Good morning. I'm Ryan Ghazaeri, Director of Capital Markets and Strategic Planning. Welcome to our Earnings Call for the Fourth Quarter and Full Year 2022. Please note, this call is being recorded and all lines have been placed on listen-only mode to prevent background noise. Before we begin this morning's call, I'd like to remind you that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various factors, risks, and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the page entitled forward-looking information for additional details. Presentation materials for today's call were posted on the Investors section of Visteon's website this morning. Please visit investors.visteon.com to download the material if you've not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer; and Jerome Rouquet, Senior Vice President and Chief Financial Officer. We have scheduled the call for one hour and we'll open the lines for your questions after Sachin and Jerome's remarks. Please limit your questions to one question and one follow-up. Thank you for joining us. I will now turn over the call to Sachin.

Thank you, Ryan, and thanks everyone for joining us this morning. 2022 was an exceptional year for Visteon. Our industry-leading digital cockpit electronics products performed very well, resulting in full year sales of $3,756 million, an increase of 35% over last year, compared with our customers' vehicle production growth of approximately 5%. We ended the year with the 15th consecutive quarter in which our sales outperformed our customers' vehicle production. Adjusted EBITDA was $348 million, or 9.3% of sales, an increase of $120 million over last year. The Company's cost-efficient footprint combined with the shift to platform-based product development and operational and commercial discipline resulted in higher sales and drove margin expansion of 110 basis points. Adjusted free cash flow for the year was $101 million, in line with the midpoint of the original guidance range that we provided at this time last year. Our liquidity remains strong with over $500 million in cash. Visteon has and remains focused on sustainability and I'm pleased to report that we have committed to reduce our Scope 1 and 2 greenhouse gas emissions by at least 45% by 2030 compared to 2019 and Scope 3 emissions by at least 25% compared to 2021. These targets were formally submitted for validation to SBTI in late December and they align well with our mission to make driving safer, cleaner, and more convenient. We launched 45 new customer programs in 2022 and extended several existing programs on new vehicle models. The Company also achieved its goal of winning $6 billion in new business for the year, reinforcing the strength of our product and technology portfolio. We introduced several new products and services that extend our product offering to address emerging trends in the industry. These include a new cloud service for OTA that complements our app store service and several products for the electrification, including an onboard charger, DC-to-DC converter, and smart junction box that were showcased to customers at CES earlier this year. We also announced the collaboration with Qualcomm for our next-generation SmartCore system that is targeted as software-defined vehicles of the future. Our high number of launches, new business wins, and strong product portfolio position us well for market performance in 2023 and beyond. I would like to thank the entire Visteon team for their hard work and dedication in what has been a difficult year for the industry. Our performance this year is the result of the team's resiliency and dedication to each other and to our customers. Turning to Page 3. We saw robust demand for all core products throughout the year that exceeded the supply of semiconductor and other critical components. While our customers' vehicle production grew by 5% year-over-year, our sales grew by a robust 21% when excluding the impact of customer recoveries of supply chain related costs. Our market outperformance was driven by the recent launches of products that ramped up production in 2022. The growth over market was higher-than-anticipated due in part to the rapid ramp-up of our digital cluster program with a North American OEM. We also benefited from the product mix shifting to higher content products like digital clusters and from smaller legacy displays to larger displays. The automotive industry's transition to digital clusters continued in 2022. One out of four new cars were equipped with a digital cluster. This trend benefited Visteon, and our digital cluster sales increased by 40% year-over-year. Digital clusters now represent about half of all clusters shipped by Visteon and were a significant driver of our sales growth in 2022. SmartCore sales grew approximately 75% year-over-year, driven by recent launches with carmakers in Asia. The industry is shifting to high-performance cockpit domain controllers to deliver user experiences that drive on mobile devices, which is helping drive higher SmartCore sales. 