Adient plc (ADNT) Q4 2026 Earnings Call Transcript

Welcome to Addient's fourth quarter 2026 earnings call. Parties will be in a listen-only mode until the question and answer session of today's call. I'd like to inform all participants that today's call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Linda Conrad. Thank you. You may begin. Thank you, Denise.

Good morning, everyone, and thank you for joining us. The press release and presentation slides for our call today have been posted to the investor section of our website at adiant.com. This morning, I'm joined by Jerome Dorlock, Adiant's President and Chief Executive Officer, Mark Oswald, our Executive Vice President and Chief Financial Officer, and Peter Carlin, Vice President of Finance and incoming Chief Financial Officer. On today's call, Jerome will provide an update on the business, Mark will review our Q4 and full-year financial results, and then Peter will provide an outlook for fiscal year 2027. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome, Mark, and Peter, there are a few items I'd like to cover. First, today's conference call will include forward-looking statements. These statements are based on the environment as we see it today, and therefore involve risks and uncertainties. I would caution you that our actual results could differ materially from these forward-looking statements made on the call. Please refer to slide two of the presentation for our complete Safe Harbor Statement. In addition to the financial results presented on a GAAP basis, we will be discussing non-GAAP information that we believe is useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures to the closest GAAP equivalent can be found in the appendix of our full earnings release. And with that, it is my pleasure to turn the call over to Jerome.

Thank you, Linda. Good morning, everyone, and thank you for joining us today. Before we begin, I would like to take a moment to recognize Mark Oswald and thank him for his contributions during his time at Adiant. Mark has been a valued partner to me and to the broader leadership team, and we greatly appreciate all that he has done for the company. At the same time, I am very pleased to welcome Peter Carlin to the CFO role as of November 16th. After serving on our board for several years, Peter brings a new perspective to the organization. And I'm looking forward to partnering with him as we move into our next chapter. As I always do in this call, I would like to take a moment to recognize the commitment of our global team and thank them for their efforts. This past year has been full of unexpected challenges, and our team has worked diligently to deliver upon our commitments. Their efforts have not gone unnoticed. They are recognized and very much appreciated. In addition, I would also like to thank our customers for their continued trust and partnership. We remain committed to meeting and exceeding their expectations by delivering innovative solutions and operational excellence. With that, let's turn to slide four. EDIENT delivered a solid finish to fiscal 2026. Our focus all year was on executing what we could control. That focus showed up in our results, in our cash generation, And then how we deploy a capital. Beginning with the top line, fiscal 26 revenue was approximately $15.2 billion, up 4% year-over-year. Adjusted EBITDA was $884 million flat versus last year. We were able to hold earnings steady, even though the backdrop was very challenging. We generated $222 million of free cash flow. And end of the year with $886 million of cash on the balance sheet. With that free cash flow, we repurchased $100 million of adding shares, roughly 6% of our shares outstanding. We also paid down $35 million of debt, ending the year with $2.4 billion of gross debt and $1.5 billion of net debt. I don't want to gloss over the environment, though. Across the industry, geopolitical disruptions, macroeconomic factors, and elevated input costs collectively weighed on the year. In the Americas, we saw near-term operational headwinds, including customer and supplier-driven inefficiencies. In EMEA, we faced lower volumes and unfavorable customer mix. And finally, in Asia, we saw China market pressure, lower domestic volumes. And due to the conflict in Iran, lower export volumes as well from certain of our operations. Even so, the team stayed focused on execution, and that is why we can report a solid finish to the year. Turning to the next slide, Adiant's localized wins and premium seeding content are supporting a diversified customer base across the globe. In the Americas, Adiant continues to be a net beneficiary of customer onshoring. This quarter, we secured new business with Nissan on their e-Power vehicle, an on-shoring win where we will be supplying JIT, trim, foam, and other components. We expect this program to come online in the back half of fiscal 28 with around 40,000 annual units. Next, we continue to win business across all powertrains, further expanding our industry-leading diversity. Our windspan electric, hybrid, and internal combustion platforms. This quarter, we won vertically integrated content on the Neo Cygnus BEV, where we are providing first-row jet, trim, and foam. On the Proton AMA05ICE platform, we have the complete seat, and on the Dongfang Honda NX1 plug-in hybrid, we have the third-row complete seat. In Europe, we are retaining and extending business with many European OEMs. We have secured a number of replacement and lifecycle extension awards this past quarter, including content on the Volkswagen Audi Q8, the Skoda K-Rock, and the rear seat structure on the BMW X1, X2, and Mini Countryman. These awards reinforce our incumbent positions and extend revenue visibility on existing programs. Importantly, they leveraged our established manufacturing footprint and seeding expertise while supporting profitable growth with key customers. And finally, in Asia, we continue to launch vertically integrated, high-content, premium seeding products with a variety of customers. A couple of highlights from this quarter's launches include the Mitsubishi Pajero, where we provide powered comfort features and flexible second- and third-row seating, and the Xiaomi Sky Nomad N90, which includes zero-gravity seating on both rows, as well as a swivel function on the first row. Taken together, these ones show a diversified customer base across regions. Power trains, and product types. Moving on to slide six, this page highlights how the team has successfully executed across the year and what that means for business going forward. Let me begin with our customers. We received numerous customer awards and recognition in every region this year, reinforcing our supplier of choice status. That recognition is translating into business. We continued to win on-join programs, and we also secured multiple new and conquest wins that were highlighted throughout the year. Next, we delivered on innovation. Automation and modularity drove new product wins across the business. Our innovative products were recognized by our customers with new program wins and launches. These product offerings help us increase content per vehicle and allow our customers to differentiate themselves in the market. A few examples of this include the Step Joy Foot Massage, which is sold on the NEO ES9. We also have the ProForce Massage Flow, which is available on multiple models now in the Asia-Pacific region. And the Power Swivel is available on Leap Motor D99. Our breadth of innovation from product to process will continue to be a key differentiator for Addion. Moving on now to the regional dynamics. Each region faced its own set of challenges this year. In spite of those challenges, we delivered growth over market in the Americas and China. In EMEA, restructuring benefits are beginning to materialize. Strong business performance is helping to offset macro headwinds. We continue to execute commercial, operational, and strategic actions with a focus on driving value. In Asia, we have a strong business both in China and outside of China. We deliver double-digit margins in the region and expect that to continue into next year. Finally, on margins and cash. In China, we mitigated margin compression and continued to actively manage our JV footprint. After the quarter end, we entered into an agreement to sell our 50% stake in our FAA joint venture. This joint venture is a seat frame joint venture with CFAA, and the transaction will be subject to closing conditions. This will simplify ownership and oversight. Combining the frame and seating business should result in improved coordination and cost competitiveness. It will also achieve a more closely integrated seeding solution. Across the company, we've stayed laser-focused on cash generation while managing through industry and macroeconomic conditions. As the management team reflects on what we accomplished this year, this is an execution that supports our confidence heading into fiscal 2027 against what is a very challenging macro backdrop. And with that, I'll turn the call over to Mark to walk you through a financial review.

