume and business performance. I'll note that business performance within the Americas regions benefited by about $4 million due to the non-recurring insurance settlements. Primarily offsetting these benefits was an increase in net commodities, primarily related to the timing of certain contractual true-ups and FX movements between the two periods. In EMEA, the positive year-over-year increase was driven by improved volume, business performance, and benefits associated with FX movements between the periods. EMEA's portion of the insurance benefits, which is included in the business performance bucket, totaled roughly $16 million. Partially offsetting these benefits was a $49 million headwind related to commodities, primarily driven by the timing of certain contractual true-ups and a favorable non-reoccurring influence in FY 2022. In Asia, the year-over-year improvement was driven by the benefit of higher volumes, mix, and increased equity income. FX movements between the two periods and costs to support Adient's growth in the region were modest offsets. Let me now shift to our cash, liquidity, and capital structure on slides 13 and 14. Starting with cash on slide 13, I'll focus on year-to-date results as the longer timeframe helps smooth some of the volatility in working capital movements. Free cash flow, defined as operating cash flow less CapEx, was $196 million. This compares to an outflow of $132 million for the same period last year. Key drivers impacting the comparison include: the higher level of consolidated earnings, driven by improved volumes and a modestly better operating environment, lower interest paid, driven by the reduced level of debt between the two periods, and the lower level of accrued compensation, primarily timing-related. These benefits were partially offset by the timing of tooling recoveries, VAT deferrals, payments, and the non-repeat of a VAT refund received in last year's third quarter, and typical work- and typical month-to-month working capital movements. One last point, Adient continues to utilize various factoring programs as a low-cost source of liquidity. At June 30th, 2023, we had $150 million of factored receivables versus $206 million at the end of Q2 FY 2023, and $269 million at September 30th, 2022. Flipping to slide 14. As noted on the right-hand side of the slide, we ended the quarter with about $1.9 billion total liquidity, comprised of cash on hand of $908 million, and roughly $1 billion of undrawn capacity under Adient's revolving line of credit. During the quarter, the company used approximately $37 million of cash towards share repurchases, $1.9 million of which settled and closed in early April and was disclosed during our Q2 earnings call. Year to date through June, share repurchases and cash deployed totaled approximately $1.8 million and $65 million, respectively. At quarter end, Adient's debt and net debt position totaled about $2.5 billion and $1.6 billion, respectively. One important point to call out, the strong financial performance achieved over the past several quarters, combined with our focus on deleveraging, has driven our net leverage ratio on a trailing twelve-month basis to 1.75, within our target range of 1.5-2.0. This is no doubt a very good result. In summary, Adient's strong cash and liquidity position provides flexibility and agility, which, as you know, will be essential to navigate through the potential production disruptions that may occur in late Q4 FY 2023. Turning to slide 15. Adient's FY 2023 guidance has been updated to reflect our year-to-date results through June and current market conditions, including revised production assumptions and current FX rates. With that as the backdrop, we currently forecast Adient's consolidated sales to land at about $15.4 billion, which reflects higher production volumes across North America, Europe, and China versus the April S&P forecast used in our previous guide. For Adjusted EBITDA, we are now forecasting about $920 million for the full year. This increase is driven by continued strong business performance and the positive impact of increased production volumes. The $920 million includes equity income of about $80 million. Also important to remind you that $30 million of the $920 million is related to non-recurring items, specifically the insurance recoveries from Q2 and Q3, that should be removed from your ongoing run rates. Just a point or two on the implied Q4 results. First, important to remember, as I discussed earlier, and putting aside the non-recurring insurance settlement, Q3 benefited from better-than-expected expected volume and also certain activities and costs timed for Q4 that were ultimately executed in Q3. Moving into Q4, we continue to expect positive business performance. However, on a sequential basis compared to the quarter just completed, volumes are projected to be significantly lower across North America, Europe and China. Not only will this lower level of volume negatively impact our consolidated EBITDA, it will also impact our equity income, which will likely be about $10 million lower in Q4 versus Q3. Due to the lumpiness that exists between quarters, best to take second half 2023 view versus an individual quarter. When comparing H1 and H2 on a consolidated basis, adjusted for the non-recurring insurance recoveries, Adient's guidance implies a sequential 50 basis point improvement. Moving on, interest expense, given the company's debt and cash position, is still expected to be about $180 million. Cash