2022 was a continued period of transition for Visteon from small legacy displays to larger displays, both in terms of new launches as well as business wins. Recently launched multi-display systems with Maserati in Europe and Nissan and Ford in Asia contributed to the growth of our displays business in 2022, offsetting the decline of smaller legacy displays. We also experienced higher sales of audio infotainment products with the ramp-up of Android-based systems in South America and Asia and new launches of audio systems with an OEM in North America. Overall, we benefited from strong demand for our digital cockpit products and the momentum from recent launch activity. Turning to Page 4. 2022 was a busy year for new product launches for the company. We successfully launched 45 new programs across 18 different OEMs globally. Digital clusters topped the list, with 17 launches, continuing the trend of the past few quarters, followed by displays with 11 launches including multi-display systems with Maserati and Kia. Displays is an exciting area of growth for Visteon and these launches will help drive higher sales for this product in the coming quarters. Our digital cockpit products are powertrain agnostic, and about 25% of our new program launches in 2022 were for vehicle platforms that have both electric and ICE models. We finished the year strong with 13 new program launches in the fourth quarter and have highlighted a few on the bottom half of the slide. Going forward, we launched a new audio system for several vehicle lines supporting Ford's latest SYNC Infotainment system. The program was launched in North America and Europe on super duty trucks, the transit, commercial vehicle and SUVs for Ford and Lincoln brands. In addition, we launched multiple digital cluster programs on the same vehicles. In China, we launched our latest generation of a SmartCore cockpit domain controller and center infotainment displays on the Lotus Lambda all-electric SUV in partnership with ECARX. The launch of the first model will be followed by additional models in China, as well as in other regions. Additionally, we launched a digital cluster for Stellantis that we won in Q1 of 2021, less than two years from award to production. The cluster comes in 10 and seven-inch variance and we launched on multiple brands including Jeep, Fiat and Alfa Romeo. Our new program launches in 2022 and ongoing vehicle model extensions of programs launched in prior years demonstrate the continued momentum we have been building for our near and midterm sales growth. We are launching programs across all core product lines that will drive further growth in 2023 and beyond. Turning to Page 5, we won $6 billion in new business in 2022, achieving the target we had set out at the beginning of the year. This is particularly significant considering the disruption caused by supply chain shortages. All our core products did well, including over $1.5 billion in Display awards, the first time this product category has crossed the $1 billion mark in a single year. SmartCore also did very well, adding two new OEMs in Europe, representing three car brands and winning over $1 billion for the year. We won over $1 billion of digital clusters business in 2022, including our first global win with Toyota. Asia represented more than half of all digital cluster wins in the year as more OEMs start to transition to digital cockpit in that region. We anticipate that growth of electric vehicles will be a tailwind for Visteon in the future. And in 2022, about 45% of our total digital cockpit wins were for electric vehicles. We also had several future vehicle models added to our awarded BMS business as customers updated their plans for EV model launches in the coming years. The first Q4 win highlighted on the right is a center infotainment display for a North American OEM. The 12-inch Center display uses a slim tablet-like design with an integrated driver-facing camera and will be featured on the electric version of a popular SUV vehicle line for the OEM. We extended a SmartCore program that's currently in production with the customer in India to two new compact SUV models that will launch in 2024. Our first launch of SmartCore with this OEM has been very successful and this follow-on launches will feature an updated SmartCore technology with additional features and functions. Lastly, the third win highlighted on this slide is a follow-on win for an existing multi-display system with a Japanese OEM. This follow-on win is on the high-volume mass-market vehicle, while the lead vehicle was for the luxury brand. So a perfect example of how the multi-display trend is starting to come to the mass-market vehicles segment. Our product portfolio is well-aligned with the major trends in the automotive industry and 2022 was a great example of how we expect our sales mix will transform in the coming years. Turning to Page 6, the automotive industry lost