Thanks, Jerome. Let's jump into the financials. Adhering to our typical format, slides 8 and 9 detail our reported results on the left side and our adjusted results on the right side. We will focus our commentary on the adjusted results, which exclude special items that we view as either one time in nature or otherwise not reflective of the underlying performance of the business. Full details of these adjustments are included in the appendix of the presentation for reference. That said, moving to the right side, sales for the quarter were $3.7 billion, up 1% year-over-year, with adjusted EBITDA of $229 million and adjusted EBITDA margin of 6.1%. Adjusted EBITDA and adjusted EBITDA margin. We're both relatively flat year on year, despite the impact for Middle East conflict related costs. Equity income was up significantly year over year, mainly driven by favorable business performance in certain of our China joint ventures. And it reported adjusted net income of $40 million or 52 cents per share. For the full year, let's flip to slide nine. Sales came in approximately $15.2 billion, up 4% year-over-year. If we exclude FX, sales were up approximately 2% year-over-year. Adjusted EBITDA landed at $884 million, essentially flat with fiscal year 2025. Positive business performance offset the unfavorable headwinds related to the Middle East conflict, which we'll get into a little bit more on the bridges. Equity income, as I mentioned on the last slide, mainly up due to favorable business performance in certain of our China joint ventures. For the year, we reported adjusted net income of $147 million, or $1.87 per share. I'll go through the next few slides briefly as details for the results are included on the slides, allowing sufficient time for Q&A. Diving deeper into the quarter and beginning with revenue on slide 10, we reported consolidated sales of approximately $3.7 billion in Q4, which was a $42 million increase compared to Q4 fiscal year 25, primarily driven by favorable volume and pricing in the quarter. Looking to the right side of the slide, At-Am's consolidated sales were favorable to the broader market in the Americas due to strong volumes with key customers as well as pricing, while sales in EMEA underperformed due to customer mix. Consolidated sales in China continued to outperform the market due to strong new program launches with customers such as NIO, Leap Motor, and Xiaomi, while the rest of Asia underperformed, driven by softer volumes, primarily in Korea, as well as lower exports due to the ongoing disruptions caused by a Middle East conflict. In adding unconsolidated revenue, year-over-year results declined approximately 19% adjusted for FX, reflecting lower volumes on ICE platforms amid accelerating NEV adoption and softer consumer demand in China, with some modest impact from the Middle East conflict as well. Turning to slide 11, we provided a bridge of adjusted EBITDA to show the segment performance between periods. Adjusted EBITDA was $229 million during the quarter, up $3 million year-over-year. Business performance was strong during the quarter, driven by favorable material margin and commercial discipline, despite a $22 million headwind for Middle East conflict-related costs in Q4. However, volume and mix represented a year-over-year headwind due to lower customer volumes in EMEA. And expected mixed headwinds in China. Let's look at the full year. Moving to slide 12. Adjusted EBITDA was $884 million, up slightly year-over-year. When we adjust for the $41 million impact of Middle East conflict-related costs, adding it drove nearly $100 million in favorable business performance year-over-year. The team's disciplined execution continued to deliver. Unfavorable volume and mix of 70 million year-over-year was a result of lower customer production in Europe and customer mix headwinds in Asia partially offset with net impact of volume and mix from the Americas. As in past quarters, we've provided segment performance details in the appendix of the presentation. Starting on page 20, I'll walk through these briefly. For the full year, America's adjusted EBITDA was $399 million, down slightly year-over-year. The region absorbed the largest share of the Middle East conflict-related costs, most of which landed in Q4, as the chart shows. In EMEA, adjusted EBITDA was roughly flat year over year at $125 million. Vaughan and Mix remained a headwind, but business performance improved through restructuring benefits and commercial actions, which helped offset about $15 million of Middle East-related costs. In Asia, adjusted EBITDA was $450 million for the year, up $10 million year-over-year. The region remained highly profitable with favorable business performance in both the consolidated and unconsolidated businesses. Helping to mitigate volume and mix headwinds due to expected mix-related margin compression in China and softness driven by the Middle East conflict. To sum up the regions, fiscal year 2026 was a year of challenges, as Jerome noted in his opening remarks. The team stayed focused on what we could control, generating strong cash despite the headwinds. The underlying operating performance remained resilient. Turning to Addion's cash flow now on slide 13, for the full year, 2026, the company generated $222 million of free cash flow defined as operating cash less capex. We have highlighted the key drivers impacting the full year free cash flow on the right side of the slide. During the year, we benefited from certain fiscal year 2025 dividends that were delayed and paid in fiscal year 2026. We also had a favorable impact of roughly $35 million due to the timing of IEPA refunds in fiscal year 26, which we expect to return to our customers in fiscal year 2027. In addition, cash flow was favorably impacted by about $25 million of customer program tooling payments that was pulled from 2027 into 2026. We also had lower year-over-year restructuring spend during the year, which was offset by higher CapEx to support growth and innovation, as well as higher cash taxes due to non-recurring tax settlement during the year, which we previously highlighted. In total, we had about $60 million of timing-related working capital benefits during the fourth quarter. Turning to Slide 14 for our Liquidity and Capital Structure. We ended the year with total liquidity of approximately $1.7 billion. That included roughly $886 million of cash on hand and $857 million of undrawn capacity under our revolving line of credit. We remain well-positioned from a liquidity standpoint. On capital allocation, we returned $100 million to shareholders in fiscal 2026, Through share repurchases, about 4.9 million shares, or roughly 6% of our shares outstanding. On the debt side, we continued to be active in the fourth quarter. We paid down $35 million of our 8.25% senior unsecured notes. We also took advantage of the market and executed an opportunistic refinancing of our $500 million of 7% notes through an add-on to our term loan B. That transaction should generate approximately $6 million of annualized interest savings. Our net leverage ratio on a trailing 12-month basis is 1.7 times. As you can see from the maturity profile on the right side of the slide, we have no near-term maturities. Importantly, the balance sheet is in a strong position, and we remain disciplined with how we deploy capital. With that, I'll hand it over to Peter to talk about our outlook for fiscal year 2027.

