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Visteon Q4 and Full-Year Earnings

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Visteon released its overall 2017 and Q4 2017 earnings on February 22, 2018.

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Visteon Q4 and Full-Year Earnings

  1. 1. Visteon Q4 and Full-Year 2017 Earnings Feb. 22, 2018
  2. 2. 2 Visteon Electronics – A Record Year Q4 2017 Summary • Sales of $797 million • Adjusted EBITDA of $102 million • Adjusted free cash flow of $58 million • New business wins of $2.4 billion FY 2017 Summary • Sales of $3.146 billion • Adjusted EBITDA of $370 million • Adjusted free cash flow of $148 million • New business wins of $7 billion • Backlog of $19.4 billion
  3. 3. 3 Volume and new launches drive faster-than-market growth • Global production volumes increased 2.1% Y/Y • Asia Pacific and Europe performed better than expected • North America showed weakness especially in 2H 2017 • Visteon top-5 customers grew by 1.7% 2017 Market Performance (Y/Y) Visteon Sales Growth (Y/Y) • New product launches and production volume grew sales 8.3% over prior year, offset by 4.4% of product roll-offs • Pricing negotiations impact in 2017 was similar to prior year • Higher volumes, product launches and roll-offs increased Visteon’s sales Y/Y by ~4%; double market growth rate Market Overview and Visteon Sales 2.6% 3.2% (4.3)% 20.4% 2.1% Asia Pacific Europe North America South America Global $3,107 $3,146 $258 $(138) $(81) 2016 Sales Volume/ Launches Roll-offs Currency/ Pricing 2017 Sales 8.3% (4.4)% (2.6)% (Dollars in millions) 1.3% 3.9%
  4. 4. Market leading performance in Instrument Cluster segment 4 • Two consecutive years of strong performance in cluster business wins • On track to improve global market share position • Significant growth in all-digital cluster wins in 2017 • ASP of 2017 new cluster business up ~20% Y/Y • Acceleration of analog to digital conversion • Combination of safety-relevant info plus digital content from infotainment and cloud • Increase of display size and software complexity • Emergence of 3-D and driver monitoring technology 2017 Key Cluster Market Trends Visteon Digital Cluster Platform Visteon New Business Wins in Clusters Instrument Clusters 1% 38% 61% 2017 FY $3.9B Hybrid Analog All Digital 6% 57% 37% 2016 FY Hybrid Analog All Digital $3.8B
  5. 5. Audio/Infotainment Gaining momentum in Audio/Infotainment with $1.5B in new business wins 5 • Strong performance in all three categories compared to 2016 • Acquisition of AllGo strengthens position in Display Audio • ASP of 2017 new audio/infotainment business up ~10% Y/Y • Two infotainment wins with Phoenix™ platform in 2017 • Two domain controller wins with SmartCore™ platform in 2017 • Audio being replaced with display audio for entry infotainment • Embedded infotainment systems become connected platforms • Android as potential option for operating system for embedded infotainment • Emergence of integrated cockpit domain controllers 45% 8% 47% 2016 FY $0.7B Embedded Infotainment Display Audio Audio 38% 21% 41% 2017 FY $1.5B Embedded Infotainment Display Audio Audio Visteon Infotainment Platform 2017 Key Audio/Infotainment Market Trends Visteon New Business Wins in Audio/Infotainment
  6. 6. New Business Wins and Backlog Record new business wins result in significant backlog growth 6 2017 NBW Highlights • Record year for new business wins with 30% growth Y/Y • Growing significantly faster than market in all-digital clusters • Doubled audio/infotainment awards Y/Y • Increased average size of new business wins by ~25% • Regional NBW mix in-line with global production volumes 2017 Backlog Growth • Order backlog grew 18% in 2017 due to strong new business win performance • Significant portion of backlog in faster growing products and regions 30% $5.4B $7.0B $19.4B 18% $16.5B
  7. 7. Looking Ahead – Key Technology Trends 7 Digital Cockpit Connected Car ECU Consolidation HMI for Level 3 Autonomous L1-L2 ADAS L3-L4 Autonomous 2005 2010 2015 2020 2025 Cockpit Electronics ADAS/Autonomous
  8. 8. Convergence of Cockpit Electronics and Autonomous Driving 8 Uniquely positioned to meet industry demand for converged cockpit solutions Individual hardkeys, buttons, knobs, digital displays Digital clusters Head-up displays 3-D instrument clusters Driver monitoring Augmented reality L1 L2 L3 L4 L5 2005 2010 2015 2020 2025 2030 Cockpit Electronics Technologies Automated Driving Levels Visteon Technology Platforms Digital Cluster Platform Autonomous Driving Platform
