Earnings Call Transcript - ADNT Q1 2026

Operator, Operator

Welcome to Adient plc First Quarter 2026 Earnings 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 will now 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 section of our website at adient.com. This morning, I'm joined by Jerome Dorlack, Adient plc's President and Chief Executive Officer, and Mark Oswald, our Executive Vice President and Chief Financial Officer. On today's call, Jerome will provide an update on the business. Mark will then review our Q1 financial results and our outlook for the remainder of our year. After our prepared remarks, we will open the call to your questions. Before I turn the call over to Jerome and Mark, 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's my pleasure to turn the call over to Jerome.

Jerome Dorlack, CEO

Good morning, everyone, and thank you for joining us to review our first quarter results. Today, we will focus on the quarter's solid performance and provide an update to our fiscal year 2026 outlook. We will also discuss new business awards and launches as well as share some insights on our expectations for the future beyond fiscal year 2026. Before we get into the results, I would like to take a moment to acknowledge the hard work and dedication of our more than 65,000 employees who work diligently every day to deliver on our commitments, especially in light of the significant challenges during the past quarter. The management team and I appreciate the team's collective efforts, which resulted in a solid start to fiscal year 2026. I would also like to thank our customers around the world who continue to recognize Adient plc as the world's preeminent CDN supplier. Thank you. Turning to slide four, which summarizes our first quarter results. The beginning of the year was filled with uncertainty. The Novella's fire, the Nexperia shortage, and JLR productions were all unknowns. But as the Adient plc team does time and time again, we managed through each of these events by leveraging a resilient operating model. Thankfully, the uncertainty of these events is nearly behind us, and we are focused on execution to meet the needs of our customers. For the most part, volumes are expected to recover within our fiscal year, and we expect to mitigate much of the overall impact of these events. Our revenue for the quarter was up 4% year over year, primarily driven by FX tailwinds from Europe. Excluding FX, revenue in China was up significantly as expected, delivering on our growth commitments and more than offsetting production headwinds from North America. We remain laser-focused on new business wins and ensuring we remain our customer's supplier of choice. We are supporting our customers' onshoring efforts in North America, both direct and indirect, and continue to view Adient plc as a net beneficiary of onshoring. While we have no new programs to announce at this time, we remain highly optimistic about the near-term potential for a large domestic OEM program. Our free cash flow generation and balance sheet remain strong, which allowed us to allocate capital in a disciplined manner. We returned an additional $25 million to shareholders through share repurchases this quarter, which Mark will detail further in his section. And we ended the quarter with $855 million in cash. Focusing beyond the operations and the quarterly financials, I would like to highlight that we have issued our 2025 sustainability report, which we will talk about in more detail in a few slides. Finally, as we look beyond the quarter to the full year, we are raising our guidance for revenue, adjusted EBITDA, and free cash flow, which Mark will outline in more detail during his section. Let's turn now to slide five. As fiscal year 2026 has become another year of transition for the industry, analysts and investors have been asking about fiscal year 2027 and beyond. So we wanted to provide our perspective on this year as well as some insights on where Adient plc is heading. We have said a key factor impacting this year's outlook is volume, which is very true. We are a volume-driven business. Production volumes are trending higher, particularly in North America, and overall industry volume indicators remain positive. With this production outlook and our resilient operating model, we are confident that we can deliver solid business performance. As a result, we are able to raise our guidance. But this year is about much more than just volume. It's about launching several key and complex new programs flawlessly. It's about continuing our drive for automation. It's about exceeding our customers' expectations with new and innovative products. It's about ensuring that our teams have the tools and the skills to evolve as AI takes hold. These are the things we are focusing on this year that go beyond our drive for operational excellence. Whether it's cross-functional or cross-regional, our teams are collectively working together to ensure Adient plc is equally focused on operational excellence and growth. As a result, this is what we expect for the 2027 fiscal year and beyond. We expect our investments in automation to ensure continued positive business performance as most projects have a payback under two years. We are capitalizing on approximately 400,000 units of near-term onshoring opportunities that will support our customers as they continue to reevaluate their manufacturing footprints. Our innovative products and processes, such as Sculpt to Trim, will help us win new business as they are expected to improve styling and also reduce costs by nearly double-digit percent. We have accelerated our growth with China domestic OEMs and will exit this year with 60% of our revenue in China from domestic OEMs. We expect this trend to continue. We expect our growth in cash flow generation to continue to reinforce our disciplined and balanced approach to capital allocation. It is for all these reasons that Adient plc is well-positioned for long-term shareholder value creation. In addition to outlining our expectations, I also want to provide some additional specific context around our growth opportunities. As we have discussed, onshoring in North America remains a clear focus, and we are actively working with all of our customers to support their onshoring activities. To date, we have won approximately 150,000 units of direct onshoring business and hope to be able to provide an update on another significant win in the near term. For clarity, when we talk about onshoring, onshoring for us means business that is produced outside of the borders of the U.S. and has moved within the borders of the U.S. In addition to direct onshoring opportunities, we've also won indirect opportunities resulting in an incremental 25,000 units. For 100,000 units of new and conquest business in The Americas. The collective impact of these wins and anticipated wins is an additional estimated revenue of $500 million, with $300 million impacting fiscal year 2027 and the full $500 million impacting fiscal year 2028. Looking beyond The Americas, the growth outlook for Asia is also solid. We expect China will continue to have double-digit growth through fiscal year 2028 in spite of relatively flat overall vehicle production. In addition, Asia, outside of China, is expected to grow above market in both fiscal year 2027 and 2028. Turning to Europe. Our teams continue to win new business in Europe. We expect these wins to offset the impact of our planned strategic program actions in the region and also expect these wins to be margin accretive.