Thanks, Mark, and thank you for your decade of service at ADIN. I also want to say thank you to Jerome and the board for providing this opportunity to me. As we enter fiscal 2027, we expect significant volume headwinds. Global mobility anticipates global vehicle production will decline approximately 1%, with all key markets down year over year. ADIN also faces incremental pressure from vehicle and program mix in the Americas and China. Against that backdrop, our focus remains squarely on the things we can control. We will continue to drive growth in our core product lines, execute our launch pipeline, invest in automation, improve productivity, partner with vendors and suppliers to find savings, and advance our restructuring actions. We expect these actions to support continued modest margin expansion and a declining sales environment. We will focus on cash generation, which remains our highest priority. While lower volumes will create pressure on free cash flow in Fiscal 27, we end at Fiscal 26 with a strong cash balance and remain committed to returning value to our shareholders. We are evaluating multiple opportunities to generate additional cash in 2027. While the industry backdrop for Fiscal 27 appears to be challenging, neither our priorities nor our confidence in our ability to execute have changed. With that backdrop, let's turn to slide 17 and walk through our fiscal 2027 outlook. We expect revenue of approximately $14.8 to $15 billion, reflecting lower production volumes across each of our major regions, partially offset by continued outgrowth in Asia. Despite the lower volume environment, we expect adjusted EBITDA to be in the range of $900 to $925 million. We expect the benefits from continued business performance to more than offset the headwinds from lower volume in foreign exchange. Our commitment to business performance reflects the ongoing work across the organization around productivity, commercial discipline, and restructuring, and demonstrates the resilience we have built into the business. I want to thank all of our employees around the world for their hard work, dedication, and contributions to our ongoing success. Turning to cash, we expect free cash flow of more than $100 million. That is below the level of cash generation we expect from this business. CapEx and restructuring will continue to be elevated as we launch new programs, win new business, invest in automation, and position ourselves for lower costs. We are working every day to find ways to lower these costs and focus on only the fastest payback investments. Instilling this discipline will take time. Fiscal 27 cash flow is unfavorably impacted by $60 million of actions pulled forward into Fiscal 26. In addition, there is another $35 million headwind year-over-year related to dividends, where for the past two years we have benefited from timing of dividend payments. We do not expect this to recur in 2027. As I said earlier, we finished Fiscal 26 with a strong cash balance of $886 million and remain committed to a disciplined approach to capital allocation of Fiscal 27. Turn to slide 18. We are laser-focused on creating shareholder value. Reflecting confidence in audience outlook and cash flow generation, the Board recently approved a $400 million increase to our share repurchase authorization. This provides additional flexibility to return capital to shareholders over time. Our current authorization represents over 30% of our share count in today's prices. Management and the Board believe our current stock price and multiple present an excellent opportunity to repurchase shares. For fiscal 27, we are currently planning approximately $100 million of share repurchases. Importantly, we will remain disciplined in how and when we deploy that capital, taking into account our cash generation, market conditions, and other opportunities for capital. We are actively looking at other means of generating capital to take advantage of the multiple opportunities in front of us. We will evaluate additional options to deploy this capital into high-return investments across our capital structure and our business. The Board also approved a tax benefits preservation plan designed to protect our valuable U.S. tax assets, including our U.S. net operating loss carry-forwards and other tax attributes that could reduce future taxable income. These tax attributes represent meaningful future cash benefits, and the plan is intended to reduce the risk that an ownership change could limit our ability to utilize those attributes. Taken together, these actions reflect the same disciplined approach we have brought to the business. Generate cash flow, maintain financial flexibility, and focus on ways to create long-term value for our shareholders. With that, operator, we can turn it over to Q&A.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please unmute your line and press star 1. You will be prompted to record your name. To withdraw your question, you may press star 2. Again, press star 1 to ask a question. And one moment for our first question. Our first question comes from Alex Perry with Bank of America. You may ask your question.