about 4.5 million vehicles to semiconductor shortages in 2022 and while semiconductor suppliers improving the outlook for 2023 is a loss of about 3 million vehicles. However, the nature of the semiconductor shortages will be different in 2023. In 2022, power and analog chips were more constrained than microcontrollers. In 2023, we expect gradual improvements in analog and power chips with investments made in production capacity by integrated device manufacturers like Texas Instruments and on semi. However, semiconductor suppliers that rely on foundries for the front-end capacity will continue to be constrained and wafer supply. As these foundries have not invested in capacity for legacy nodes of 40 nanometer and higher that are used extensively in automotive. Weaker macroeconomic environment and geopolitical concerns are also causing us to believe that the strong consumer demand the industry experienced in 2022 may start to soften, especially if these macro issues persist throughout the year. As a result, we are forecasting global vehicle production in 2023 to be up modestly to 84 million units. But Visteon customers are expected to grow 1% over last year. Furthermore, we expect production to be lower in the first half due to tighter semiconductor supply before improving in the second half of the year. From a regional perspective, we expect our customers in North America to have modest production growth at mid-single-digit levels driven by recent model launches and the low-level of dealer inventories. In Europe, our customers remain optimistic due to strong order books, but the ongoing economic and geopolitical uncertainties cause us to temper our outlook for the full year. China has started slowly in January after COVID-19 impacted production in the fourth quarter of last year. While we anticipate vehicle production to slowly increase throughout the year as the country transitions from zero COVID to zero lockdowns. We expect vehicle production at our customers to be down in low-single digits year-over-year and especially pronounced with our global customers operating in China. In summary, we are cautious about vehicle production growth in 2023 on account of the demand and supply dynamics that I just mentioned. However, we also believe that the momentum we have built with our product portfolio, combined with the operational capabilities of our team will support better than market growth in 2023 and beyond. Turning to Page 7, in 2023, we are anticipating sales to be $4.05 billion at the midpoint of our guidance, with the range from $3.95 billion to $4.15 billion. On the right-hand side of the page, we provide a waterfall chart bridging 2022-based sales of $3.26 billion, which excludes the positive impact from customer recoveries. 2023-based sales, which at the midpoint of guidance is approximately $3.75 billion. As stated on the previous slide, we are expecting only a modest improvement of 1% in our customers' vehicle production in 2023. However, we expect that our strong new product launch performance in the past two years plus additional launches in 2023 will continue to drive market outperformance with base sales excluding customer recoveries growing in the mid-teens. The combination of annual customer pricing and the impact of foreign exchange is expected to be a slight net headwind. Like in 2022, we will need to mitigate the impact of semiconductor shortages to deliver another year of double-digit base sales growth. With expectation of improving chip supply, we anticipate fewer open-market purchases of semiconductors as compared to last year. As a result, we expect customer recoveries in 2023 to be lower than 2022 as shown in the dotted boxes on the waterfall chart. Overall, I'm pleased with the mid-teens growth forecasted in base sales, which reflects our multi-year product transformation, continued operational excellence, and supply chain capability. Turning to Page 8, in summary, the company executed very well in 2022, which helped drive record sales in what continues to be a challenging environment. I would like to thank our customers, suppliers, employees, and investors for their support in a challenging year. We launched a high number of digital cockpit programs that will drive our market outperformance in the near to mid-term and continue to build a strong foundation for future growth by bookings, $6 billion in new business during the year. As we look towards 2023 and beyond, we anticipate further sales growth and market outperformance as we benefit from the alignment of our product portfolio with key automotive trends driving high demand for our digital cockpit and electrification products. We will be sharing more information on our vision for the future and strategy for capitalizing on key automotive trends in a couple of weeks at our Investor Day on March 7th in New York City. I look forward to seeing all that are able to attend. Now, I will turn the presentation over to Jerome to review the financial results.