Mark Oswald, CFO

Let's move to the financials on Slide 13. Adhering to our typical format, the page shows our reported results on the left side and our adjusted results on the right side. I will focus my commentary on the adjusted results, which exclude special items that we view as either one-time in nature or otherwise skew important trends in underlying performance. While the details of all adjustments for the quarter are listed in the appendix of the presentation for reference, I would like to specifically highlight one adjustment related to our tax expense. You may recall on our fourth quarter call when we gave our outlook for fiscal year 2026, we mentioned a one-time non-recurring tax settlement in a non-U.S. jurisdiction. That settlement was recorded this quarter and is the key driver of the GAAP net loss of $22 million. Moving to the right side, high level for the quarter. Sales of $3.6 billion were 4% better than the first quarter of fiscal year 2025, with adjusted EBITDA of $207 million. As Jerome mentioned earlier, there were some temporary customer production disruptions during the quarter, and despite these challenges, the team improved adjusted EBITDA by 10 basis points year over year to 5.7%. This improvement continues to demonstrate the resilience of the Adient plc operating model and the team's ability to efficiently and effectively manage external disruptions. Moving on, equity income was favorable year on year, primarily due to increased sales at our joint ventures. Adient plc reported adjusted net income of $28 million or $0.35 per share during the quarter. Let's move to the revenue and regional performance versus the market on Slide 14. I'll go through the next few slides relatively quickly as detail for the results are included on the slides, allowing adequate time for Q&A. Adient plc reported consolidated sales of approximately $3.6 billion in Q1, which was a $149 million increase compared to the same period last year, primarily driven by FX tailwinds and favorable volume and pricing in the quarter. Shifting focus to the regional performance on the right-hand side of the slide, In The Americas, Adient plc consolidated sales were generally in line with the broader market. In EMEA, sales trailed the market, reflecting customer mix and deliberate portfolio actions. Asia outperformed, driven by expected significant growth in China, as new programs with domestic OEMs ramped throughout the quarter. The remainder of Asia lagged the industry trends, particularly in Japan and India, where our customer presence is more limited. In Adient plc's unconsolidated revenue, year-over-year results declined approximately 3% adjusted for FX. Results were primarily affected by the joint venture portfolio rationalization action in The Americas that was finalized in late first quarter 2025. While both our EMEA and China unconsolidated businesses experienced growth year over year. Turning to Slide 15. Provided a bridge of adjusted EBITDA to show the performance of our segments between the periods. Adjusted EBITDA was up 6% at $207 million versus the same period last year. The primary drivers of the year-on-year comparison are detailed on the page. Business performance improved by $8 million year over year, despite the temporary inefficiencies experienced this quarter due to customer disruptions. As we've highlighted in the past, commercial recoveries tend to be a bit lumpy throughout the year, the favorable timing of some recoveries partially offset these inefficiencies as well as the planned increases in launch costs during the quarter. Equity income was favorable $8 million year over year, mainly due to higher