Good morning, everyone, welcome to the Lear Corporation First Quarter 2023 Earnings Conference Call. All participants will be in a 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. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Ed Lowenfeld, Vice President, Investor Relations. Sir, please go ahead. Thanks, Jamie. Good morning, everyone, and thank you for joining us for Lear's Q1 2023 earnings call. Presenting today are Ray Scott, Lear President and CEO, and Jason Cardew, Senior Vice President and CFO. Other members of Lear's senior management team have also joined us on the call. Following prepared remarks, we will open up the call for Q&A. You can find a copy of the presentation that accompanies these remarks at ir.lear.com. Before Ray begins, I'd like to take this opportunity to remind you that as we conduct this call, we will be making forward-looking statements to assist you in understanding Lear's expectations for the future. As detailed in our Safe Harbor statement on slide two, our actual results could differ materially from these forward-looking statements due to many factors discussed in our latest 10-Q and other periodic reports. I also wanna remind you that during today's presentation, we will refer to non-GAAP financial metrics. You are directed to the slides in the appendix of our presentation for the reconciliation of non-GAAP items to the most directly comparable GAAP measures. The agenda for today's call is on slide three. First, Ray will review highlights from the quarter and provide a business update. Jason will then review our Q1 financial results. Finally, Ray will offer some concluding remarks. Following the formal presentation, we would be happy to take your questions. Now I'd like to invite Ray to begin. Thanks, Ed. Now please turn to slide five, which highlights key financial metrics for the Q1. Lear started the year strong, delivering significant increases in both revenue and earnings in the Q1 compared to last year. Sales increased 12% to $5.8 billion and core operating earnings increased 43% to $263 million. Adjusted earnings per share increased 54% to $2.78 per share. Slide six outlines key highlights from the quarter. Both Seating and E-Systems had significant growth over market and higher margins as compared to last year. In Seating, we are excited to announce that the Conquest award we mentioned on our last earnings call is for the Wagoneer and Grand Wagoneer. They will be producing complete seats and key thermal components for these vehicles with production beginning later this year. This Conquest award is another example of Lear's strong reputation for quality, operational excellence, and product execution as we expand our strong relationship and partnership with Stellantis. In E-Systems, we continue to increase momentum in electrification with additional awards for two of our innovative products. Stellantis recognized our advanced technical capabilities as the premier supplier of high-performance battery disconnect units and selected Lear to supply the BDU for a new electric vehicle. We continue to increase our intercell connect board backlog with the award of additional volumes from General Motors to support their Ultium battery platform. Our customers continue to recognize Lear for innovative technology and quality. For the sixth consecutive year, we are recognized as a supplier of the year for General Motors. I'm excited that we completed the acquisition of IGB, which will play a key role in expanding our Thermal Comfort Systems business and increasing our market share and margins in seating. I wanna thank everyone that supported this transaction. There was a lot of hard work and significant time spent to close this deal. I couldn't be more proud to welcome the IGB team to the Lear family. Slide seven provides a business profile of IGB and highlights the benefits of the transaction. IGB brings new technologies to Lear, including active cooling, steering wheel heating, and occupant detection sensors. This transaction also complements the product capabilities we acquired from Kongsberg and adds scale to our growing Thermal Comfort Systems business. IGB has a well-balanced customer base consisting of many of the world's largest global OEMs. This acquisition is the latest and final piece of our comprehensive thermal comfort strategy to extend Lear's leadership as the most vertically integrated automotive seat supplier, increase market share, and further strengthen our industry-leading margin and return profile. Lear is the only company with this expertise to complete incomplete seats, as well as comprehensive Thermal Comfort Systems capabilities. These unique capabilities will drive transformation of the Thermal Comfort Systems market by creating innovative designs that will improve performance, efficiency, and comfort while reducing weight and cost. On slide eight, I will walk you through the evolution of our Thermal Comfort Systems product strategy. Today, many OEMs design and source each thermal component individually and package them together by layering them on top of each other. Several of these features rely on subcomponents that are redundant, increasing the number of parts and requiring more space for packaging. The acquisitions of Kongsberg and IGB, as well as the work we have done internally over the last 10 years developing into seating, provide a broad-based capability to improve this model. At the time, leveraging best practices across the combined organization will improve efficiency and increase flexibility in our manufacturing facilities. Following the Kongsberg acquisition, our team has been working diligently to design more efficient thermal comfort modules by combining common functions across multiple components. For instance, we're developing a system that integrates ventilation with the lumbar and the massage modules. We also are developing innovative solutions to move thermal comfort components closer to the occupant by integrating them directly into the trim covers. This will improve the performance of Thermal Comfort Systems