Thank you, Sachin, and good morning everyone. Visteon's fourth quarter financial results came in strong reflecting another quarter of robust commercial and operational execution. Q4 sales were $1,064 million a record quarter for Visteon. We were able to outperform industry production volumes thanks to the unprecedented cadence and size of our recent product launches in the last few quarters, combined with very proactive supply chain management. Although semiconductor supply has improved since the first half of the year, we are still seeing a disconnect between supply and demand. In the quarter, we benefited from our proactive product designs, while also securing an important amount of components through brokers and distributors. In partnership with our customers, we shared the elevated cost and recovered cost increases through customer recoveries in the quarter. Compared to prior year, sales were up 35%, including the negative impact from foreign exchange, which reduced sales by approximately 8%. While Visteon's customer production volumes were up 3%, our growth over market excluding net pricing was 26%. Incremental customer recoveries, partially offset by annual price-downs also increased sales by 14% for the quarter. Finally, excluding customer recoveries, base sales were approximately $900 million, a good indicator of how our underlying business is performing. On a comparable basis, this is also a record level for Visteon. Adjusted EBITDA was $103 million, up $11 million versus prior year, and representing a margin of 9.7%. Compared to the prior year, adjusted EBITDA benefited from higher base sales and year-over-year operational improvements. The quarter also benefited from approximately $5 million of catch-up in customer recoveries related to costs incurred earlier in the year. Partially offsetting these benefits were the impact of currency headwinds, the non-recurrence of a one-time customer claim last year, as well as an increase in both gross engineering and SG&A. While we continue to invest in various strategic areas of engineering, as mentioned by Sachin, gross engineering costs were also impacted by one-time program expenses this quarter, while higher SG&A primarily related to incentive compensation increases. Adjusted free cash flow for the quarter was an inflow of $141 million, driven primarily by higher EBITDA and favorable working capital, generated by increased customer recovery collections. We ended the quarter with a total cash of $523 million and $349 million of debt, resulting in a net cash position of $174 million. Turning to Page 11, for the full year, sales came in at $3.75 billion, eclipsing our previous record of $3.15 billion, which was achieved in 2017 when industry production volumes were at 95 million units. Since 2020, industry production volumes have increased modestly as growth continued to be constrained by semiconductor availability. Despite this challenging environment, Visteon's compounded annual sales growth was 21%, benefiting from a robust set of product launches, proactive supply chain management, and customer recoveries. Compared to prior year, sales in 2022 grew 35%, growth over market excluding pricing was 21% while customer recoveries offset by annual price-downs was a positive contributor of 14%. Customer production volumes provided an increase of 5%, while foreign exchange was a 5% headwind. Excluding customer recoveries, base sales were approximately $3.26 billion in 2022, an increase of 28% compared to 2020, while production volumes increased 10% in the same periods. Our adjusted EBITDA margin of 9.3% in 2022 was nearly 2 full percentage points higher than 2020. With programs launched on higher volume platforms and relentless operational and efficiency improvements combined with an improved best-cost footprint as well as an engineering platform approach, our incremental margins have been approximately 22% when excluding the dilutive nature of customer cost recoveries. Cash flow conversions average approximately 30% over the last three years. Turning to Page 12, we ended the year with a total cash position of $523 million and maintain a debt balance of $349 million resulting in a net cash position of $174 million. This represents our highest net cash position in five years and demonstrates our commitment to maintaining a strong balance sheet. In addition, we were proactive and refinance our debt earlier last year, extending our debt maturities through 2027 and locked in a low-cost of debt with a current interest rate of approximately 3.5% when including our cross-currency swaps. In short, we have ample flexibility to invest in strategic actions and drive shareholder value. Adjusted free cash flow was an inflow of $141 million in the quarter. The inflow of cash in the quarter was driven by continued improvements in profitability and our focus on optimizing capital expenditures. In addition, working capital was an inflow for the quarter as we were able to better align the timing impact related to semiconductor spot purchases and the corresponding recoveries. For the full year, we generated $101 million of adjusted free cash flow, in line with our original guidance issued in February of last year. The increase in adjusted free cash flow compared to prior year was primarily driven by the expansion of our adjusted EBITDA. Trade working capital was an outflow for the year, with supply disruption negatively impacting inventory