  9. 9. Q4 and FY 2017 Highlights Strong finish in Q4 delivered record year for Visteon in 2017 9 • Delivered strong Q4 with $797M in sales and record $102M in adjusted EBITDA (12.8% of sales) • Achieved 12th straight quarter of Y/Y adjusted EBITDA margin growth • Won record $2.4 billion in new business wins • Delivered $3,146 million in sales representing volume/mix growth of 3.9% • Delivered adjusted EBITDA margin of 11.8%, compared to 11.1% in prior year • Won record $7 billion in new business, increasing backlog to record $19.4 billion • Gained momentum in all-digital clusters and infotainment • Achieved strong performance in China with 21% sales increase Y/Y • Strengthened technology platforms to address key trends in cockpit electronics Q4 2017 FY 2017
  10. 10. Q4 and Full-Year 2017 Financial Results Feb. 22, 2018
  11. 11. Q4 and FY 2017 Key Financials* Electronics Product Group Q4 2016 Q4 2017 2017 B/(W) 2016 Sales $803 $797 $(6) Adjusted EBITDA $98 12.2% $102 12.8% $4 60 bps Adjusted free cash flow $79 $58 $(21) (Dollars in millions) 11 * All items above except sales are non-GAAP measures. Please see appendix for definitions and important disclosures regarding “Use of Non-GAAP Financial Information.” Electronics Product Group FY 2016 FY 2017 2017 B/(W) 2016 Sales $3,107 $3,146 $39 Adjusted EBITDA $346 11.1% $370 11.8% $24 70 bps Adjusted free cash flow $167 $148 $(19)
  12. 12. Sales and Adjusted EBITDA Growth – Electronics Only Strong flow-through from the sales increase (Dollars in millions) 12 Adj. EBITDA Full Year Sales EBITDA 2017 Actual $3,146 $370 2016 Actual 3,107 346 2017 B/(W) 2016 $39 $24 Key Drivers Volume / Mix / Manufacturing $120 $74 Engineering and SG&A - 42 Pricing/Other (86) (86) Currency 5 (6) Total $39 $24 $3,107 $3,146 FY 2016 FY 2017 Sales $346 $370 FY 2016 FY 2017 11.1% 11.1% 11.8% 1.3% 6.9%
  13. 13. Cash Flow Generation and Healthy Balance Sheet Electronics adjusted free cash flow was $148 million in 2017 13 (Dollars in millions) FY 2016 FY 2017 Adjusted EBITDA $346 $370 Trade Working Capital - (47) Cash Taxes (81) (49) Other Changes (24) (27) Sub-Total $241 $247 Capital Expenditures (74) (99) Electronics Adjusted Free Cash Flow $167 $148 Electronics Restructuring / Other (43) (34) Discontinued Ops (incl. Separation Costs) (79) 4 Total Visteon Free Cash Flow $45 $118 12/31/17 Cash $709 Debt 393 Net cash $316 Visteon Leverage LTM Adj. EBITDA $370 Debt / EBITDA 1.1x
  14. 14. 14 Capital Return Update $700 million remaining in share repurchases $700M $200M remaining OMR/ASR programs to complete the 2017 authorization $500M Outstanding Amount to be Repurchased To be executed through 2020 $400M Total Amount Authorized $200M repurchased in 20172017 Buyback Program $500M 2018 Buyback Program $900M at an average price of $101 for ~2M shares
  15. 15. Building the Foundation Through Operational Excellence 15 Executing on Our Long-Term Strategies Margin Expansion / Cash Flow Generation Return Enhancement Through Capital Deployment • FY new business wins of $7 billion, leading to backlog of $19.4 billion • Strong performance in All-Digital Cluster and Audio/Infotainment • Delivered $370 million in FY adjusted EBITDA, 11.8% of sales • Delivered positive FY adjusted free cash flow • Executed $200 million in share repurchases • $700 million remaining in authorized share buyback programs
  16. 16. Appendix Feb. 22, 2018
  17. 17. Forward-Looking Information • This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these forward-looking statements, including, but not limited to: • conditions within the automotive industry, including (i) the automotive vehicle production volumes and schedules of our customers, (ii) the financial condition of our customers and the effects of any restructuring or reorganization plans that may be undertaken by our customers, including work stoppages at our customers, and (iii) possible disruptions in the supply of commodities to us or our customers due to financial distress, work stoppages, natural disasters or civil unrest; • our ability to execute on our transformational plans and cost-reduction initiatives in the amounts and on the timing contemplated; • our ability to satisfy future capital and liquidity requirements; including our ability to access the credit and capital markets at the times and in the amounts needed and on terms acceptable to us; our ability to comply with financial and