Hi, thanks for taking our questions here. I just wanted to ask about China and just can you give us an update about how you're thinking about your China business in 2027? Definitely been an area about performance there. You know, what level of outgrowth do you expect against the, I think you I said minus 3% production outlook. Thanks.

Yeah, thanks very much for the question. China continues to be a very dynamic market environment, just in general, between the mix of exports, domestic, and general compression of the domestic market. I think when we think about our China business, we reflect on 26. We were able to exceed our commitments in managing the margin compression. When we think about 27, some of that margin compression will now start to flow through that we've been talking about. And speaking about, in terms of growth over market, we had a very good year this year. Do we expect that level of growth over market to continue? No, I don't think we would anticipate that. We do still see us growing above market in China, really driven from three factors, the first one being our customer mix as we continue to diversify into the China domestic OEMs. We've actually exceeded our commitment on what we had laid out, saying by 26, we wanted to be somewhere in the 60 China, 40 Western. We're actually now exceeding that, so the team continues to outperform in winning with the winners in China. The second factor is innovation. If you look at our innovation portfolio in China, it is world-class, whether that be our premium massage offerings that we have that are truly differentiated, things like Stepjoy that we launched with NEO. Or I look at our long rail, our long track portfolio, as well as our swivel mechanism portfolio, which will continue to allow us to grow in the market and exceed where the market's performing. And then the last thing that I think in China, when we look at the market, which allows us to be successful, is just a relentless focus on managing the cost there. And when we think about managing costs, it's not just about... Some of the input costs, it's managing the dividends, it's managing the total capital allocation in the region, and some of our partner relationships. We talked a little bit today about how we're looking at our FAA joint venture and working to monetize that, but that also allows, then, our partner, CFAA, to have a more integrated portfolio that they can bring to the market and will still benefit from that joint venture overall. Does that answer the question?

Yes, no, that's perfect. Thank you. Thank you for that. And I guess very similar question on EMEA, actually, for 27. You know, what sort of level of growth versus market are you expecting there? Are you seeing any signs of, you know, things bottoming there? And when would you sort of expect Europe to turn more towards, you know, growth in line with market as you look forward over the next few years? Thanks.

I think with This year, it's still too early to say where we'll end up at with respect to growth versus market. There are significant currents and dynamics in EMEA that are changing almost on a monthly basis, whether that is the cancellation of EV projects. The extension of ICE platforms, the extension of a couple of EVs, our customers, a few of them are continuing to have execution challenges, which is delaying launches that we are on. We saw that in 26. We anticipate there will be some level of that again in 27. So the EMEA theater is the most challenging operating theater that we have. I think we've been very open about that. We don't expect that to change in 27 or any time in the near future, so it's really then about us managing costs in that region, optimizing capital deployment between restructuring and capital dollars, as well as then looking for other ways to harvest cash in that region through non-core operating assets, which we're working to explore.

That's really helpful. Best of luck going forward. Thank you.

Thank you. Our next question comes from Joe Speck with UBS. Your line is open.