levels. Capital expenditures came in at $81 million as we continued to focus on the best-cost industrialization practices as well as equipment we use. CapEx was also lower than we originally anticipated for the year, as we benefited from favorable timing on some program spending. Our cash flow for the year demonstrates the team's ongoing commitment to drive actions that are critical to generate cash for the company. With nearly 30% of cash conversion for 2022, we continue to remain diligent about cash conversion improvements. Turning to Page 13, on Page 13, we present our full-year guidance for 2023. Our guidance for sales is $3.95 billion to $4.15 billion, which at the midpoint of $4.05 billion represents an increase of 8% year-over-year. Focusing on the midpoint, this assumes our customer production is up 1% compared to prior year, while growth over market is anticipated to be in the low to mid-teens. On the pricing side, we are currently assuming that customer recoveries for 2023 are lower than 2022, primarily due to the lower spot purchases and associated recoveries. This will translate into negative pricing of approximately $200 million or 5%, plus our normal annual price-downs to customers. Excluding customer recoveries, we anticipate base sales will be approximately $3.75 billion in 2023. On a comparable basis, this equates to a 15% year-over-year increase in base sales. Adjusted EBITDA is expected to be between $405 million and $445 million, representing a 10.5% adjusted EBITDA margin at the midpoint, with a range of 10.3% to 10.7%. Compared to prior year, adjusted EBITDA margin is expected to increase 120 basis points as a result of higher volumes and operating efficiencies, partially offset by an increase in net engineering spend. We currently anticipate net engineering as a percentage of sales will be in the mid to high 5% range as we continue to invest in various strategic areas. Compared to 2022, we also expect the net impact of supply chain disruptions cost net of recoveries will be similar. Finally, we anticipate that margins will be diluted by approximately 80 basis points due to customer recoveries. Adjusted free cash flow is expected to be between $115 million and $165 million, which at the midpoint of $140 million equates to a conversion of approximately one-third of adjusted EBITDA into adjusted free cash flow. We expect working capital will be an outflow for the year as a result of higher sales and the ongoing supply chain challenges. CapEx is forecasted at approximately $130 million as we invest for future growth, expanding our manufacturing plant capacity in the Americas, EMEA, and in India. We are also investing in critical capability and capacity for our industry-leading battery management systems, as well as optical bonding preparing for electrification and display growth. Despite these investments and some unfavorable timing of spend, CapEx as a percentage of sales will remain in the low 3% range. And finally, even though we are not providing quarterly guidance, which is consistent with our existing practices, we do want to highlight some negative calendarization in Q1 with industry production volumes forecasted to be down sequentially and the unfavorable timing of customer negotiations related to supply chain cost and recoveries. As a result, we expect our earnings profile to follow a similar cadence to the one we had in 2022. Turning to Page 14, 2023 represents another year in which we anticipate sales growth, margin expansion, and cash flow generation. This outlook has been years in the making as we embarked on numerous key initiatives starting as early as 2015. These initiatives enabled us to benefit from the cockpit secular trends while outperforming in a challenging environment. Since 2015, we have transitioned our portfolio from primarily analog clusters and AM FM radios to industry-leading digital clusters, centralized domain controllers, advanced displays, and smart battery management systems. We now have a product portfolio that aligns very well with key secular trends in the industry and has led to robust levels of new business wins every year. In addition, we have been optimizing our cost base with our best-in-class engineering footprint. The introduction of product platforms that increase and the implementation of a cost-focused organization. From 2020, industry production volumes are forecasted to grow modestly by 4% annually as growth has been constrained by the COVID-19 pandemic and associated supply chain challenges. In the recent environment, we are forecasting sales growth at an annual rate of 17%, margin expansion of 300 basis points, and an increase in cash flow generation, representing strong financial performance as a result of the actions we have taken. Turning to Page 15, Visteon remains a compelling long-term investment opportunity. We have positioned the company for top-line growth, margin expansion, and free cash flow generation, and our strong balance sheet provides ongoing flexibility. I would like to close by again thanking the entire Visteon organization for their hard work in 2022 to drive record performance and pave the way for future growth. As Sachin mentioned, we are hosting our Investor Day in March, and we look forward to sharing our ongoing growth story and capital allocation thoughts with you in a few weeks. Thank you for your time today. I would like now to open the call for your questions.