interest, which is also called out, is forecast at $145 million. The lower level of cash interest is primarily driven by the timing of the first interest payment on the new bonds, which is set for 15th October 2023, after the close of Adient's 2023 fiscal year. Cash taxes are expected at $95 million. Our P&L tax expense continues to trend just north of $100 million. For modeling purposes, call it $110 million for FY 2023. CapEx, largely based on customer launch schedules, is now forecast to come in just under $300 million, a slight tick down from our May guide. Finally, given our revised earning expectations, combined with our revised CapEx forecast, we now expect free cash flow of $275 million for the year, up from the previous guide of $215 million. With that, let's move on to the Q&A portion of our call. Operator, can we have our first question? Thank you. At this time, if you would like to ask a question, please press star one, unmute your phone and state your name and company clearly. Again, star one to ask a question, star two to withdraw your question. Our first question comes from Rod Lache of Wolfe Research. Your line is open. Good morning, everybody. just wanted to first ask about the positives and negatives in this inflation recovery. in the quarter, you talked about $600 million of positive price and $55 million of commodity impact. Is that commodity impact kind of a net number? And I wasn't exactly clear on why the performance would slow as we look out to fiscal Q4, if that was largely just a timing thing. Yeah. Rod, on the first question regarding the commodity impact being a net, yes, the commodity impact is a net position, as you've noted. With respect to your second question on why the business performance would slow, you know, as we go into Q4, I, I wouldn't look at it as necessarily a, you know, a Q3- Q4. I'd really look at it as H1 over H2. Again, just due to the lumpiness of how, you know, how the seating business runs and the timing of certain actions and our ability to execute the actions. If you look at our H1 versus our H2, you know, we actually have an incremental $50 million of business performance moving from H1 - H2. That's really how I would think about how this business operates. It's, it's just the timing of when we can execute, you know, those actions and those business performance recoveries. It's not really a, a Q3- Q4 as much as it is H1- H2, and the acceleration of unwinding those sticky costs and those labor recoveries and things along those lines. In addition to that, if you look at volume, especially in the European front, you know, there's a big drop-off in volume. As you know, this business runs much better when we have volume. Our plants run much better as we have volume. It's easier to execute CI, it's easier to push through those types of CI projects and CI activities. There is a volume drop-off, especially in Europe, in our Q4. Okay. Just to clarify that, you're talking about this $55 million as being largely timing related. Are you suggesting that basically, the recovery on this would be something you'd get in the upcoming fiscal year? Fifty-five? Yes, Rod. The net commodities, you're right, there is half... I look at it two ways. Half of it is timing related, just in terms of when those contractual true-ups occur. Over the course of the next month or two, there's typically a two-quarter lag, right? We'll pick those up as we go through the next couple of quarters. The other piece was related to a favorable settlement last year's results. Obviously that does not pick up. It's just a nonrecurrence of a favorable item from last year. Okay. Just one last one I was hoping to ask, Doug. One of your competitors recently articulated a view that increasing vertical integration and thermal comfort is gonna cut costs for them and ultimately lead to something like 400 basis points of market share in a relatively short period of time. I'm just wondering if that, in your view, signals any change in the competitive dynamics and whether that affects your view on cash returns versus M&A or any kind of strategic changes for the company? Sure. Thanks for the question, Rod. I guess I would start by saying maybe where we're in agreement with what some of the competition is doing with regard to comfort, is we do think, you know, comfort's going to continue to play an important feature in future seating. We pointed to some of the work we're doing with NIO on zero gravity and, and some of the integration of safety systems in a partnership we have with, with Autoliv on, on that particular platform. When I, when I think about vertical integration, I think about it, it's, it's, it's tricky, and, and sometimes filled with pitfalls. And, you know, when I think about vertical integration and Adient, you know, we, we are the most capable supplier for mechanisms and, and metal. That particular element of vertical integration hasn't necessarily translated into incremental, you know, business performance or market share gains. When we, in the past, tried to leverage that into market share gains, it, quite frankly, didn't work out very well. The issue with vertical integration is it requires a tremendous amount of engineering and capital investment. I think, you know, some of that plays against the value, let alone if you're going to pursue it through M&A and the cash outlay that you have to put there, the restructuring that you have to put in place, you know, to integrate those operations, you know, into the fold. Our approach is, is, has