by increasing the speed to sensation for the occupant. This also reduces the size of packaging within the seat, which facilitates integration of these features into the rear seats. Another innovative product we developed is FlexAir, a foam alternative that is 100% recyclable. FlexAir reduces CO₂ emissions by up to 50% and mass by up to 20% compared to traditional foam used in today's applications. These innovations are gaining traction with our customers. We currently have 15 development projects in process on 41 different car lines with seven OEMs for our various Thermal Comfort Systems. Our customers recognize the benefit of more efficient Thermal Comfort Systems. They have begun to grant sourcing control of these products to Lear. Since Lear is the only JIT supplier with these capabilities, the additional sourcing control is limited just to us. This gives us an advantage in the marketplace. We can provide higher performing and more efficient solutions to our customers. The final phase of our strategy is to combine our component modular solutions with our FlexAir foam alternative and trim cover capabilities. To develop a fully integrated seat module by incorporating all of the thermal comfort components into an efficient modular design, we can drive significant part reduction and mass savings while enhancing the comfort for the occupant. These improvements will further reduce the cost of thermal comfort system to our customers while increasing the value proposition for Lear Corporation. Slide nine provides a pro forma outlook of our combined thermal comfort portfolio. The addition of the IGB product portfolio gives us strong market position in each of the key thermal comfort categories. We estimate we have a top three market position for each major product. Pro forma 2022 revenue for the combined TCS business is $550 million. We expect this to grow to approximately $800 million by 2027. Revenue growth will come from a combination of industry factors and innovation. The overall thermal comfort market is estimated to grow over two percentage points faster than the vehicle production. With improved packaging, better performance and reduced costs, we are confident that the market will grow more quickly as take rates increase and these products proliferate beyond the luxury segment and into the rear seat applications. Historically, our customers granted sourcing control for Thermal Comfort Systems on about 30% of their JIT programs. Given our increased capabilities, our opportunity to direct this sourcing has grown. Seven major customers have granted us 100% sourcing control for future Thermal Comfort Systems. The unique competitive advantage we have developed in Thermal Comfort Systems allows us to provide a better value proposition for our customers, which our competitors cannot match. Longer term, in addition to driving higher market share, we believe that our Thermal Comfort System strategy has the potential to drive our overall seating profitability above our current 7.5%-8.5% margin target. Turning to slide 10, I will highlight some key business awards from the Q1. The conquest win for the Wagoneer and the Grand Wagoneer is a significant program that was included in our three year backlog we announced in February. We also won an award to provide seats on a second program launching in late 2024. We estimate the combined revenue for these two programs could reach approximately $600 million in 2027. Since 2019, we have won $2 billion in conquest awards. That's a big number, Frank. Thank you. Nice job. Given our strong pipeline of conquest opportunities we are pursuing, we expect this momentum to continue and result in additional market share gains. For E-Systems, we continue to win awards in electrification as well as for high voltage and low voltage wiring on several EV platforms. The pace of new business wins in E-Systems this year is well ahead of where we were last year at this time. Just last week, we were awarded the BDU for the new Stellantis electric vehicle. This win solidifies our position as one of the leaders in high-performance BDUs. The additional volume awarded by General Motors for the ICB is another example of their confidence in our technical capabilities in increasing the value of our overall program. Our expected 2025 revenue on the platform has increased to $50 million to over $100 million. We had expected this program to generate annual revenues of approximately $150 million. With the added volume, we now see peak revenue reaching $250 million. I'd like to turn the call over to Jason for the financial review. Thank you, Ray. Slide 12 shows vehicle production and key exchange rates for the Q1. Global production increased 6% compared to the same period last year and was up 8% on a Lear sales weighted basis. Production volumes increased by 10% in North America and by 17% in Europe, while volumes in China were down 8%. The dollar strengthened against both the euro and RMB. Slide 13 highlights Lear's growth over market. For the Q1, total company growth over market was six percentage points, driven by favorable platform mix and the impact of new business in both segments. With seating growing six points above market and E-Systems growing four points above market. Growth over market was particularly strong in Europe and in China. In Europe, sales outperformed industry production by 12 points, with both business segments benefiting from higher volumes on the Land Rover, Range Rover and Defender. New programs such as the BMW 7 Series and Seating and new wiring and electronics content on the Volvo XC40 and XC40 Recharge and E-Systems contributed to the strong growth in the region as well. In China, growth over market of eight points resulted from strong production on the Mercedes-Benz C-Class and E-Class in Seating and the Volvo XC40 and XC40 Recharge in E-Systems. Our North America business lagged industry growth estimates by one percentage point. This is driven by unfavorable platform mix primarily related to the changeover of the Ford Escape in E-Systems, which was partially