Our first question is from Emmanuel Rosner with Deutsche Bank. Your line is open.

Thank you so much. First question is, I was hoping you could maybe put the 2023 margin guidance or outlook I guess in the broader context of your sort of like existing midterm margin outlook. Obviously, as reported, the margin sort of like mid-10s, but even if you add sort of like recoveries, which probably be sort of like in the sort of like low-to mid-11%, maybe that's some. The environment is sort of like presented some challenges, but I guess what would it take, I guess, what sort of inputs are needed for you to sort of back go towards the 12% that you saw in the past, you'd be getting to?

Yes, it's Jerome. Good morning, Emmanuel. Our guidance for 2023 projects sales of $4.05 billion, reflecting some recoveries. Although recoveries are expected to decrease compared to 2022, we anticipate about $300 million in recoveries for 2023 without margin. The key figure to focus on is base sales, which is total sales minus recoveries, amounting to $3.075 billion for 2023. This means we are $250 million short of our $4 billion sales target. If we consider this shortfall along with a mid-20% incremental margin, we could reach the 12% margin target. It's worth noting that this estimate does not account for any leakage still included in our 2023 guidance. Overall, we are on track toward achieving our 12% margin, though industry volumes are currently lower than the 89% we initially predicted, which is impacting sales. We believe it will take just a few quarters to reach the 12%.

Okay. That's very helpful. And then second one, I guess, on the free cash flow and specifically on CapEx, I guess this is a pretty meaningful step up, which seems to be driven by investment in growth. I guess how should we be thinking about it specifically in terms of the needed investments for this year and then what that means in terms of your capital allocation going forward?

We had previously guided that we would increase from $81 million this year to $130 million in 2023. This represents a significant increase. It's worth noting that the $81 million figure was somewhat lower than we anticipated due to timing differences between 2022 and 2023, which will result in some revenue shifting into the first quarter of this year. The increase aligns with our growth strategy, particularly in investments related to electrification, capacity, and display capabilities. Additionally, while we have some minor plant expansions contributing to our capital expenditures for 2023, we're also making some investments in IT. Overall, we are maintaining our capital investment close to the usual 3% range we’ve adhered to in the past.

Okay. Thank you very much.

The next question is from Luke Junk with Baird. Your line is open.

Good morning. Thanks for taking the question. First, Jerome, the question on operating expense guidance. I'm just hoping you could expand on the investments in engineering and SG&A that you said in the prepared remarks and specifically, I'm just trying to square it with the one-time items and incentive comp impacts that we saw in the fourth quarter here just in terms of run rate levels going forward for those items?

Yes. Overall, I'll begin with engineering and then allow Sachin to provide additional insights regarding the investments. In terms of numbers, we concluded the year with engineering expenses being relatively low, approximately $200 million. This included a slightly higher gross due to one-time costs we incurred, but it was mostly balanced by higher recoveries. Overall, we ended the year with engineering expenses at 5.2%, which is a bit lower than our initial guidance. Similar to capital expenditures, we're starting from a low base. For next year's investments, we remain focused on electrification, and Sachin also mentioned online services in his prepared remarks.

Yes. Maybe I can jump in here.

Yes, Sachin.

So yes, Luke, we are anticipating that the technology trends in automotive are going to accelerate both on the corporate as well as EV powertrain and electronics. And the trend towards a software-defined vehicle for the industry are going to go through these two domains initially, and we are anticipating and preparing for that. Now we have really good assets today in those areas, such as SmartCore and our BMS technology. But we are looking at opportunities to extend these assets and address even beyond the passenger vehicle market, two-wheelers, commercial vehicles, etc. And as Jerome mentioned, add new features and functions, especially in the areas of cloud services, and for BMS and for power electronics, add new features and capabilities, there's a push towards faster charging and higher levels of safety for EV powertrain electronics. And we are really driving the cutting edge of that technology, and this is going to require some investments from our side as we go forward.