other covenants in our credit agreements; and the continuation of acceptable supplier payment terms; • our ability to satisfy pension and other post-employment benefit obligations; • our ability to access funds generated by foreign subsidiaries and joint ventures on a timely and cost effective basis; • general economic conditions, including changes in interest rates and fuel prices; the timing and expenses related to internal restructurings, employee reductions, acquisitions or dispositions and the effect of pension and other post-employment benefit obligations; • increases in raw material and energy costs and our ability to offset or recover these costs, increases in our warranty, product liability and recall costs or the outcome of legal or regulatory proceedings to which we are or may become a party; and • those factors identified in our filings with the SEC (including our Annual Report on Form 10-K for the fiscal year ended December 31, 2017). • Caution should be taken not to place undue reliance on our forward-looking statements, which represent our view only as of the date of this presentation, and which we assume no obligation to update. The financial results presented herein are preliminary and unaudited; final financial results will be included in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017. New business wins, re-wins and backlog do not represent firm orders or firm commitments from customers, but are based on various assumptions, including the timing and duration of product launches, vehicle productions levels, customer price reductions and currency exchange rates. 17
  18. 18. Use of Non-GAAP Financial Information • Because not all companies use identical calculations, adjusted gross margin, adjusted SG&A, adjusted EBITDA, adjusted net income, adjusted EPS, free cash flow and adjusted free cash flow used throughout this presentation may not be comparable to other similarly titled measures of other companies. • In order to provide the forward-looking non-GAAP financial measures for full-year 2017, the Company is providing reconciliations to the most directly comparable GAAP financial measures on the subsequent slides. The provision of these comparable GAAP financial measures is not intended to indicate that the Company is explicitly or implicitly providing projections on those GAAP financial measures, and actual results for such measures are likely to vary from those presented. The reconciliations include all information reasonably available to the Company at the date of this presentation and the adjustments that management can reasonably predict. 18
  19. 19. Reconciliation of Non-GAAP Financial Information Adjusted Gross Margin The Company defines adjusted gross margin as gross margin, adjusted to eliminate the impacts of employee charges, other non-operating costs, intangibles amortization and stock- based compensation expense. Adjusted SG&A The Company defines adjusted SG&A as SG&A, adjusted to eliminate the impacts of employee charges, intangibles amortization and stock-based compensation expense. 19 2016 (Dollars in millions) Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Gross margin $121 $109 $105 $129 $464 $131 $112 $116 $140 $499 Less: Stock-based compensation expense - - - (1) (1) - (1) - (1) (2) Intangibles amortization - COGS (2) (1) (2) (1) (6) (1) (1) (1) - (3) Other - - - - - - 1 3 2 6 Subtotal $(2) $(1) $(2) $(2) $(7) $(1) $(1) $2 1 1 Adjusted gross margin $123 $110 $107 $131 $471 $132 $113 $114 $139 $498 2017 2016 (Dollars in millions) Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year SG&A $56 $54 $53 $57 $220 $51 $53 $54 $64 $222 Less: Employee charges 1 - - - 1 - - - - - Stock-based compensation expense 2 2 2 1 7 2 3 3 2 10 Intangibles amortization - SG&A 2 2 2 3 9 2 2 2 3 9 Subtotal $5 $4 $4 $4 $17 $4 $5 $5 $5 $19 Adjusted SG&A $51 $50 $49 $53 $203 $47 $48 $49 $59 $203 2017