offset by the benefit of new business. Turning to slide 14, I will highlight our financial results for the Q1 of 2023. Sales increased 12% year-over-year to $5.8 billion. Excluding the impact of foreign exchange, commodities, and acquisitions, sales were up by 14%, reflecting increased production on key Lear platforms and the addition of new business. Core operating earnings were $263 million compared to $184 million last year. The increase in earnings resulted from the impact of higher production on Lear platforms and the addition of new business, partially offset by the impact from foreign exchange. Adjusted earnings per share improved significantly to $2.78 as compared to $1.80 a year ago. Q1 operating cash flow was a use of $36 million. Operating cash flow was negatively impacted in the quarter by the timing of customer receipts as compared to last year and a significant increase in sales late in the quarter. Our outlook for full-year operating and free cash flow is unchanged. Slide 15 explains the variance in sales and adjusted operating margins in the Seating segment. Sales for the Q1 were $4.5 billion, an increase of $540 million or 14% from 2022, driven primarily by an increase in volumes on Lear platforms and our strong backlog. Excluding the impact of commodities, foreign exchange and acquisitions, sales were up 15%. Core operating earnings improved to $300 million, up $83 million or 38% from 2022, with adjusted operating margins of 6.7%. The improvement in margins reflected higher volumes on Lear platforms and an improvement in commodity costs, partially offset by higher engineering spending and launch costs to support our strong new business backlog and recent conquest awards, as well as the impact of foreign exchange and acquisitions. Slide 16 explains the variance in sales and adjusted operating margins in the E-Systems segment. Sales for the Q1 were $1.4 billion, an increase of $97 million or 8% from 2022. Excluding the impact of foreign exchange and commodities, sales were up 12%, driven primarily by higher volumes on key platforms and our new business backlog. Core operating earnings improved to $49 million or 3.5% of sales, compared to $42 million and 3.2% of sales in 2022. The improvement in margins reflected higher volumes on Lear platforms and our margin accreted backlog, partially offset by higher commodity costs, net of customer recovery, the impact of foreign exchange and elevated launch costs. Moving to slide 17, we highlight our strong balance sheet and liquidity profile, a major competitive advantage for Lear in a rising interest rate environment. The acquisition of IGB will be financed with a three year fully prepayable term loan. We do not have any near-term outstanding debt maturities. Our earliest bond maturity is in 2027, our debt structure has a weighted average life of approximately 14 years. Our cost of debt is low, averaging approximately 4%. In addition, we have $2.9 billion of available liquidity. We remain committed to returning excess cash to our shareholders, having repurchased $25 million worth of stock in the Q1, along with our quarterly dividend. Our current share repurchase authorization has approximately $1.2 billion remaining, which allows us to repurchase shares through the end of 2024. Turning to slide 18. This slide highlights the key factors that will impact our financial outlooks. While our Q1 results were strong and industry production volumes are continuing to recover, there is still uncertainty around the pace of the recovery and overall global macro environment. We're not changing our full-year outlook at this time. We expect a modest improvement in industry production levels this year, while remaining well below prior peak levels. We expect a gradual but sustained recovery stretching into 2024 and beyond. The outlook for commodity costs is somewhat mixed. While we did see a significant reduction in steel prices late last year, prices in North America have since rebounded. We are seeing some moderation in select chemical commodity prices as well as freight and logistics costs, but also experiencing higher component costs as our supply base contends with higher labor costs. On the positive side, we expect to largely offset the headwinds we're facing through improved operating performance and negotiated sharing agreements with our customers. In addition, we're benefiting from resilient demand on luxury vehicles and other key platforms, as well as our margin accretive backlog. As we weigh these risks and opportunities, we continue to take aggressive steps to improve our competitive position and financial performance. We also continue to make significant progress through our Lear Forward initiatives, including aggressive steps to improve capacity utilization and working capital management and remain on track to meet or exceed our $50 million savings target for the year. These performance improvement actions, coupled with strategic investments in key products such as Thermal Comfort Systems and High Voltage Connection Systems, have positioned both businesses for sustained revenue growth and margin expansion. I'll turn it back to Ray for some closing thoughts. Thanks, Jason. Please turn to slide 20. The Q1 was a great start to the year. Both business segments saw year-over-year margin growth with strong growth over markets. Our Lear Forward plan continues to yield results. The team has identified and implemented actions that will reduce costs and improve operating cash flow. We continue to win business in both seating and E-Systems, and our pipeline of new opportunities is very strong. Closing the IGB transaction was the final piece required to solidify our thermal comfort system strategy. With this completed, we are looking forward to giving you a comprehensive update of our seating business with a particular focus on thermal comfort on June 27th. We'll be hosting a seating product day on the Lear campus in Southfield, Michigan. We look forward to seeing many of you in person. In closing, I wanna thank the Lear team for their tireless efforts that resulted in another strong quarter. I firmly believe we have the best team in the industry, and I am proud to work with you each and every day. Now, we'd be happy to take your questions. Ladies and gentlemen, we'll now begin that question-and-answer session. To ask a question, you may press star and then one on your touchtone phones. