LEAR CORP Q4 FY2025 earnings call

• Strategic priorities include extending global leadership in Seating, expanding margins in E-Systems, growing competitive advantage via Idea by Lear, and disciplined capital allocation. • Seating secured significant new business awards, including a major truck program from an American automaker and complete seats for GM's large SUVs and full-size pickup trucks. China team secured complete seat programs with Chang'an, Dongfeng, etc., and thermal comfort award with BYD. • E-Systems had strong momentum with $1.4 billion in new business awards in 2025, including wire harness and electronics programs across regions. • Digital transformation with Palantir and Lear Fellowship, first cohort completed in 2025, second cohort launching in 2026. • Achieved more top four finishes in J.D. Power quality study, 11 quality awards in E-Systems, and PACE award for zone control module. • Onshoring and conquest awards in Seating and E-Systems, with thermal comfort solutions generating significant revenue and growth.

In the fourth quarter, Lear's Seating segment had sales of $4.4 billion, a 5% increase from 2024. For the full year, Seating sales were $17.3 billion, a 0.4% increase. The E-Systems segment had fourth quarter sales of $1.6 billion, a 3% increase from 2024, and full year sales of $6 billion, a 2% decrease. Seating outgrew industry production by two percentage points in the fourth quarter, while E-Systems margins improved by 30 basis points compared to 2024.

• 2026 revenue expected $23.2-$24 billion (midpoint +2% vs 2025). • Core operating earnings expected $1.03-$1.2 billion (midpoint +5% vs 2025). • Adjusted net income expected $6.45-$7.65 billion. • Restructuring costs ~$175 million, capital spending ~$660 million. • Operating cash flow $1.2-$1.3 billion, free cash flow $600 million midpoint. • Net performance targets: 40 basis points in Seating and 80 basis points in E-Systems in 2026.

• Industry and macroeconomic volatility can impact sales and margins. • Commodity price fluctuations, though largely indexed, could cause choppiness in revenues. • Trade and tariff disputes may affect volumes and cost structures. • Production disruptions, such as T1 downtime, can lead to volume fluctuations.

Q: Dan Levy asked about conquest wins and market share aspiration.

A: Ray Scott discussed the significant conquest win driven by innovation and technology, validated Lear's strategy, and emphasized the target of 29% market share remains reasonable due to innovation.

Q: Colin Langan inquired about earnings cadence and onshoring.

A: Jason Cardew said the first quarter is off to a strong start, similar to fourth quarter, with Seating in low 6s and E-Systems around 5% margins; onshoring wins like Orion award launch in 2027.

Q: Joe Spak asked about canceled EV programs and recoveries.

A: Jason Cardew stated major negotiations for canceled programs are largely complete, with cash benefits embedded in 2026 guidance.

Q: Emmanuel Rosner asked about T1 downtime and copper impact.

A: Jason Cardew said T1 downtime is more in third quarter, and commodity impacts are nominal due to indexing agreements.

Q: Mark Delaney asked about TCS and conquest business.

A: Jason Cardew mentioned TCS revenue target remains, with timing pushed slightly, and Lear has a billion and a half dollar pipeline of seating conquest opportunities in 2026.