sales and favorable business performance in our joint ventures. FX was a $6 million tailwind stemming from a combination of translational and transactional benefits. And finally, volume mix was an $11 million headwind during the quarter, driven by anticipated margin compression in China as well as unfavorable customer mix due to disruptions with key customers in The Americas. Overall, it was a solid start to the year, and the Adient plc team did well from an operational perspective, continuing to execute and manage what is within our control. As in past quarters, we've provided our detailed segment performance slides in the appendix of the presentation for your review. High level, both The Americas and EMEA continue to drive positive business performance. In Asia, business performance was impacted by the timing of certain growth investments, namely increased engineering spend and launch costs. Before we move to the cash and liquidity section, I'd like to point out that we have provided additional context in how our customer base is distributed across regions. In the appendix, the AdientEtic landslide provides a helpful view of our customer mix and revenue contribution based on our fiscal year 2025 consolidated revenue. Moving on, let me flip to our cash liquidity and capital structure on Slides sixteen and seventeen. Starting on Slide 16, For the first quarter, the company generated $15 million of free cash flow defined as operating cash less CapEx. This was higher than our internal expectations leading into the quarter. The team did a lot of good work to drive this number higher. We also benefited from an approximately $20 million timing impact from the previously mentioned non-U.S. jurisdictional tax settlement, which is now expected to be paid out in Q2. On the right side of the slide, we have highlighted the key drivers impacting the free cash flow during the quarter. These include timing and amount of net customer tooling payments, reduced restructuring spend year over year in Europe, and higher adjusted earnings compared to the same period last year. These benefits were offset by timing and level of VAT tax payments, timing and level of commercial settlement payments, as well as your typical period-to-period working capital movements. As we've mentioned in the past, our cash flow is typically more second-half weighted due to the seasonality of our business. We continue to expect solid cash generation for the full year. In fact, our expectations have increased to $125 million. I'll have more on our outlook in just a minute. As a reminder, as mentioned on our last earnings call, there are a few timing and non-recurring items placing temporary downward pressure on our free cash flow this year. Such as the one-time non-recurring tax settlement previously discussed. Beyond fiscal year 2026, we expect free cash flow to return to normalized levels and benefit from our increased sales earnings and a lower level of cash restructuring. Moving now to Slide 17 for our liquidity and capital structure. Total liquidity for the company was $1.7 billion at 12/31/2025, comprised of $855 million of cash on hand and $823 million of undrawn capacity under our revolving line of credit. During the quarter, the company returned a total of $25 million to its shareholders, repurchasing approximately 2.1 million shares, leaving approved authorization of $110 million. In addition, Adient plc continues to proactively manage our debt maturity and costs. In January, subsequent to the quarter end, we successfully replaced our term loan B and achieved a 25 basis point reduction, resulting in an annual savings of approximately $1.5 million.