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. At this time, we will pause momentarily to assemble the roster. Our first question comes from John Murphy from Bank of America. Please go ahead with your question. Good morning, guys. Maybe just ask one-. Good morning, John. One simple one, first, just on schedule stabilization. I'm just wondering if you could kinda highlight, you know, how much they've stabilized in the Q1, how much sort of the disruption cost you last year and what you expect to not reoccur this year? Well, actually, this year, I always say everything is all relative. It's, this year is a lot better year than last year. We talked about just stable production from our customers. We're getting a lot better clarity around, you know, if there is gonna be downtime, you know, so that we can respond a lot quicker in respect to what we can do internally from an efficiency standpoint. Much more clarity around the production environment, although there's been still some short notice, but much better than it was last year as far as the financial strength. Jason, you can go through that. Really, it was, we didn't see a meaningful, you know, premium cost in the quarter. It did improve versus the prior year. We've seen a gradual improvement, John, as you look at sort of first half of last year to the second half of last year and then again in the Q1. As Ray mentioned, we're still incurring some premium costs. We're still seeing some stop-start production from our customers, some challenges with some of the new programs that our customers are changing over and, you know, some challenges with our supply base, which weighs a little bit on, you know, the conversion rates you see with volume and the backlog. Certainly less meaningful than what we experienced over the last two years. Okay. just a second question on IGB in the acquisition there. Is there a greater opportunity on content with EVs as you're looking at sort of the in-seat HVAC systems essentially, versus what you have on the ICE? I think you also, I just wanna follow up on something I think you mentioned that you said seating margins, which are targeted 7.5%-8.5% eventually, you know, there could be upside to that 7.5%-8.5% because of IGB. I'm just wanted to kind of clarify that statement as well or confirm it. Yeah. John, I'm glad you asked the question. One, I couldn't be more excited. This is a big day for Lear Corporation. This has been 10 years in the works. You know, going back, we're just discussing amongst the team here before the call. At 10 years, we looked at the inefficiencies within the seat. You know, when we talk about these priceable features and content within the seat, how they could be completely revamped and redesigned for packaging and efficiency and cost and mass and weight. All those elements are particularly of interest to our customers on EV vehicles. One, just the draw of in use of the battery consumption, the better use of the combination of HVAC and seat for the occupant within the seat. The packaging that we're gonna able to proliferate these, I think, across multiple different seat sets. I think equally as important, not just luxury vehicles, but be able to use them in more mid-vehicle ranges because we're gonna have a much more efficient system. Short-term, we're looking at this thing. It is just, we have this in three phases. One is, you know, just doing a really good job with our purchasing leverage, the ability to scale things properly with our manufacturing facilities on the traditional parts, and they're both great companies, and they complete what we're really focused on. We also protect ourselves with almost 400 patents on the new design that I was referring to as far as we get into these modular components. We believe that's gonna allow us to grow. Those components that we're referring to are accretive in respect to margins. Our goal is to offer our customers a great value proposition, but also, more importantly to us, is expand our margin. That's really the intent of this, and it really culminated in the acquisition of IGB. Kongsberg was a great acquisition. IGB is a great acquisition, but now we're well-rounded in what we're gonna do as far as priceable features within the seat system. Yeah, the only thing I would add, Ray, too, what was important about IGB, it brought, you know, steering wheel heat and panel heating, which I think also plays an important role as you think about reducing the use of the HVAC, you know, and the impact on the battery and shifting that to other parts of the interior that are more efficient for heating and cooling the occupants. That's important additional product capabilities that we were after with IGB. You know, John, we talked about the investor day. We're gonna have two of them. We don't share a lot publicly for competitive reasons. When you see what we're talking about as far as the transformational change of the components, when we put this in front of the customers, Frank's here, it's a layup. I mean, it's amazing. It's not traditional for us to get 100% of sourcing control on these programs. We're getting it because of the acquisitions we made and the capabilities we have and the vision of the value that we can create. At the investor day, we are really excited about being able to disclose a little bit more about what we've been working on for over 10 years and the change to the seat system and how we believe that can... You know, I think this two and a half to $3 billion market can grow faster when you actually have a system that creates a significant value for your customers. If I could just sneak one more in on the IGB Intercell Connect Boards. You seem like you're winning more and more on the Ultium