been slightly different. You know, we, we are much more open to partnerships with, with, you know, alternative suppliers. You know, we've talked in the past, and they're continuing to develop our relationship with Gentherm on comfort systems. Probably hear more about that in the future, but those are programs we're actually working on for awarded business with a number of different customers utilizing, you know, some of the technology we have, and then integrating the Gentherm into, you know, more of a modular approach. You know, similarly, we work with Autoliv on safety systems. You know, we work with other companies on sound and seat, and, and these are programs that we're, you know, actually doing application engineering that are targeted to launch in the coming years. I, you know, I don't think there's anything that's particularly daunting out there with what the competition has in front of it. I don't think vertical integration, necessarily leads to, market share gain. I think about market share, you know, we've talked in the past, revenue gains with some customers are very, very different than revenue gains with other customers. I think, you know, profitability across customers, varies quite a bit. So we're not really focused on the traditional way of looking at market share gains on revenue. We're really focused on where we can use an existing footprint, for vertical integration, with customers that we've historically been able to get returns on our investment. And really not go down the rabbit hole of pursuing, top-line revenue gains, as, as a priority in our business. Okay. Thank you. Yep. Thank you. Our next question comes from John Murphy of Bank of America. Your line is open. Good, good morning, guys. Maybe if I can follow on to that sort of line of questioning Rod just had. Doug, you mean, on Slide five, you guys talked about some pretty significant growth in China over the next five years. I'm just curious, who you think you might be taking market share from, or is this a consolidation of some of the in-house operations that are being outsourced from the Chinese auto manufacturers to you? I mean, you're already a leading supplier over there in seating, so just curious how you're gonna be able to grow that fast and consolidate that market. Yeah, it's, it's a, it's a good question. I mean, you know, China is pretty dynamic. no need to remind everyone of that. market share has been shifting quite a bit. I think, you know, generally what we were trying to communicate in this package is we see a shift from the traditional Western automakers to the domestic Chinese. I think we stated in our, you know, prepared comments today, that represents about 40% of our business. It's moving to 60%. I really think that's where our market share growth comes from. you know, we've, we've spoke, you know, in the past about, you know, pursuing XPeng, NIO. That's just, you know, a couple of the domestics that we're looking at. You know, what gives us confidence that we can grow in that market is really, the way we conduct ourselves in the region. You know, we're, to a certain degree, decentralized. We've got a team that knows how to move at China speed. We've got, you know, dedicated engineering resources that have demonstrated, you know, that they can go from, you know, award to launch in, in 18 months, developing products, scaling what we have already in the market. It's really pulling those levers that give us the confidence. You know, where we see the growth is, is by shifting to the domestics. Even when we looked as we dissolved our JV, one of the reasons that gave us confidence that that was a move, that made sense to us, was it, it, it naturally allowed some of that to happen. Does that mean we're abandoning all of our traditional customers? No, but we're focused on, you know, certain brands, that we think, you know, can, can coexist with the, the domestics that, are developing their platforms, their switch to EV powertrains, that's going to allow them to continue to have, you know, relevant market share in China. Okay. I mean, the fourth quarter does look a little bit light, and I appreciate, Jerome, the idea of looking at first half versus second half in sort of totality. You did mention something about disruption at the end of the quarter in North America. I'm assuming you're, you're talking about a potential for a UAW strike, you know, at 1, if not all, the D3 at the same time. Have you baked anything into your numbers, and is that part of the conservatism potentially in the fourth quarter? I would say conservatism, you might not, but it, it just seems like that might be part of the equation as well. No, there's nothing in our guide around any type of a UAW action. Yeah, I would just kind of frame it up in terms of, you know, when the contract expires versus when our fiscal year ends, there's about 10 working days that are in there. Yep. Given kind of the unpredictability around, you know, how that, that strike could play out, you know, and how it could kind of phase in and out, you know, there wasn't. There are just too many scenarios for us to look at. To maybe frame it up for your benefit, you know, if all D3 were to go down, it's somewhere between $80 million-$100 million a week of revenue for us. You know, what I would remind is versus our peer, our largest peer, that's, that's less in terms of revenue impact per week, really, because of our leading diversification in the region. You know, we have more exposure to Toyota, more exposure