Jerome Dorlack, CEO

Focusing on our balance sheet, Adient plc's net debt position totaled approximately $2.4 billion and $1.5 billion respectively, at 12/31/2025. The company's net leverage at December 31 was 1.7x, comfortably within our target range of 1.5x to two times. Moving now to Slide 18, let's review our updated expectations for the remainder of the fiscal year. As we highlighted in our Q4 call, when we provided our full-year fiscal year 2026 guidance, we anticipated an improvement in the production volume environment would be a meaningful impact on our results. That said, with North America vehicle production now expected to be in the 15 million unit ballpark for fiscal year 2026, up from the 14.6 million at the time we gave the original guidance, we are raising our outlook for revenue, adjusted EBITDA, and free cash flow. For the full year, we now expect sales to be approximately $14.6 billion, up from our previous guidance of $14.4 billion. Adjusted EBITDA is now expected to land around $880 million, up from our previous guidance of $845 million, and free cash flow, as I indicated earlier, is now expected to be $125 million, up from $90 million in our previous guide. Keep in mind, this revised guidance reflects our current production schedules, FX rates, and assumes no significant changes to the current tariff policies. We continue to expect our overall earnings will be weighted towards the second half of the year. While we don't provide quarterly guidance, it's important to note that our second-quarter results are expected to be impacted by the seasonality of the Chinese New Year, as in past quarters. The lower level of production forecast for Q2 versus Q1 will translate into lower consolidated sales earnings and equity income for the region. Obviously, regaining momentum in Adient plc's Q3 and Q4 as production picks up. Given the puts and takes in production across the regions, we'd expect Q2 EBITDA to look very similar to the quarter just completed. For purposes of our analysis, we don't expect any meaningful changes to equity income, interest expense, or cash taxes from our previous guidance. And CapEx is expected to remain elevated this year due to customer launch schedules and increased investment in innovation and automation.

Operator, Operator

The first question today comes from Colin Langan with Wells Fargo. Your line is open.

Colin Langan, Analyst

Great. Thanks for taking my questions. There's been some media headlines that there's possible disruption around the F1, F Series recovery. Have you seen any impact in your schedule so far? Is there any way to kind of help frame maybe the risk to guidance if there are some hiccups in the recovery?

Jerome Dorlack, CEO

So first of all, Colin, thanks very much for the question. I think as we handled in what would have been our Q4 call. We're not going to kind of front-run Ford. I think what we have guided to currently represents what we have on releases in our best information that we have today. You know when Ford says kind of F Series, we always have to remember there's going to be a split between F-150, which is the platform we have, and then Super Duty production that they have in Kentucky. And so we don't know if there is going to be a disruption, how that disruption will unfold. And then in terms of framing what the disruption will be, I think that's why we put into the appendix material kind of what the split is, what our key platforms are, and how those key platforms break out. I think if there is something meaningful, we can always circle back with you guys. But as of now, it's kind of best-known information. I think as we said, in my commentary in the prepared remarks, we kind of anticipate making up any of that production that we lost in Q1 kind of now throughout the back half of the year. What we've tried to reflect in the guide as best we can.

Colin Langan, Analyst

Got it. No, that's helpful. And maybe if you could just talk a bit on the onshoring opportunity that you flagged. I think it was a couple of quarters ago, you said it was $175 million, so we're to $500 million. And then also in your commentary today, I'm not sure if I heard it right, that there's a significant near-term win that you're hoping to update us on. So any color on maybe how quickly some of these wins could come? Because I feel like some might start trailing out into '29 and beyond, or are these gonna still be things that hit in '27 and '28?

Jerome Dorlack, CEO

Yeah. So what I would say is, you know, so the 175 has grown to 500. That includes the conquest win that's in there as well. We picked up a conquest win, call that know, it's about 100 to 150 million. So between onshore and conquest now it's up to $500 million. And the big thing that's still left to get that I think we feel confident in is a domestic OE who is moving production from Mexico into the U.S. You know, we're in the quote process, kind of the final stages of that right now. I think we're hopeful that we'll hear something in the next couple of weeks on kind of the final decision. And that now makes up kind of the gap between know, we're at what I'd call 250 million of booked 250 to 300. That'll make up the gap between the 300 to the 500. So kind of if you wanna think of the bridge, last time we gave you an update we were at a 175. We're now kind of on the books for 300 and we've got another 200 of wood to chop. And we hope to know about that in the next I'd say, two weeks or so. Yep. And then, Colin, with regard to your question in terms of what rolls on, right, assuming that all comes in, we've indicated that about 300 million of that $500 million comes in 2027. And the other rest of it, the run rate full run rate comes in, in 2028. Yeah. Think that's a good point. I mean, we really don't see that some of it's already launching any of that really pushing out into '29. I mean, in this year with a lot of it now coming on in '28. So it is known booked revenue. We're spending capital now and launching up now to be able to roll it on in '27.