platform. I mean, that is a platform. I'm just curious, when you think about that, you know, how much share do you have on that Ultium platform as far as you can tell on what you've won so far? I mean, is that being dual sourced or are you sole sourced on that? What's the story there? It's dual sourced, today. We have a strong position with General Motors on that particular component. Roughly 50%. Yeah, 50%. Okay, great. Thank you very much, guys. Yep. Our next question comes from Rod Lache from Wolfe Research. Please go ahead with your question. Good morning, everybody. Morning, Rod. Hey, Rod. I had a couple things I wanted to ask about. The E-Systems margins currently running at 3.5%. You had guided to 4.5% for the year. I was just hoping you could give us a little bit of color on what changes from here, thoughts on incremental margins. Does your guidance still hold? The, obviously, the exit rate would be quite a bit higher to make it average that. On seating, is it typical that incremental margins on new business would come in in the mid-6s or is that something that we should extrapolate from? Yeah, I think I'll start with the second part of the question first, Rod. Seating backlog has been rolling on in the 8%-10% range. I think if you look out over the next couple of years, we would anticipate that that's about the rate it would roll on. Sometimes you have a blip in a quarter where you have a mix of what has rolled off versus what's rolled on. It's generally in that 8%-10% range is what we're seeing. If you look at the last number of quarters, that's what we've converted at. In terms of E-Systems margins, you're right. We do expect to see higher margins in the second half of the year than the first half of the year. At 3.5% here in the Q1, you know, if we look out in the Q2, the midpoint of our guidance, we would expect similar margins, maybe slightly higher in E-Systems in the Q2, which means the second half needs to be roughly 5.5%. You know, there's a number of catalysts to that. One, you know, our launch costs in the first half of the year are much higher than they'll be in the second half of the year. We're going through not just launching the backlog, but we had significant new program changeovers. The Ford Escape, which I referenced in the prepared remarks, but also the Colorado Canyon with GM is a big program for E-Systems. Those two programs, we had a significant investment in launch costs in the beginning part of the year, and that will be less in the second half of the year. In addition to that, you know, we're in deep discussions, negotiations with our customers on commodity and inflation recovery. We did a nice job in the quarter, but we have a lot of work to do there, and we're confident that we'll achieve the assumptions that we've outlined for commodities, E-Systems, for the full year. In addition to that, you have your normal seasonality. You had the LCA agreements that are contractual that we approved in the first part of the year, Q1, Q2, that get negotiated throughout the year. Then offset through our own cost reduction actions, restructuring actions, normal plant efficiencies, purchase savings with our supply base. As is typically the case, particularly in these systems, you see that stuff sort of layered on throughout the year. Those things taken together, we believe, get us to about 5.5% for the second half of the year. I would say, you know, the range is 5.5%-6% in the Q4, maybe even a little bit beyond that as we exit the year, any systems. Okay. Thanks for that. I didn't quite understand the kind of the net of the puts and takes that you were, you were mentioning on commodities. Maybe you could just elaborate on that. It sounded like there's a little bit of caution in your, in your tone. Not surprising this in light of macro, but you had given an indication about potentially coming in at the higher end of your guidance range earlier in the year. Are you seeing anything in terms of customer schedules or mix that is, that is resulting in that or is that just conservatism? Yeah. I would characterize it more as caution than conservatism at this stage. Nothing has changed from when I spoke at investor conference earlier in the quarter. You know, as we sit here today, if the conditions from the Q1 hold up for the balance of the year, and there isn't a significant pullback in demand that impacts production or, you know, disruption due to the labor negotiations in the US and Canada that impacts production, those things don't happen, then, you know, we see the revenue at the high end of the guidance range, maybe even a little bit beyond that. I'll provide a little bit more color on that point. It's kind of an important point. We have a relatively conservative assumption on foreign exchange, you know, at 105 for the full year, or 107 in the Q1. That implies a little less than 105 for the balance of the year. If you just kind of modeled out the last, you know, five days average exchange rates, revenue would be about $300 million higher than what we have included in the guidance. That would, that would convert at the company margin overall. In addition to that, you asked about commodities. You know, one thing that we experienced in the Q1 that we now are expecting to continue is, you know, elevated revenue as both our the directed suppliers. Suppliers that our customers source directly and negotiate pricing directly with are getting price increases, and we're just kind of an administrator in the middle passing that through. You're seeing additional revenue without earnings as our directed suppliers negotiate with our customers. That's a new development, you know, as we started the year, and that's nearly $200 million of revenue. As we're seeing additional pressure on component cost increases in our business, particularly in E-Systems, we're negotiating pass-through agreements on that. You know, we see almost $100 million of additional revenue from that. You know, the commodities and FX taken together and the fact that IGB closed a little bit earlier, you know, we see about $500 million-$600 million of sort of revenue tailwinds that may not have a lot of earnings associated with that. We may see if conditions hold up consistent with the Q1 revenue that's at or above the high end of the range with earnings that are, you know, at the high end or maybe a little bit lower than that, as, you know, some new developments to happen with commodities. Speaking specifically about commodities, what, you know, what's changed from our original guidance there. You know, we lock in our North America steel price, one quarter at a time. The Q1 was really based on the Q4, we saw a nice reduction and nice benefit in the Q1. Q2 is based on the average price in the Q1. That is going up sequentially. We've assumed that that sort of continues in the second half, by the Q4, it comes back down. Based on that assumption, the net effect for steel, instead of being a $30 million benefit, is now about, you know, a $20 million benefit. A little bit of an impact for the unrecovered portion of steel. We're seeing some favorability in chemical costs, freight and logistics, and that's helping to offset the higher steel. We're seeing some pressure on component costs. More so in these systems than in seating, particularly with insulated wire. you know, that part of the supply base is a bit more challenged. You know, I think you see evidence of that and the challenges with Leoni that are very public. We are seeing some pressure on costs there, but we're also working with our customers on negotiating a sharing and pass-through agreement on that. Thanks for that. Just to clarify, you didn't mention any transactional impact from the FX, just given your peso exposure. Is that essentially hedged? Yeah. For the full year, we're about 85% hedged on the MXN and on most of our currency pairs we're, you know, 60%-85%, sort of the range. We were a little less hedged in the Q1, we did see a little impact there. We don't see it as significant for the full year at this point in time. We have a rolling 24 month hedge program, we've locked in about 40% of that exposure for next year as well, which should help. But, you know, as we sit here today, it's not a meaningful issue. It's maybe $10 million for the full year relative to what we expected at the start of the year. Great. Thank you. Welcome. Our next question comes from Dan Levy from Barclays. Please go ahead with your question. Hi, good morning. Thank you for taking the question. Sorry I jumped on late, and I know you talked a bit about E-Systems, but maybe you could just address in the quarter, you know, the conversion was on volume mix and on backlog was just meaningfully lower than what you had seen in prior quarters. Maybe you could just get a bit into the conversion on E-Systems within the quarter. Yeah. Part of that is the mix of revenue by region, in North America, where we tend to have a little higher variable margin profile than in Europe and in Asia. Given the changeover activity on these key platforms like the Ford Escape and the GM Colorado Canyon midsize pickup program, you know, so revenue was down on those and up on our European programs and a little bit in Asia. That's really the driver. It's a sort of mix of program by region. Backlog, as we look out for the balance of the year, we expect that to continue to roll on sort of in the 10% range in E-Systems. We feel pretty good about how the backlog is rolling on, and see that as continuing to be accretive to margins in E-Systems. Understood. Thank you. Just as a follow-up, I know you said that, you know, for commodities, you're now assuming $20 million for the year versus the prior outlook, $30 million tailwind. Maybe you could just remind us within that number, what you're assuming on recoveries for non-raw material items, be it, maybe some of the pass-through components which you said you're seeing some recoveries there or freight or most notably, labor on your end. Are you assuming within that recoveries for labor where I know you had assumed that there was gonna be some wage inflation on your side? Yeah. I think, Dan, at this point, we wanna be a bit careful on that for, you know, competitive reasons. We are in negotiations with our customer on labor. You know, oftentimes in both business segments, you know, we have, we work with models that our customers have and so the model has a labor rate input and so that is certainly providing an opportunity for us to have a dialogue with our customers. There's a certain level of wage inflation that's our responsibility. We experience that each year, and we offset it through productivity. What we're after is really the extraordinary wage inflation in places like Mexico, where there was a significant increase in wage costs. In terms of the component cost increases and recovery of that, you know, we're expecting between, you know, 90%-95% of that will be recovered within the year. We're not expecting that to be a significant headwind. We're expecting nearly 100% on the seating side because most of that is on direct components where our customers negotiating with the supplier directly. In E-Systems where there's a little less that's directed, you know, there's more work to do in those negotiations, but we still see a high level of recovery happening this year. Could you just clarify within the $20 million if there's a growth number on that? You know, that's the net. There a growth number? Our gross impact for this year, we're estimating at this point is about $200 million. Okay. Got it. Thank you. You're welcome. Our next question comes from James Picariello from BNP Paribas. Please go ahead with your question. Hi. good morning, everyone. Morning. On the E-Systems, commodities and component sourcing headwind, the $6 million, you know, $5 million or $6 million headwind for the quarter, could you just confirm what does that impact look like through the rest of the year for E-Systems? It's, We see it as a little less for the balance of the year than it was in the Q1. I think the Q1 and Q2 will be similar and then more of the recovery will happen in the