  20. 20. 2016 (Dollars in millions) Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Cash from (used by) operating activities ($58) $72 $24 $82 $120 ($10) $96 $45 $86 $217 Less: Capital expenditures, incl intangibles 25 12 19 19 75 32 15 22 30 99 Free cash flow ($83) $60 $5 $63 $45 ($42) $81 $23 $56 $118 Reconciliations to Adjusted Free Cash Flow Free cash flow ($83) $60 $5 $63 $45 ($42) $81 $23 $56 $118 Exclude: Restructuring / transformation-related payments 55 19 20 19 113 12 6 10 2 30 Adjusted free cash flow ($28) $79 $25 $82 $158 ($30) $87 $33 $58 $148 2017 Reconciliation of Non-GAAP Financial Information (cont’d) Net Income, EPS & Adj. EPS Free Cash Flow and Adjusted Free Cash Flow 20 2016 2017 (Dollars and Shares in Millions) Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year. Net income attributable to Visteon $19 $26 $28 $2 $75 $63 $45 $43 $25 $176 Average shares outstanding, diluted 38.5 34.4 34.4 33.5 35.4 33.0 32.0 31.8 31.7 32.2 Earnings per share $0.49 $0.76 $0.81 $0.06 $2.12 $1.91 $1.41 $1.35 $0.79 $5.47 Memo: Adjusted EPS Net income attributable to Visteon $19 $26 $28 $2 $75 $63 $45 $43 $25 $176 Restructuring expense (10) (7) (5) (27) (49) (1) (3) (6) (4) (14) Other income and expense (4) - (13) (7) (24) - - (1) (1) (2) Loss on divestiture - - - - - - - - (33) (33) Loss on non-consolidated affiliate transactions - - 1 (1) - (1) 3 2 - 4 Other - non-recurring costs incl in Gross Margin - - - - - - 1 3 2 6 Employee severance charges included in SG&A (1) - - - (1) - - - - - Discontinued operations (13) (9) 7 (25) (40) 8 - - 9 17 Tax effect of adjustments - - - 1 1 - - - - - Sub-Total ($28) ($16) ($10) ($59) ($113) $6 $1 ($2) ($27) ($22) Adjusted net income $47 $42 $38 $61 $188 $57 $44 $45 $52 $198 Average shares outstanding, diluted 38.5 34.4 34.4 33.5 35.4 33.0 32.0 31.8 31.7 32.2 Adjusted earnings per share $1.22 $1.22 $1.10 $1.82 $5.31 $1.73 $1.38 $1.42 $1.64 $6.15
  21. 21. Reconciliation of Adjusted Earnings Per Share (Electronics PG) 21
  22. 22. 2017 and 2018 Reconciliation Adjusted EBITDA to Net Income Reconciliation 22 Actual Full Year (Dollars in millions) 2016 2017 Low-End High-End Electronics Adjusted EBITDA $346 $370 $370 $380 Depreciation and amortization 84 87 90 90 Restructuring expense 37 14 10 10 Interest expense, net 12 16 15 15 Equity in net income of non-consolidated affiliates (2) (7) (7) (7) Loss on divestiture - 33 - - Loss (gain) on non-consolidated affiliate transactions - (4) - - Other (income) expense, net 10 (4) - - Provision for income taxes 41 48 55 55 Non-cash, stock-based compensation expense 9 12 20 20 Net income attributable to non-controlling interests 16 16 15 15 Net Income - Electronics Only $139 $159 $172 $182 (Income) loss from discontinued operations, net of tax 40 (17) - - All other loss (income) net of tax 24 - - - Net Income attributable to Visteon $75 $176 $172 $182 Estimated 2018 Full Year
  23. 23. 2017 Reconciliation (cont’d) Free Cash Flow and Adjusted Free Cash Flow (Electronics Product Group) 23 2016 2018 FY Guidance (Dollars in millions) Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Low-end High-end Cash from (used by) operating activities Total Visteon ($58) $72 $24 $82 $120 ($10) $96 $45 $86 $217 Less: Discontinued operations and other operations (45) (20) (9) (4) (78) - - - 4 4 Cash from (used by) operating activities (Electronics) ($13) $92 $33 $86 $198 ($10) $96 $45 $82 $213 $235 $255 Capital expenditures, incl intangibles (Electronics) Total Visteon $25 $12 $19 $19 $75 $32 $15 $22 $30 $99 Less: Discontinued operations and other operations 1 - 1 (1) 1 - - - - - Capital expenditures, incl intangibles (Electronics) $24 $12 $18 $20 $74 $32 $15 $22 $30 $99 $100 $95 Free cash flow (Electronics) Cash from (used by) operating activities (Electronics) ($13) $92 $33 $86 $198 ($10) $96 $45 $82 $213 $235 $255 Less: Capital expenditures, incl intangibles (Electronics) 24 12 18 20 74 32 15 22 30 99 100 95 Free cash flow (Electronics) ($37) $80 $15 $66 $124 ($42) $81 $23 $52 $114 $135 $160 Exclude: Restructuring / transformation-related payments (Electronics) 15 7 8 13 43 12 6 10 6 34 25 20 Adjusted free cash flow (Electronics) ($22) $87 $23 $79 $167 ($30) $87 $33 $58 $148 $160 $180 2017
  24. 24. Visteon 2017 Sales and Adjusted EBITDA 24
  25. 25. Reconciliation of Electronics Financial Information Electronics Product Group 25
  26. 26. Q4 2017 Financial Results – U.S. GAAP (Dollars in millions except for Earnings Per Share) 26 Consolidated Visteon (Dollars in millions) Q1 Q2 Q3 Q4 Full Year Q1 Q2 Q3 Q4 Full Year Sales $802 $773 $770 $816 $3,161 $810 $774 $765 $797 $3,146 Gross Margin $121 $109 $105 $129 $464 $131 $112 $116 $140 $499 SG&A $56 $54 $53 $57 $220 $51 $53 $54 $64 $222 Net income attributable to Visteon $19 $26 $28 $2 $75 $63 $45 $43 $25 $176 Diluted EPS $0.49 $0.76 $0.81 $0.06 $2.12 $1.91 $1.41 $1.35 $0.79 $5.47 Cash from operations $(58) $72 $24 $82 $120 $(10) $96 $45 $86 $217 Capital expenditures, incl intangibles $25 $12 $19 $19 $75 $32 $15 $22 $30 $99 2016 2017

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