Colin Langan, Analyst

Just to quickly clarify the win that you're hoping to get from the domestic going from Mexico to the U.S. Is that in the 500 already? Or is that that would be incremental?

Jerome Dorlack, CEO

Yes. So that would be in the 500. That would be the bridge from kind of 300 on the books going to 500.

Colin Langan, Analyst

Okay. Got it. Alright. Thanks for taking my questions. Thank you.

Operator, Operator

Thank you. The next question is from Nathan Jones with Stifel. Your line is open.

Andres (for Nathan Jones), Analyst

Good morning, everyone. This is Andres on for Nathan Jones. Thanks for taking my question. Regarding Europe restructuring spend, can you please provide an update as to the progress you're making in restructuring the European business?

Mark Oswald, CFO

Yes. So what we've indicated in the past and what we've guided to looking forward, right, if you look at the elevated spend last year call it, you know, around that 130 million-ish, most of that was in Europe. This year, '26, another, call it, $120-130 million in restructuring primarily Europe. We didn't indicate that that goes down in fiscal year 2027. Beyond that, we said it's very hard for us to give you a good line of sight because a lot of any type of restriction that goes out beyond '27 is really dependent on what our customers do with their programs. Right? So we're in active discussions with them just looking to see you know, end of production for certain programs, what new programs might be rolling into plants. So really, we'd love to be able to tell you what's happening in 2028 and 2029. There's gonna be restructuring. It's just a question of the magnitude of that. And, it's really relative to what our customer production plans are.

Andres (for Nathan Jones), Analyst

Awesome. Thank you. And then just one more, that's helpful. Asia adjusted EBITDA declined 7 million driven by increased engineering spending for new programs. Should this be expected to continue, sustain? Just trying to get a better idea as to the timing there.

Mark Oswald, CFO

Yeah. I'd say that overall, APAC, right, if I look at business performance, that's gonna be positive. For full year '26. Clearly, there's gonna be quarters where you have increased launch and engineering costs. Again, those are gonna be offset as I go through the quarter with, you know, other ops other efficiencies that roll on. But we did indicate that net engineering and launch were going to be higher this year as we continue to grow out and spend for the growth.

Andres (for Nathan Jones), Analyst

Got you. Thank you. Appreciate it. Thanks for taking the questions. Thank you.

Operator, Operator

The next question is from Emmanuel Rosner with Wolfe Research. Your line is open.

Emmanuel Rosner, Analyst

Great. Thank you very much. I was hoping to ask you about the commercial settlement. I think it's you mentioned it in a few slides as a factor in terms of at least timing and sometime magnitudes. Can you just help us understand if you know, the magnitude of it is beyond what's usual sort of like this year, if that's know, like, helping the Outlook or if you're just flagging it as essentially a cadence or calendarization impact?

Mark Oswald, CFO

Yeah. Emmanuel, it's a good question, and thanks for the call and I'd say it's more of timing and cadence know, as you know, our business you know, is a transactional business. There's always certain commercial negotiations that are planned for the year. So we did have what I'd say a bucket of what I'd say planned commercial actions that the team had to go out there and get. Obviously, first quarter was benefited from, I'd say, the timing pull forward or certain of those commercial actions. Nothing that I would say is extraordinary versus what we were planning within the original '26 plan.

Emmanuel Rosner, Analyst

Okay. And then if we were trying to think about, you know, fiscal twenty-six as sort of like a bridge sort of like in future years. Are there any sort of extra recoveries expected this year that we shouldn't be capitalizing, or is that sort of no more course of business?

Mark Oswald, CFO

Say normal course of business.

Emmanuel Rosner, Analyst

Understood. Thank you.

Jerome Dorlack, CEO

Thank you for the questions, Emmanuel.