second half of the year. You know, for the full year, we don't expect it to be $25 million. If you were to extrapolate the $6 million, we expect it to be less than that with the benefit of that happening in the second half. Right. And there's some associated recovery tied to the lessening effect in the second half, or is this just expectation on pricing? It's recovery that's. Yeah. that drives the difference first half to second half. Okay. For IGB, will the initial contribution margin for that business trend similarly to what Kongsberg, you know, what we saw with Kongsberg last year, you know, losing about, you know, I don't know, $5 million a quarter initially? Just on that point, you know, it's pretty clear you view thermal comfort as margin additive to Lear seating business over time. Can you know, maybe just speak to or confirm, you know, the timeline on when, you know, those businesses can get there. Thanks. Yeah. I think that we still have some work to do on the purchase accounting that could lead to a slight change in this. We do expect the margins in Thermal Comfort to be roughly break even this year. We're going through some restructuring now. Ray referenced the purchasing synergies. We're seeing some opportunities there. We're on track for the combined business to be profitable next year. We had talked originally about it being accretive to seat margins in 2024. We still see that probably in the second half or towards the tail end of 2024, because you know it just took longer for the IGB regulatory approval and closing to get over the finish line. You know, when we talked about 2024 being accretive, we had assumed that that point, that it would be kind of the full year this year in our hands and it's obviously four months later than that. You know, we still see this business being accretive to seat margins. I think, you know, contribution margins are gonna be similar to seating or a little bit higher, so in the 20% range, 20%-25% even on certain programs. Over time, as we grow that business, it will, the impact on seat margins will continue to increase and culminate with pushing that 7.5%-8.5% range above 8.5%. We'll save some of the details around that for the investor day in June. We're excited to talk about that in a little bit more detail at that point. Understood. Thanks. Our next question comes from Emmanuel Rosner from Deutsche Bank. Please go ahead with your question. Oh, thank you very much. Was hoping to put maybe a final point on your outlook and I guess what's assumed in there. Q1 played out, you know, I guess a bit better than expected and than you were even proving back in March. Now based on the unchanged outlook, you know, you'd be basically assuming some sequential deterioration in profit at midpoint or maybe sort of like stable, you know, versus the Q1 at the high end, and that's despite obviously improving margins in E-Systems, for example. Can you maybe just, you know, holistically talk about, you know, how you see sort of like the rest of the year play out? Where are the areas of caution that would essentially, you know, keep you, I guess, a bit more cautious now? Yeah. I think the caution is just around the production volume assumption that, you know, we have a pretty good handle on the rest of the drivers. Just so mechanically, you know, by holding the full year with such a strong Q1, what it suggests is that the Q2 will be about 2.5% lower. I think the industry volumes are down about 2.5% in the Q2 from the Q1. You know, there are fewer work days in Europe, in North America, so we think that makes sense. You know, say $125 million-$200 million lower than the Q1 revenue. You know, and if that holds, then that suggests a fairly sizeable contingency, so to speak, on production volumes for the second half of the year, because it would imply pretty low revenue in the second half of the year. Again, you know, it's early. There's so many, you know, geopolitical, macroeconomic factors in play. We just thought it was prudent to hold serve at this point. You know, if conditions hold up like the Q1, we would certainly look to raise our outlook, you know, on the Q2 earnings call. Understood. I guess one follow-up on the E-Systems. Based on your outlook, maybe even like 5.5% margins in the second half, obviously, you know, quite a bit more upside needed towards some of your, you know, midterm targets. As we look past, I guess, the second half or the Q4 exit rates, is the main driver there just, you know, adding more revenues and operating leverage? Or are there any other, you know, big factors to get you to your midterm view? Yeah. You know, we talked about this, I think, on the Q4 earnings call, and certainly in other settings, we've described sort of that bridge from 4.5% this year to 8% in 2025. You can look at it two different ways. You know, one way is just looking at sort of volume and backlog. We see that as 250 basis points of the improvement from 2023 to 2025, and then 100 basis points of net performance. This year, you know, net performance is sort of negligible in both segments. We see it as 50 basis points positive in 2024 and 2025 through a combination of lower inflation, some continued success on passing through higher commodity costs, and just fully realizing the benefits of our restructuring program and other cost reduction initiatives without that added weight of extraordinarily high wage inflation that we saw this year. You know, another way that to look and to think about these systems progression from 2023 to 2025, if you look at it by business segment, you know, we talked about 100 basis points of the improvement being driven by the growth in Connection Systems, and certainly this additional volume with GM on the Intercell Connect Board helps there. We had previously expected $285 million of additional revenue there. It's gonna be a little bit more than that now with the additional volume award on that platform. That's 100 basis points. You look at our core electronics and what we're doing with that business, we see 125 basis points of margin growth