Thank you. Good morning, everyone. Look, there's clearly some timing here that changed between, I guess, originally 25 and 26, but now I'm more focused on 26, 27. So I just want to make sure we lay this out correctly. Like, you were looking for about 130 this year. That was your prior guidance. You ended up doing 220, but it seems like 60 million was pulled in. And you did. So that at least, you know, gets you to. To sort of exceed your initial expectations. And then you're looking at 100 next year. But I think originally, it feels like that 60 that came in this year was expected in next year. So can you just sort of, is that right? Can you just sort of help us understand that? And maybe just one more point on the 27 free cash flow, if you could give us a sense of.

So, I'll take the first question, and then I'll hand it over to Peter on the restructuring topic. So, the way you framed it up, Joe, is, I think, pretty much spot on. You know, we had said this year for 26 ending, we would expect to be somewhere – You know, in a 120 to 130 with a balance sheet of about 800 million cash available, we ended the year with almost 900 million on the balance sheet and free cash flow of the 220 figure. And that is a couple factors. One is a pull-ahead timing, and it's always better to have the cash in our balance sheet in our hands versus sitting out there either in a customer receivable or a supplier payable. So, I mean, we always want that money as soon as we can get it, and that's some of that timing. In addition, there were other factors in terms of, say, the tariff repayment from the government that came in sooner than what we had anticipated, and so that cash that's on our balance sheet. And what you really should then focus on is what's the combined cash flow over the two years as well as the balance sheet position. Between the two years, we had expected to be somewhere in the 280, 290 range for combined cash flow. We'll now look at combined cash flow over the two years closer to 320. So we're actually exceeding where we thought we would be for combined cash flow, especially when you adjust for the lower revenue and the challenging operating environment that we're in. And then really turn your focus then to the balance sheet, and that's where we'll be able to run with somewhere in the $800 million of cash in the balance sheet. We continue to push that even to $750 million. That will allow us to look at the capital deployment, as Peter talked about in his prepared remarks. We see somewhere in the $100 million of share repurchases this year available, and we'll monitor that as we go throughout the year to see timing as well as additional cash generation. As well as looking at ways to monetize non-core assets, and so really driving that distributable cash flow certainly greater than the $100 million of free cash flow. And as far as European restructuring, I'll hand it over to Peter to talk about how we're thinking about that and what's embedded.

In total, we expect sort of flattish restructuring dollars. We have an increase, actually, not in Europe, but in the other regions, offsetting a small decrease in Europe for 2027.

Thank you. And by the way, before I forget, Mark and Peter, our respective congratulations to each of you on your next roles here. The second question I had is maybe, you know, this tax benefit preservation plan with, obviously, you know, in some respect, it sort of highlights the big NOL you have and maybe a value that's not being accrued to that. But can you talk about... Why you felt there was a need to incorporate this at this point in time? Like, did something change? Was it sort of a prior oversight that something wasn't here to sort of help protect that NOL?

Yeah, I mean, so I do think our tax attributes are undervalued. You know, the amount of cash taxes that our NOL saves us each year is very significant, and so it's critical, and we have a fiduciary responsibility to protect those assets. And it wasn't an oversight, you know, previously in not putting a 382 protection plan in place. It's really, Joe, as we look at share ownership shift, and that's what drives a risk to your NOLs. We continually monitor the share ownership shift, and as we've been able to welcome new shareholders into Adient due to the performance and interest, it just moves that share ownership shift. You know, we as management and the board thought it was prudent, given the value of those tax attributes, to make sure we can protect them. And that's why we pushed it forward and implemented it. Okay. Thank you for that.

I appreciate it.

Thank you. The next question comes from Mike Ord. You may ask your question.

Thanks very much. Good morning, everyone. Jerome, you talked about some operating inefficiencies in the Americas. What were they, and how fast can they be mitigated?

Yes, so we, I mean, we didn't break out what the operating inefficiencies were, Mike, and, you know, we won't break out what the operating inefficiencies were, other than to say, you know, we've been very transparent talking about things like fuel surcharge, where you've had diesel fuel go from $3.50 up to, in the quarter, it peaked at almost $8, and some of our operating units, that will continue into $27. I am, I think, pleased to say that the Americas team is engaged with every customer on fuel surcharge recoveries, and in some cases, we've already been able to reach settlement. So, it's an industry dynamic that... Our business just is not meant to absorb, and we have to go out and get those costs back. In addition, you had unscheduled downtime at certain of our customers that wasn't anticipated. Unfortunately, some of that unscheduled downtime will continue into our Q1 and even potentially into Q2 with certain sets of our customer group. And then the last one is we reached a revised UAW settlement in two of our largest manufacturing plants. And that UAW settlement really hit us full on in terms of a run rate in our Q4, and as you know, it takes time to work through either customer recoveries or initiatives on the shop floor to offset some of those.

Okay, so it sounds like that works through that you start to get some recoveries, so maybe fiscal 2Q and 3, we start to get back on track to more normalized levels.

