Magna International Inc. Q4 FY2025 earnings call

• Operational excellence drove margin benefits in 2025, expected to add 35-40 basis points in 2026. - Secured important commercial recoveries and executed tariff mitigation plans. - Strong cash generation: $3.6B operating cash flow and $1.9B free cash flow in 2025. - Key milestones in 2025: hit annual bookings target, 90% of 2028 business secured, collaboration with NVIDIA, thermal sensing technology award. - Unified digital architecture covering 80% of divisions, material flow optimization program, AI solutions for scheduling and quality control. - Received 151 customer awards for quality and operating performance.

Seating: Fourth quarter sales up 8% year over year. Full year had program-specific impacts but margins resilient. Body Exteriors and Structures: Expected positive sales growth and meaningful margin expansion. Power and Vision: Margin expansion expected, benefited from new launches and operational excellence. Complete Vehicles: Fourth quarter sales down 10% due to end of certain programs, but new launches with Chinese OEMs (Xiaopeng, GAC) provide growth opportunity.

• 2026 outlook: weighted sales growth over market 1.5% midpoint, adjusted EBIT margin expansion 40-100 basis points, free cash flow $1.6-$1.8B. - Adjusted EPS range $6.25-$7.25. - Plan to repurchase all remaining ~22M shares under NCIB. - Sales near flat to up 3.5% vs 2025, EBIT margin 6%-6.6%, back-half weighted EBIT.

• Forward-looking statements involve risks, assumptions, uncertainties. - Potential impact of DRAM and raw material costs on ADAS business. - Uncertainty around commercial recoveries and their timing affecting free cash flow. - Exposure to changes in vehicle production volumes and OEM strategies.

Q: Question on guidance for outgrowth ex Complete Vehicles A: Swamy Kotagiri discussed operational excellence, new programs, and how outgrowth is driven by BES, P&V growth and Complete Vehicles exclusion Q: Question on operational excellence runway and commercial recoveries A: Swamy Kotagiri stated operational excellence is a continuing journey with 35-40 basis points expected in 2026 and commercial recoveries expected neutral year-over-year Q: Question on Seating segment A: Swamy Kotagiri clarified Magna Seating didn't lose incumbent programs, remains core, and discussed program-specific impacts on 2026 Seating numbers Q: Question on free cash flow and commercial recoveries timing A: Philip Fracassa explained commercial recoveries had a fourth quarter impact on free cash flow and expect incremental benefit in 2026 but not at 2025 levels Q: Question on sales conversion and margin drivers A: Philip Fracassa and Swamy Kotagiri discussed FX impact, operational excellence as margin driver, and pull-through on incremental volume Q: Question on DRAM and raw material costs A: Swamy Kotagiri mentioned coordinating with customers on DRAM issues and included modest unrecovered cost headwinds in guidance Q: Question on steel/aluminum tariffs and non-auto opportunities A: Swamy Kotagiri discussed tariff mitigation through customer terms and non-auto opportunities aligned with core strategy Q: Question on Complete Vehicles growth momentum A: Swamy Kotagiri discussed new customer wins and how Complete Vehicles growth is influenced by value-add revenue and program dynamics Q: Question on autonomy and megatrend investments A: Swamy Kotagiri discussed ADAS pipeline and no change in EV investment strategy, focusing on optimizing engineering and capital Q: Question on Chinese vehicle exports and positioning A: Swamy Kotagiri stated Magna is present in China for Chinese and international OEMs, seeing it as an opportunity Q: Question on BES and Seating margins bridge for 2026 A: Philip Fracassa discussed operational excellence as key driver, FX impact, and normal incrementals for BES and Seating margins