to Honda, and some of the non-NAFTA suppliers. So we're less impacted by that type of UAW action, which benefits us. That's why the revenue per week is less. That's kind of how you should think, think about that in terms of revenue per week, if all D3 were to go down. There's nothing in, our guide from that standpoint. Okay. That's incredibly helpful. Thank you so much. Thank you. Our next question comes from Emmanuel Rosner of Deutsche Bank. Your line is open. Thank you so much. Good morning. One follow-up on the on the China discussion. Would this kind of essentially volume growth, so a market outperformance expected, you know, over the midterm or even longer, does that change at all the framework you have for the company's overall growth above market profile? I know that this year, for example, it's, it's pretty strong, but you've said that, hey, it's driven by, you know, a particularly strong Chinese growth, but this is not necessarily sort of like a new framework going forward. This China growth seems to be pretty sustainable. Does that change your course of the market profile overall? I mean, I would think about it more in terms of, you know, we're seeing a consistent trend on content growth. Content growth comes from a number of sources. It comes from, you know, market segmentation, be it focused on SUVs, so there's typically more seat content in SUVs than the traditional passenger car. We tend to focus on premium brands. Premium brands tend to have more content per vehicle. I think what you're seeing, particularly in China with the domestic Chinese, is they're adding a fair amount of content, as they look to, you know, enhance their product. You know, we talk a lot about EVs, but what we're also seeing with the domestics is a focus on ADAS-related features. You know, when we talk about zero-gravity seating and some of the other things that they're doing, that's driving a fair amount of content. You know, again, at, at a fairly high macro level, that's how we're seeing the business transitioning. I think, I, I guess you could say that's, that should be a reflection beyond just China as, as we think other automakers are going to look for seating systems to provide some level of diversification from the competition. Does that leave your growth of the market above what would have been a typical 1%-2% type of profile, or is that still the right framework? Yeah, no, I think, I think it does. I don't at this point, we've not come out and said what we think that shift is from an available market, but you should expect in the near future, we're going to better define that. It's moved pretty quickly. You know, we've, we've all talked about the Shanghai moment when all of the automakers went out to China and saw what the domestics were doing. A big part of that was in interior systems and seating systems. All of them went back, kind of retrenched, recalibrated, and we're seeing, as they look at, you know, the revised product plans, a significant amount of content being added in the seating systems. I you know, when we come out in November, talk about our 2024 plan, and our outlook beyond that, we'll be a bit more specific on how we think about content per vehicle and where the market's trending. Thank you. Then the, my second question is on margin. Could you please put back in context this year's expected performance or updated outlook, you know, compared to where your longer-term margin goals and opportunity is? Remind us how much more margin expansion you see in terms of opportunity, and what will the main drivers be again? Yes, I, I mean, thank you for the question, Emmanuel. I mean, you know, we continue to say, you know, we think this business is, you know, capable of achieving in that, you know, call it 8%-8.5% range. You know, this year, the implied guide would have us in that, you know, 5.9% range, so there's still a, a gap to be closed there. The three, you know, we've called them kind of the three buckets of where that margin gap closure comes from. You know, the first one being the volume step up, you know, getting the industry back to kind of that LVP build of, in that 90 million range, that's, call it one-third of the bucket. There's still a number of what I would call sticky costs that are in, you know, built into the system, commodity recoveries, labor, economic recoveries. Freight has largely come back now, so it's not so much much of an issue, but still a bit to be had there. That's the other bucket. You know, call it that middle bucket. The other last bucket is, and we've talked, and we've been very vocal about this, the roll-off of some of the legacy contracts that occurs in the 2025 and 2026 timeframe, especially in the metals business, that's still left out there, that needs to drop off. That really allows us to kind of get the last third of that. You know, we've, we've talked about that. We've, you know, we've kind of shown that roadmap. We've displayed that, that graphic pretty visually in terms of the timing of when we think that happens and how we think we get there. The other thing I would say is, and we've been pretty vocal about this, is it's, you know, whether we settle in at 8 or 8.5, it's also the amount of cash that we generate along the pathway to get there. You know, if you look at, at this year, what we've been able to do with cash generation, and then as we move forward, you know, the calls for cash in this business remain very steady along the way. You know, we'll be in kind of that CapEx range that we're at