LEAR CORP Q1 FY2025 earnings call

Strategic Priorities - Extending global leadership position in Seating - Expanding margins in E-Systems through focused product portfolio - Growing operational excellence and competitive advantage through IDEA by Lear - Supporting sustainable value creation with disciplined capital allocation ### Business Highlights - Executed on strategic priorities to improve operating margins in both Seating and E-Systems despite challenging market conditions, with historic levels of positive net performance contributing to margin improvements - Extended global leadership in Seating by winning new ComfortFlex and Global Seat programs, and providing modules for Volvo and Hyundai - In E-Systems, won over $750 million in annual sales new business, including awards with Ford and BMW, and received a PACE Award for zone control module - Invested in IDEA by Lear and automation projects, generating $11 million in savings in Q1, and reduced global hourly headcount by 3,600 in Q1

In the Seating segment, sales for the first quarter were $4.2 billion, a decrease of $327 million or 7% from 2024. Excluding the impact of foreign exchange, commodities, acquisitions and divestitures, sales were down 5% due to lower volumes on Lear platforms, partially offset by the addition of new business. Adjusted earnings were $280 million, down $15 million or 5% from 2024, with adjusted operating margins of 6.7%. Operating margins were higher compared to last year, reflecting strong net performance, partially offset by lower production on Lear platform. In the E-Systems segment, sales for the first quarter were $1.4 billion, a decrease of $108 million or 7% from 2024. Excluding the impact of foreign exchange, commodities, acquisitions and divestitures, sales were down 5%, driven primarily by the wind down of discontinued product lines and lower volumes on Lear platforms, partially offset by the addition of new business. Adjusted earnings were $74 million or 5.2% of sales compared to $77 million and 5.1% of sales in 2024. Operating margins were higher compared to last year, reflecting strong net performance and the roll-on of our margin-accretive backlog, partially offset by lower production on Lear platforms and the wind down of discontinued product lines.

• Due to ongoing international trade negotiations introducing significant uncertainty, not reaffirming 2025 full year outlook - Have fairly decent clarity on the second quarter but will provide more clear guidance on the second quarter at an investor conference in early June - Temporarily pausing share repurchase activity to maintain strong liquidity position during uncertain period, planning to reinstate when visibility improves

• Tariff impact: Direct exposure in Mexico and Honduras, indirect exposure to vehicle production disruption due to tariffs or softening demand - Uncertainty in global trade policy affecting automotive industry production and sourcing - Volatility in production schedules and potential market share shifts

Q: Have you seen any meaningful changes to the production schedules yet? Or are you just anticipating this?

A: Jason Cardew mentioned they have seen changes announced in the last four or five weeks, but the environment remains dynamic. They withdrew guidance due to uncertainty in end consumer response to price increases, customers' reaction to changes, and additional trade policies. They have fairly decent clarity on the second quarter but will provide more clear guidance at an investor conference in early June Q: Is there a way to get your customers to be the importer of record or get anointed as an approved importer of record such that they could claim that 3.75% reimbursement?

A: Ray Scott said the team has presented options to customers, including who is the importer of record. Honduras is a significant exposure, and they are considering moving parts and manufacturing, but it's a competitive location. About half of gross tariff costs are from Honduras, and they expect the tariff rate on wire harnesses to be adjusted Q: What is the lower end of your outlook contemplating as far as LVP by region?

A: Jason Cardew said their February guidance contemplated production down 1% globally and down 2% on a Lear-weighted basis with a $1 billion range on revenue. They are seeing top line improvement from FX, revenue from tariff pass-through, and reduction from volume reductions. North America market is a big question mark with S&P's forecast vs prior guidance Q: How much can you still inflect up the benefit from restructuring actions this year?

A: Jason Cardew said they are increasing restructuring investment by $30 - $40 million, which will produce immediate cost structure benefits. They are dialing back capital spending by a similar amount, reprioritizing investments between capital expenditure and restructuring programs Q: What came in so much better at the end of the quarter to get you so much higher than what you were thinking?

A: Jason Cardew said production held up better than anticipated, especially in Asia in March, and there was a pull ahead of some commercial performance in the Seating segment. It was strong performance in both business segments across all regions Q: When you think about wiring harness and other stuff done outside the U.S., what's the hurdle of bringing back to the U.S.?

A: Ray Scott said the roadblocks include labor scarcity, workforce development required, and technology not being there yet for fully automating wire harnesses. Labor attractiveness for workers in the U.S. is low for such labor-intensive work Q: Going back to Slide 8, any pressure on trim mix thus far in Q2?

A: Jason Cardew said they are anticipating mix headwinds due to components on high content trims, like rear seat entertainment with high tariff components. They haven't seen significant changes in features generally but expect some as customers manage higher costs Q: How should we think about the timing of when new business awards flow into revenue?

A: Jason Cardew said most new business awards in E-Systems flow into revenue mostly in 2028, with a little at the tail end of 2027