Yeah, and that's generally the timing. You've been following this business for a long time, Mike. It's very cyclical in nature in terms of how customer recoveries come on. How certain customer actions take shape. And given the nature of these costs, you know, where you don't have fuel surcharge agreements in place, it takes time to work through that, but we are aggressively working through it. And I'd say the same thing on some of the UAW agreements we've reached. We need time to work through the automation activities. You know, we have a world-leading automation portfolio. It's just how do we want to deploy that within our plants and deploy it in the plants that will offer us the highest return against those. Allocations.

On the 27 outlook, there are some big program disruptions, I guess, in your fiscal 2Q and 3Q. Can you talk about those, how they went into your planning? And I assume because of the size of them, if you get some upside, it's going to come from those as we get later in the year. Am I looking at that right, Peter or Linda, whoever put that one together?

Yeah, I mean, we have continued. Not just the ones you're talking about, but mixed headwinds in the Americas and China that are very significant in 2027. Yes. I mean, could it be better than that? Absolutely. I mean, again, we're relying on global mobility forecasts and what we get from our customers today. So, I would say we do have a lot of mixed headwind and volume headwinds in the Americas in 2027, but certainly it could be better if the customers, you know, I think don't makeshift in the way that they're expected and if they can accelerate some of the program launches. But we're not baking that probability in.

Right, but the biggest impact is 2Q, your fiscal 2Q. The March-April time period, is that the biggest impact to some of those changes?

Yeah, I think driven by downtime at certain customers as they're switching over to new models, that would be when we see the largest impact.

Okay, and then as you get through that, you get some momentum as you head into the summer as they rebuild inventory and those sorts of things.

I think as we look at the Americas business, You start to build momentum kind of end of Q3, Q4, because that's when certain of the on-shoring winds start to take shape. Some of the other programs that are coming out of very disruptive performance start to perform. But it will be, you know, this is a business where we sell to an end customer, and that end customer has to perform for us to see benefits of it.

Thank you. And, Mark Oswald, thank you for everything we've learned.

Thanks, Mike. Appreciate your support over the years.

Talk soon.

Thank you. Our next question comes from James Figuerello with B&P Paribas. Your line is open.

Hi. Good morning, everybody. Apologies if I missed this, but can you confirm what's embedded in the guide for the structures business roll-offs across the Americas and EMEA, and what's assumed for the Americas new business backlog contribution this year, which I believe was geared toward $400 million?

Yes, we haven't explicitly stated what's assumed for the metals roll-off in the Americas or Europe, other than to say we continue to, you know, have metals in the Americas, if you just look at the programs that we're on, such as some of the Volkswagen Atlas, some of the other common seat structure frames for the Germans, when those start to roll off, we expect to see continued momentum and right-sizing our metals portfolio across the Americas. And then to your second question as far as the backlog. The backlog that we had previously talked about for onshoring business, because the backlog is larger than that, you know, such as the Dakota wind and other things, but for pure onshoring business, the backlog overall is intact. In fact, we're now exceeding the $400 million. We talked today about the e-power wind with Nissan. So we're actually exceeding the $400 million backlog of just onshoring winds. It's really about timing, and when do certain of these programs begin to roll in? There has been delays on some of those key projects for us that will put pressure on, again, the mix in the Americas in particular in 27, so the total backlog remains intact, actually exceeding what we have previously communicated. Got it.

That's helpful. And then I guess just higher level by segment for the 2027 guide, can you share thoughts on regional growth over market and margin expectations and specific to Asia-Pac, right, this past year saw much better margin performance? Relative to your original year-of-year margin decline expectation of, like, 100 basis points plus, right? That came in better. What drove that favorable outcome, and how should we be thinking about the year-of-year trajectory for Asia-Pac margins this year?

Yeah, so we, you know, we didn't give a growth over market number projection for each region, just given the overall dynamics between the regions that I talked about earlier, particularly in China. If you just kind of go region by region, for Asia-Pacific, you know, we've always been signaling margin compression in 26 and then continued margin progression in 27. We outperformed in 26. There will be some catch-up to that in the 27 fiscal year, but the region itself will still remain very accretive to ADDIAN overall, very cash-generative to the region or to ADDIAN overall. And would expect it to outperform the market growth dynamics in China and in Asia Pacific as a combined entity. In Europe, I already talked a little bit about the European color. Growth over market there, I think, is a significant unknown. What we are focused on in Europe with laser attention is controlling our costs, controlling our capital expenditures, controlling our restructuring dollars. And looking at divestiture of non-core businesses in order to generate cash in that region. The margin profile in that region is going to largely depend on how we treat that capital allocation. We could look at restructuring more to drive margin expansion, but is that the best use of cash? You know, that's why we want to take time to continue to evaluate that, because it is just such a dynamic. Region and customer schedules, customer programs continue to change. What we and the management team can commit to is looking at that region from a cash flow standpoint and making sure that we're maximizing cash flows coming out. And then turning to the Americas. Within the Americas, we expect to see growth over market in our highest contribution product lines. So if you think about trim and you think about foam, I mean, we will exceed growth over market in those. Some of that gets eliminated out due to intercompany, but it helps to drive margin expansion in the region, and we expect margins to expand, especially on an operating level, in the Americas in 2027. And that is against what is a very, very challenging backdrop in the Americas. You know, we talked a little bit about fuel surcharge. You know, fuel surcharge is a big, big topic for us. We haven't quantified it, but it is significant in nature. Another one that we haven't talked about, but I think we need to always be aware of, is the changing tariff policies. You know, just the most recent change in the Canadian tariffs. Put somewhere between a $30 to $70 million pull on Americas that that team now has to go and get, and our ability to recover that is embedded in the guide. And then finally, as Mike just asked about in his questions, there is significant downtime that is planned as our customers change over models, and that's leading to trapped costs that the team has to go and recover. And again, that's embedded in the guide. So there is a significant amount of business performance in the Americas, which will drive margin expansion, even in the face of what is top line, you know, I would say declining year over year, but really driven by customer mix schedules. Does that answer your question, James?