today, you know, somewhere between, you know, sub $300-$330. The calls for restructuring will remain, you know, very steady. Our, you know, our tax, cash taxes in that, call it $95-$110 range. Then our interest expense, you know, we have a very stable debt stack with the nearest maturities now coming in 2026. So the cash tax, or sorry, our cash interest also remains very steady. As we build EBITDA, a lot of that then drops down into cash flow or free cash flow, which we can, we can then manage through, whether it's in, you know, share buybacks or other types of actions that we wanna take. It's not just about margin expansion, it's also about as we look at how we manage then the free cash flow that this business can really generate. I, I think it's just important to remind everyone, yes, it's about EBITDA expansion, but it's also about the free cash flow that this business can generate along the pathway. Great. Thank you. Thank you. Again, if you would like to ask a question, please press Star One. Please unmute your phone and state your name and company clearly. Our next question comes from Colin Langan of Wells Fargo. Your line is open. Oh, great. Thanks for taking my questions. Any update on some of the, the big puts and takes in the year? Cause I, I thought the initial guidance was for about $70 million in commodity, and, I think already you have over $110 with the $55 this quarter. Are sticky costs still trending at, at $150? Trying to understand how we should be thinking about those sort of drivers in the year. Yeah. I mean, commodities now will be north of $100, say probably closer, Colin, to $135. If you recall, yeah, I think the initial guide was around $100, but then we also talked last quarter about some of the steel and the acceleration that we saw in the Americas with some of the recent flips that we had, we had seen there. We had bumped that up, up a bit. I think we're, you know, we're north of that $100 number on a net basis. Then, you know, with respect to the sticky costs figure that's out there. You know, we've seen the sticky costs come down really as a function of, as we've been able to go out and work on some of the business performance end of things. I think, you know, rather than give a precise figure on the sticky costs, we really look at it as kind of a total business performance type of number, because as, you know, as we've worked in our plants to really offset, I'll give an example, European labor with more CI. You know, what we look at is how are operations performing and how is total business performance trending in the business? If you look at, you know, total business performance now, you know, we're up in, call it, the $163 million number for, you know, that's what our guide would imply. That's really offsetting all the sticky costs that are in the business, all of the, you know, labor inflation and everything that's coming in. I'd really not so much think of it as sticky costs as much as it is. We've got $160 million of positive business performance that's coming in, offsetting everything like, you know, energy, labor, you know, customer pricing, everything that goes with it. That's, that's more how I would kind of frame it up now. Got it. Should we think about that $135 in commodity or greater than $135 in commodity? Is that sort of your cost, or is there still opportunity to, to get some of that back from your customers? Yeah, how I would think about the 135 is, you know, the way our customer contracts are set up, there's always gonna be a kind of a rolling effect with them. You know, so this year, based on the timing of when those recoveries come in, and the timing of when our contracts are set with their with our suppliers, there's going to be a lag effect associated with it. You know, less kind of the FY 2022 reversal that Mark talked about, that's non-recurring that then hits us this year. You know, we'll see as we set the 2024 plan that Doug talked about earlier, we're in that planning process, you know, we would start to see some of that then reverse out just based on the timing and efficiency of those customer contracts, along with our supplier contracts. We're generally, I think we've said this before, about, you know, somewhere between 70%-80% recovered, especially on the steel side. Yeah. I, I would say over the long term, in a relatively stable market, it's 100%. It just takes longer because of the way it either lags or, you know, or new business rolls on, or, you know, we ultimately find some, you know, offsetting commercial settlement on it. Got it. Just lastly, Europe margins were quite high. I think it's a record high, at least from what I could see, even adjusting for the insurance recovery. Is that level sustainable? Is there a structural change that has occurred in that region that we should be thinking about? You know, well, a reminder of a couple things. You know, we've been, you know, in, in prior years, we focused a lot on restructuring in Europe to, to bring down our break-even point. The biggest, you know, that we can attribute the performance is volume. As volume comes through in, in some of the, you know, cost, structural change we've made in the business, you know, we should expect that business to perform. As I'll say, the overall macros in that region moderate, be they energy, labor inflation, commodities, you know, we continue to be optimistic that we can get good performance out of our European operations. I, I don't. You know, we don't feel it's an anomaly by any measure, insurance