Operator, Operator

Thank you. The next question comes from Joe Spak with UBS. Your line is open.

Joe Spak, Analyst

Hey, good morning, everyone. Wanted to just go back to the growth opportunities know, and I know you gave a lot of good color here, but it does seem like maybe the pie is also growing, right, versus sort of what you indicated prior? And, like, I just wanna get your sense of sort of you know, whether you think most of these reshoring decisions, least, on production, maybe not sort of the sourcing for that production is done more. Or if there if you're continuing to see customers look to or to move more here so that could maybe grow over time even if it doesn't come in necessarily in a 27 time frame. And then on the EMEA portion, you mentioned, you know, accretive balance in balance out and, you know, that that's long been part of the plan, but it's been delayed. And are you implying that you now see better line of sight to that really start to kick in in '27 where margins can start to move higher?

Jerome Dorlack, CEO

So first, for the questions in both are really good questions. On the near shoring or maybe on shoring, I think, we see an acceleration in the discussion with our customers on onshoring opportunities. And what we've highlighted today are ones that we are actively in the quote process or awarded on. And that's what kind of totals to that 400 to $500 million including the conquest wins. That said to your point, we are seeing more activity with the particularly with the Japanese OEMs where we are very well positioned given our long-term partnerships with those customers for additional potential volume growth in the twenty-eight 'twenty-nine timeframe. Whether that be you know, some of their vehicles kind of two and three-row SUV type things. That they're looking to move back here. I do think there is that potential. A lot of it will come down to their capital allocation decisions and long-term where does USMCA set up next generation. So I think as they make their footprint decisions over the next possibly six to eight months that will then influence their loading of their vehicle assembly plants. What's key for us is given those relationships, given where our JIT facilities are, and given how well we service them, we are ideally suited to be able to capitalize on that growth. And so I do think we see a potential tailwind even beyond what we've talked to today. And there'll be more to come as they make their slotting decisions. So yes, I do think there is potential there. On your second question on EMEA, we are getting a greater line of sight on some of the roll-on roll-off. I think as we look into fiscal year twenty-seven and 'twenty-eight, we do see recovery. Mark and I have been talking to you about the recovery, you know, in the balance in balance out. So it's not anything that's going to be above and beyond, you know, what we've been speaking know, seeing in other call it, you know, 25, 50 basis points as we move out of 26 into 27 and just continue to slug through that region there. I just think it's getting the credibility in our customers' ability to launch the programs there. Certainly, the new business that we're bidding, new business that we're rolling on is coming on at accretive margins. It's just the timing associated with it. And what's really driving the timing is our customers launching programs over there is the different legislation around emissions you know when are they going to phase out the current products and are their current products competitive or not? And then what's happening, especially in the A and B segment, with respect to Chinese onshoring, are they competitive or aren't they? And they're really evaluating things that I have in the pipeline are they competitive? And if they're not they're going back to the drawing board, scrapping them, which is leading to delays in their product cycle which is leading to our delays and our ability to then launch some of these new projects. Hopefully, that answers your question.

Joe Spak, Analyst

Yeah. No. That it it does. I I appreciate that. Maybe just as a second question, and sort of a quick follow-up to your recoveries comment. I just like, it it does seem like it helped the the results in the quarter from an earnings perspective. You just help me understand minus $37 million outflow you're showing in the cash from commercial negotiations. Like, is that just timing of when like, you're booking that versus the cash? Like, I I just any color on that be helpful.

Mark Oswald, CFO

It really is, Joe. So, again, as I indicated, yes, it did benefit the quarter helped offset some of the operational inefficiencies. But again, it was pulled ahead either from a Q3 or a Q4 or Q2 timing right into Q1. So again, over the course of the year, it's no more than what we are expecting from a commercial. And again, whenever we have commercial recoveries, there's always a timing mismatch between what we're trying to recover versus when that expense or when that cost actually had. Tariffs is a perfect example, right? We'll have a tariff impact in our financial but yet we don't get the recovery for that for several quarters after that right. So it's normal course, but I'd say timing.