Yeah, perfect. Thank you.

Okay. Thank you.

Thank you. Our next question comes from Dan Levy with Barclays. You may ask your question.

Great. Thank you, and Mark, congratulations. Peter, congratulations. In the past, you've given annual bridges, and you've given your guidance, and, Mark, over the years, you've done many, many bridges. So, wondering if we could just conceptually – I know you've sort of walked through some of the pieces here – give us a sense of what it's going to take to hit the midpoint of the guide, Because it seems like the starting point with volume decrementing at, you know, call mid to high teens, plus maybe some price and effects, it seems like you're going to have to have business performance that's sort of well north of $100 million. I know you just talked about that now. You did $58 million last year. So can you just maybe walk through, help us quantify a bit more the magnitude of business performance? that you're going to need. And if you could just also talk through the commodity piece as well. It sounds like there's some of this that you'll plan to try to recover from customers.

Yeah, it's Peter. I'm going to answer that question. I would say, you know, you should expect more business performance than we had in 2026. The teams, again, have a lot of headwinds that they're going to have to go recover. I think we have a good amount of confidence that, you know, some of the stuff that we endured in 2026 won't be repeated in 2027. It's a difficult commodities environment. It's also a difficult FX environment. A difficult volume environment, a different mix environment, so I would say we have a lot of different, you know, headwinds and some tailwinds. And, again, you know, we're just not going to go into too much detail from now on with respect to the exact movements, only because they change on a daily, weekly, and monthly basis. And so we're trying to provide sort of the high-level information for you guys to use. But I would tell you we have a lot of business performance ahead of us, but our teams are, you know, already mapped out a large part of it and continue to work every day to recover it. I just want to reiterate, you know, volume environment is difficult. And for us, we also have headwinds in the Americas and China from Mix, as we pointed out, plus commodities, plus tariffs, plus some FX in different regions of the world. So the team is definitely going to have to work really hard with our customers, our suppliers, and internally to find more cost opportunities to offset some of those headwinds.

Great. Thank you. And then as a follow-up, I wanted to just double click on your comment on volume. So, you know, the revenue last year from volume price was, you know, something like plus, well north of $300 million of revenue, but your volume mix On the EBITDA line was negative 70. I know you talked about some of the mixed challenges that are sort of driving down and more than offsetting the increased revenue, but maybe you could just walk through which of these pieces, you know, reverse in 2027, or, you know, should we view sort of the decremental margin on the lower revenue to be sort of outsized because mixed pressures continue?

The latter. Mixed pressures continue and are negatively impacting our decremental markets.

Okay.

Again, I mean, it could be better. Yeah, and opt is also, you know, better, which is providing, you know, that margin accretion in a down volume environment. So, again, like I said, the team's working really hard to execute, and that's our number one priority is, you know, driving down costs and ensuring that we can execute for customers.

Great. Thank you.

Thank you. And the last question comes from Emmanuel Rossner with Wolf Research. You may ask your question.

Great. Thanks so much. I was hoping to actually follow up on Dan's first question, which is around the net performance in 2027. I understand it's, you know, a little bit early and, you know, choppy to be able to sort of quantify the various pieces, but can you maybe just give us a sense of What gives you the confidence to, you know, guide assuming such a large amount of net performance and maybe within that, how much of it is sort of like, you know, recovering, you know, from customers and how much is it sort of like cost opportunities that may be sort of like more something that you directly control with your operation?

I mean, I would just say, again, we have a great group of employees at Adyen around the world, and, you know, it's a tough business, but they have to go every day and negotiate with our customers and our suppliers to save money. It's a substantial amount of money that we have to recover with commodities, tariffs. You know, FX, Middle East, all of these things, customer mix issues, customer activities that impact, you know, our performance. There's a lot, and we are, you know, dedicated to getting money out of everybody that we possibly can to recover those costs. So, I'd say, you know, if you're seeing it across the industry, there's a lot of inflation out there that we all have to endure and pass on to our customers. It's greater in many areas than it was last year, and we also have to, you know, deal with what Jerome pointed out, a significant increase in some of our labor costs in the Americas, which we're going to be annualizing in 2027, which, you know, were not annualized in 2026. So, yes, I mean, I'm not going to quantify it for you, but I'm going to tell you it's a substantial amount, and as I said earlier, it's larger than it was last year on the, you know, commercial recovery and business performance side. But we have, you know, you asked why we have confidence. I mean, I would say this is what the teams do every day. This is what they do. You know, we have good relationships with our customers. We are on solid programs. And, you know, we have a great group of employees who are working hard every day. And, you know, we've mapped out large. You asked about, like, how much have we mapped out. I mean, we know generally where we're going to get it from. We just have to actually go get it.