recovery aside. Yeah. All right. Thanks for taking my questions. Thank you. Yeah. Thanks a lot. Thank you. Our next question comes from James Picariello of BNP Paribas. Your line is open. Hi, good morning, guys. Morning. Hey, James. Just to kind of unpack the fiscal third quarter here, I, I thought you guys were expecting, I thought part of the, you know, the quarterly color on the guidance was sequentially flat versus 2Q, excluding the 2Q's, you know, $8 million one-time settlement benefit. What, what, what were the surprise features? You know, I, I know the $22 million or $20 million or so insurance settlement, but what else, you know, really is driving the, you know, the upside to the, to the quarter? I, I think it was mentioned that there was a, you know, some pull forward in performance, efficiency benefits. I think that would be really helpful. Thank you. Yeah. I think it's really two factors. One is volume. I mean, volume came in stronger in the quarter than, you know, we certainly expected it to, really across Europe, the Americas, and our Asia segment, so kind of across the field, volume came in better. You know, when volume comes in, that allows this business to convert much better. You know, what goes hand in hand with that then is, when the volume comes in, the business performance comes in, much stronger. Really, we saw kind of this multiplication effect in the quarter. As the volume came in stronger, the business performance then also came in, much stronger within, really all three regions, especially in our European operation. That was really what drove the quarter, you know, much stronger than we had expected, when we gave the guidance and when we had the call. last time together. Got it. Just the one follow-up then. The $30 million for the full year in one-time benefit called out in the guidance, is that now fully realized, or is there any remaining benefit in the fourth quarter? Thanks. Yeah, for, for that, obviously, that was something that we've been working on, so I'd say that's good for, for the full year now. We're not expecting anything else at this point. Thanks. Thank you. Our final question comes from Dan Levy of Barclays. Your line is open. Hi, good morning. Thanks for taking the questions. I think you've noted in the past that balance in, balance out is an opportunity. I think in one of the earlier questions, you were talking about sort of replacing some of the structures, mechanisms, contracts in the 2025, 2026 time frame. Maybe you could give us a flavor of how much balance in, balance out benefited you in the most recent quarter, and really just give us a flavor for how much runway there is on balance in, balance out, which, you know, you'll get those benefits regardless of macro Yeah. It's I mean, we could probably distill it down and give you some idea of that number on a quarterly basis, but that's typically not how we look at balance and balance out. We tend to look at it on an annual basis. Then within that, it's even difficult to look at the bookends we have on a, on a fiscal year, because when programs come in, they go through launch cycles, and they have to hit a level of, you know, stable production to fully realize the benefit of the business. On top of that, when we talk about balance in, balance out, and the reduced revenue from metals and mechanisms, you should also be looking at as a much improved way of generating cash, because we're not investing at the same level we historically have in our metal and mechanisms business, and we're really trying to leverage the existing capacity that we have in place. That business, and we talked a little bit about vertical integration, you know, can, can be a bit of a pitfall, if you try to bring too much of that business on, with engineering and capital investment. Great. Thank you. Then just as a, as a follow-up, you noted that you're now in line on your leverage target. You've done, you know, some share buybacks, not, not so much in the last quarter, I think, like $10 million. You know, what are the gating factors on, on the pace of share buybacks? What's gonna determine, you know, whether you accelerate buybacks? You know, is it just the pace of free cash flow generation that will determine the extent of share buyback? Yeah, I think at the highest level, what we've always said is we've, you know, looked for some level of stability in the market. Whether it's, you know, historically been supply chain disruption, you know, has, is, is always, you know. It's the market that's. Walking that fine line between, you know, our view of valuation of the company relative to existing share price and a projection of, of stability in the market. I think when we think about the end of this year, we think about the UAW strike as, as a reason to maybe give us pause and, and hang on to a bit more cash until we have a better idea of, of, you know, what the impact will be to our, you know, fiscal year 24, specifically our first quarter. That's just generally at a very high level, the approach. I don't know if you guys wanna make any specific comments beyond that. I think that was well said. Okay. Christy, it looks like we're at the bottom of the hour, so this will conclude the conference call for today. If anybody has any additional follow-up questions, please feel free to reach out, and I'll be able to help you with those as we go through the day. Thank you. This does conclude today's conference. Thank you for your participation. You may disconnect at this time. Thank you.