Joe Spak, Analyst

So that also helps the free cash flow cadence in the back half. What because that that's when you expect to get that. Okay. Thank you.

Operator, Operator

Thank you. And as a reminder, if you would like to ask The next question comes from Andrew Percoco with Morgan Stanley. Your line is open.

Andrew Percoco, Analyst

Great. Thanks so much for taking the question this morning. I do just want to come back one more time to the Europe dynamics. It sounds like you're expecting some improvement in that market in 2027. But your prepared remarks, you talked about how one of the headwinds is essentially the China import volumes into that market, that doesn't seem like something that is maybe going to slow anytime soon. So I guess my question would be, you know, what are you doing to essentially either buffer yourself or manage margins if that continues? And I guess maybe a second part to that question would be, is there an opportunity to those customers? Obviously, you've seen some success with the domestic, China OEMs in China. But as they export more volumes to other markets, I'm just wondering if there's an opportunity to be a supplier of choice there, and that might help, you know, in terms of the margin improvement in that market. Thank you.

Jerome Dorlack, CEO

Yeah. So I think there's two ways that we think about addressing that. So the first one is understanding where the Chinese exports are coming into Europe, what segments they're attacking there, and trying to insulate ourselves from the segment. So primarily as they're coming into Europe, they're heavy on the A and B segment. And so we've been very focused on going up segment. If you look at a lot of our conquest wins in the region, you know, they've been with say, 10, call it, you know, C segment luxury segment Porsche vehicles, the higher-end segment Volvo high segment type of platforms. And so business that's rolling on we talked with didn't give the platform name. We're in the middle of a complex launch. With the German OE at the moment that's on a very high-end segment type of vehicle. So it's going up segment on vehicles that are insulated at the moment from the Chinese where the Chinese are succeeding. Within Europe. So that's one way that we're going about it. Another way that we're going about it is as the Chinese are localizing within Europe we're able to win components business there. We're also able to bid on some of the JIP products and win some of the JIP content where possible. That's another avenue that we're able to actually attack and benefit from some of that. And then the last way that we see is where possible what vehicles are the Chinese exporting into China? From you know exporting into Europe from China and can we gain share there. In some cases, because the large exporters would be with SAIC, And SAIC is historically one of our competitors' territory, Yingfeng. So that's not that's not territory that Adient plc plays in. But when it's a Neil, or when it is a you know I'll point to say Geely as you know as an example. And we've just recently signed a joint venture with one of Geely's largest seating suppliers that we're able to capitalize on. And that will give us access into that export market. And that's why we were very strategic in signing that joint venture to be able to gain access into the export market for vehicles that are exported into Europe. And so it really is kind of a three-layered approach into looking at it. You know? Insulate ourselves from the segments that are being attacked, Where we can't do that, can we gain components on vehicles that are being produced in there? And then looking at what vehicles are being exported can we gain content directly on the export vehicles?

Andrew Percoco, Analyst

Got it. Okay. That's super helpful context. And maybe just continuing on the onshoring debate and opportunity, I guess, I'm curious, and this may be a few years out, but I'm curious to what extent you're hearing or having conversations with the China domestic OEMs in terms of their aspirations to come to the U.S. or Canada market. Obviously, recently Canada making a deal with China on reducing tariffs on EVs. I'm just wondering if that's going to become a bigger opportunity for you guys going forward and if starting to have those preliminary conversations.

Jerome Dorlack, CEO

Yeah. So maybe so the first thing I would say, and it's know, because you had said, you know, on the onshoring debate that mean, I just wanna be very very clear. I mean there is no debate. Adient plc will be a net beneficiary from onshoring. I mean of all the seating suppliers we will be a net winner from onshoring. It's already being shown today we will be a net beneficiary, net winner from onshoring. I mean that's already shown and that trend will continue. Secondly to your question then, as it pertains to you know, the Chinese kind of coming to whether it be Canada or Mexico, I think Mexico is another potential depending on how USMCA plays out. And if the U.S. leverages Mexico into putting tariffs on. I mean we are working through our China because there's such strong ties in China. With some of those OEs that may explore a relationship with Canada or with So absolutely we're having those discussions you know with the BYDs of the world with the GLEs of the world on you know if they want to go to Canada or if they want to go to Mexico we could be there to service them. The question is what is their real appetite for doing so? But if they want to explore that we would absolutely be able to service them. The question is do they want to? And what are those long-term trade and industrialization ties look like? But absolutely, because of our strong strong relationships in China we are able and we do have those discussions.