Right. So in 2026, it was, you know, a small amount of net performance. Is there, are you able to give us a sense of, you know, how much of 26 headwinds are yet to be recovered? And that would be incremental in 2027 to any headwinds that from next year that you would be looking to recover?

So, I think, Emmanuel, we've already given as much color as we'll give on that topic. You know, I talked about fuel surcharge, cycling in heavy in, say, Q4 in the Americas. That's obviously that we have to go and get. Some of that may or may not be retro. Talked about the labor agreements in the Americas that cycled in that we're going to have to now go and get the money on. So, there is some hangover. I think also in our Q3 earnings call, Mark gave, I think, pretty detailed commentary on commodities. And what's happening with commodities, and as long as we're in an increasing commodity environment, even though we're insulated to a very high percent, that's always going to drag on earnings until either commodities stabilize or they return back. And so there is an amount in 27 of, say, catch-up, but that assumes that commodities stay flat and they don't continue to increase. So I'll go back to what Peter said, which is... It's a very challenging environment, not just for Adiant, but in automotive overall. We have the best team in seating to go and execute against that. We have a customer mix that is, I think, very favorable given our relationships and our long-entrenched dynamics with those customers. They give us confidence that we'll be able to go and recoup these costs because the industry itself can't sustain them, so we have to go and recover these.

Yeah, I appreciate the caller. And then one of the quick topics on restructuring, it sounds like You're still, you know, thinking through the strategy for Europe in particular and, you know, how much, you know, restructuring, you know, should be done and, you know, whether it's sort of like the best use of cash and capital allocation in general there. But obviously, if this is assumption of flat restructuring spending in the free cash flow outlook, is there a possibility that it would be more than what you've guided or are we talking about? What you're thinking through is for future years.

With respect to Europe, and then I'll let Peter answer the second part, I think I've been very direct and open on this. In the European market, it is one where you either need to consolidate or you need to be consolidated. And that's going to be, you know. Value creation in Europe for the seeding industry overall. You know, there's too much capacity within the European market and too many suppliers, and so there needs to be an industry-wide solution to, I'd say, the seeding dynamic within the European theater. And that is why when we look at restructuring, you know, we're evaluating it in light of what are the future dynamics within the European industry and what's the best use of that capital. In terms of how we think about the restructuring dollars this year, I'll hand that over to Peter.

Yeah, I mean, I think... We have a very prudent plan for restructuring that's, you know, a mix of cost-driven as well as customer program-driven in EMEA in 2027. We're working hard, actually, to lower that number, not from just a, you know… It's more from an execution standpoint, right? So are there ways that we can, you know, come up with better return restructuring programs to prioritize those? Are there programs that we can fund in Europe through sort of accretive asset sales? You know, we've done a good job monetizing, like, joint ventures and assets in Asia and Americas to fund restructuring. We're looking to do more of that to offset some of the gross restructuring costs in Europe. And, you know, I think, again, our priority is what is the highest payback investment that we can make with our cash? And if we have the opportunity to invest in, you know, fast payback in EMEA, we'll do it. And if we have an opportunity to invest in fast payback in Americas, you know, we'll do it. And if we have an opportunity to invest in fast payback in Asia, we'll do it. If it's the low payback, we're going to try to avoid it, defer it, reduce it. So, you know, that's right now our priority is I don't anticipate any significant increases. I mean, our team is very aware of where our customers are and, you know, but you never know. But I would say right now I think we have a really good, reasonable estimate, and, you know, flat year over year is our current target. It could be better, again, if the opportunities, you know, to do other things with the cash are better, And it could be more if the opportunities to restructure at a high payback are better.

Great, thank you.

Thank you. So, I think that was our last question. So, in closing, just a couple of few key comments. One, I do want to just make sure everybody, when they look at the cash flow, they focused on that two-year cumulative amount and us really exceeding our commitments going in, are prudent, disciplined, and I think aggressive shareholder capital allocation that we've been able to run through. Between the prior authorization and the new authorization now, we sit almost at a billion dollars of committed share repurchases, which, as Peter outlined, we're looking at at least $100 million this year, subject to market conditions and what we can do with that. And then finally, I want to sincerely thank both our customers for working with us through what has been a very challenging 26. And an even more challenging macro backdrop for 27, but then also all of the 65,000 Adient employees around the world for your commitment and your willingness to step up to the plate and really drive through the challenges that we face. Thank you very much to our shareholders for the continued support. If you have any additional questions, feel free to reach out to Linda throughout the next couple days. Thank you very much.

Thank you. This does conclude today's call. We thank you for your participation.