over that two-year time period in electronics. That sort of leaves 125 basis points for the wire business, which is a combination of net performance and stronger volumes. Perfect. Thank you so much. You're welcome. Thanks. Our next question comes from Colin Langan from Wells Fargo. Please go ahead with your question. Oh, great. Thanks for taking my questions. Just wanted to follow up. I'm not sure if I heard that right. You said there's $200 million of gross commodity headwind, but you still expect a net positive of $20 million? I guess I'm a little confused because I thought back in 2021, there was about $450 million, and you got $185 million net. What gives you one, did I mishear that? Two, what gives you confidence that you could sort of get that much recovery versus the past? Are the contracts different now given the last couple of years changes? Well, part of it is the lag effect. You're seeing some recovery in the first part of this year, for example, that relates to higher steel costs that existed last year. There's a bit of a lag benefit that we're seeing. The balance of it really is, you know, we've worked hard to get as many of our components on an indexed agreement as we can to try and kind of insulate us from that risk. As there are changes that take place, that makes it a little bit more straightforward to pass it through. It doesn't make it easy. Looking at, you know, Kyle and Frank, it's certainly a ton of work by the team on both business segments. The other big factor, though, and probably the more important factor is that, you know, we see about $180 million of directed supplier increases where it's just a one-for-one pass through. That's really what's driving the increase. There's no impact on OI. It's a 100% pass through. It's a little bit misleading from that standpoint. You know, if you go back to what we anticipated at the beginning of the year, we expected the gross impact to be, you know, favorable, so $105 million, because of what was happening with steel. Now that has swung all the way in the other direction where we're seeing the gross impact that's unfavorable by $200 million. That's a $300 million change again, and with $180 million of that in Seating on directed suppliers that's just passed through. Got it. Okay. The last quarter, you talked about $85 million in gross labor cost headwinds. That's incremental to the $200 you're talking about in commodities, right? They're not overlapping. Any color on how that's progressing? Has the majority of that already hit, so you're working to get recoveries through the rest of the year on that, or does more of that come later in the year? The labor inflation on the hourly side, mostly hit at the beginning of the year. Some of the salary programs, have various effective dates around the world. You know, but some are in January and some are later. The discussions with the customers, started in the Q1, and will continue, I think, through the balance of the year. It's not gonna be all done in the Q2. It's gonna take time. And some of it, you know, could even leak into next year. It's a difficult discussion with the customers, and ultimately, we have to be the most competitive option for them, and we are. We have world-class footprint in both segments, and I think that's supportive of our negotiations to pass these excess costs through over time. Just one quick follow-up. Where does that fall in the walks? Is that under net performance, if I look at slide 15 and 16? I don't even think there's net performance on 15. Which bucket? Yes. Does that added cost fall in? That is in the net performance. You're correct, Kyle. Okay. Thanks for taking my question. You're welcome. Our final question today comes from Adam Jonas from Morgan Stanley. Please go ahead with your question. Kyle, this is Matthias on behalf of Adam. We're just curious to see if you guys have seen any measurable change or slowdown in the production or orders for EVs by OEMs this year? No, we're not. No, I'm not seeing that. I mean, across the board, it's still a heavy push from all of our customers on EV, with some customers, even additional capacity and quotes are out for additional volume. We haven't seen the demand side change at all from our perspective, particularly with the talking to the OEMs. No, no changes. Okay. Thank you. A quick follow-up. Can you say that the chip shortage is over now, or is there You know, incremental production uplift? I'm a little hesitant to say that. to say that. Yeah, I'm hesitant. That one's engraved in me for a long time. I'd say. Yeah. We're in a much better position. What I would tell you is that what we're experienced is, you know, there's still at the brokers, there's premium costs that we're trying to negotiate. There might be chips that are available through other outlets that we can get our hands on, but there's still premiums associated with those chips. That hasn't necessarily dissipated. I'd say generally, and I think it's all relative to where we were a year ago, we're in a much better position. There's still certain chips that are tougher to get. I think holistically across all chips, we're in a much better position. Great. Thank you so much. Yeah. Thank you. Is that the last one, Adam? Okay. I think, Jason, nice job today. Really nice job. This was a lot of heavy lifting for you, but nice job. Nice job, the team here, and appreciate all the hard work. For everyone left on the phone, the Lear team, incredible quarter. I appreciate all the hard work that you're doing every single day. Really good work. Again, just wanna welcome the IGB family into the Lear family. We're really excited. I mean, this could be a transformational change for us. We're-- been working on this for over 10 years, and I think that the two very strategic, you know, acquisitions of IGB and Kongsberg were complete. We can now move on this thing and frankly, get those margins up. Let's get to work, you guys. I appreciate everything. Thank you. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for attending. You may now disconnect your lines.