Joe Spak, Analyst

Okay, great. Thank you so much.

Jerome Dorlack, CEO

Yes. Thank you for the questions.

Operator, Operator

Thank you. The next question comes from Dan Levy with Barclays. Your line is open.

Dan Levy, Analyst

Hi, great. Good morning. Thank you for taking the question. Wanted to first start with a question on your equity income and specifically the margin dynamics. This quarter was especially strong higher equity income despite lower revenue. And I think this is interesting in context of our understanding that some of the increased China business was supposed to roll on at lower margins. So maybe you could just talk through what occurred in the first quarter on the China equity income and how we might expect some of the margin dynamics to play out as you get some of this new China business? How margin dilutive is it? What's your confidence that the net profit will, in fact, be better?

Mark Oswald, CFO

Yes. So maybe a couple of points there. Dan, and thanks for the question. We talk about the new business rolling on in China which would result in what I'd call manageable compression in our margins over there. That's really the consolidated business, right? So think of that, whether it's business with the Chinese locals that we're funneling through our consolidated sales, consolidated EBITDA, etcetera. In China. The equity income piece, that's really derived from our joint ventures right, like with Piper, certain of the other joint ventures that we have over in EMEA. Those sales, as I mentioned in my prepared comments, were actually higher this quarter. And so again, it drove my performance and my better operating performance at those joint ventures. Right? Piper being one of those joint ventures. So I think it's important to differentiate between each of those buckets, the consolidated piece as well as the unconsolidated piece.

Dan Levy, Analyst

Great. Understood. Thank you. And then second, wondering if you could just comment on one of your competitors who reported this morning pointed to a large conquest win for complete seats on a US automaker's truck program. I know you gave some positive updates here on shoring, but maybe you could just talk about maybe some of the dynamics within sourcing or large trucks, which we know are a key program for you and also for you know, this competitor as well on some of the other platforms out there? Just if you could comment, on that development from them.

Jerome Dorlack, CEO

Yeah. I mean, I think what you're getting at do we lose any large truck programs? And so there's we haven't lost any large truck programs. I think their win isn't reflective of any Adient plc losses. So I would anticipate that it is something that one of our competitors has lost. Which you guys know the market pretty well so you can where that loss would have come from. But I think stepping back more strategically and saying what does this mean for the market? First of all congratulations to Ray and Frank and Jason up there in Southfield. And I mean that. I think more strategically though what it means for the market is, and this is what I think both they've been saying and we've been saying is, this is a market that needs consolidation. You know, the competitor who had that business we have been actively conquesting their business. Know, we've conquested a large portion of their other business that sits in other portions of The U.S. So we've taken quite a few of their dots off the map. We've taken dots off of their map elsewhere. And I just think it's representative of a larger symptom of what needs to happen in seating which is consolidation. And so I think you know, for them I think it's I'll assume it's a good thing. And I think for seating, the more of this that can be forced through consolidation is generally what needs to occur in the space. But for Adient plc it's a it's no impact. It isn't anything that we had. It's none of our business. In terms of anything that we were an incumbent on.

Operator, Operator

And there are no further questions. Perfect. Thanks, Denise.

Operator, Operator

And so, in closing, I want to thank everyone once again for your interest in Adient plc. If you do have any follow-up questions, please feel free to reach out to me. Also, would like to acknowledge that we will be in New York City next week. Participating at the Wolf Conference and hope to see many of you then. With that, operator, we can close out the call.

Operator, Operator

Thank you. This does conclude today's call. We thank you for your participation. At this time, you may disconnect your lines.