So in terms of engineering percentage for next year, we are anticipating a slight increase versus where we were. So as I said, 5.2% this year on '22 and will be probably between 5.5% and 6% engineering cost as a percentage of sales for 2023. In terms of SG&A, modest investment there, inflation as well and investments in IT, we will essentially keep our percentage flat year-over-year versus what we had in 2022.

Okay. Great. Very helpful detail. Thank you both for that. And then Sachin, for my follow-up, hoping to ask about the launch that you mentioned with Lotus in partnership with ECARX, I was just hoping to better understand the mechanics of that relationship and how the two companies are working together? Thank you.

Yes. Great. Right. So when you talk about China, the market is, as you know, different from the rest of the world in terms of the level of cloud service integration that's expected in vehicles in China for the cockpit. So we provide our SmartCore platform. So that's all of the hardware, middleware, OS, and all of these features and functions that SmartCore brings and ECARX has their services on top of it as well as the HMI and the cloud services. So this is something that we don't expect Visteon in China to be able to offer to the extent that our partners can. And so this collaboration brings the best of breed from both sides. Our proven SmartCore technology that we have now launched on more customers than virtually any other supplier and this has really been well accepted in the marketplace. And ECARX with their capabilities and assets that they bring, especially on cloud services, smart voice using AI and other applications and also ADAS, by the way, that's getting more and more integrated with the cockpit in China. So that's the nature of our collaboration. We have had several vehicles launched already. And so pretty excited about what that means for our future growth for SmartCore in China.

That's very helpful. I will leave it there.

The next question is from David Kelley with Jefferies. Your line is open.

Good morning, guys. Thanks for taking my questions as well. I wanted to start with recoveries, and I appreciate the color on the expected impact on 2023 sales. I guess, how should we think about the visibility to those recoveries? How much has been negotiated in today versus ongoing discussions with your customers?

Yes, that's a good question. Good morning, David. So very pleased first with the level of recoveries we had in 2022. Net leakage was close to $20 million, slightly better, in fact, versus our original target. As we go into 2023, mechanically, I would say that most of the surcharge or recoveries are kind of a reset. But at the same time, we have had discussions with our customers for the last few months, indicating that these cost increases would continue into 2023. So, we are still in the middle of negotiations as far as recoveries are concerned. And there is definitely an expectation that 2022 cost increases will roll into 2023. And we'll add obviously some level of true-ups for the 2023 cost increases or decreases that we'll have. So right in the middle of that, we've indicated as well, I think, like a lot of other suppliers that our earnings profile will be a little bit distorted again this year by the level of success we'll have in Q1 versus the other quarters. And you'll see probably a ramp-up in terms of earnings profile throughout the year as we are more and more successful to close negotiations on recoveries.

Okay. Got it. That's helpful. And then maybe just a follow-up question on the mix impact from the ongoing supply chain disruptions. I guess, A, were you held back on let's call it, like higher dollar content shipments due to the supply shortages in 2022? And does the change in the type of those shortages moving to, you acknowledged microcontrollers and away from some of the analog and digital issues of last year. Does that at all have an impact on mix in 2023?

Yes, that's a great question. Let me explain how this mix affected us in 2022 and the changes we anticipate in 2023. In 2022, we faced shortages mainly in power and analog chips, which influenced all of our products. It's important to note that every product we create depends on these power chips to operate the circuitry, and if displays are included, some analog chips are also necessary. Therefore, almost all our products experienced some level of impact in 2022. By the end of 2022, we began to see improvements in the supply of power and analog chips, thanks to our proactive collaboration with specific suppliers, which has set us ahead of many in our industry. As we enter 2023, we notice an improvement in our situation regarding power and analog chips, and we expect this trend to continue. However, we are now facing new shortages in microcontrollers, primarily due to limited wafer supply from foundries to our semiconductor suppliers. This issue became clearer towards the end of last year. This shortage particularly affects our digital clusters more than products like SmartCore. Therefore, we anticipate some impact there, but we expect conditions to improve in the latter half of the year, as I mentioned previously. At the same time, we are redesigning some of our products to provide greater flexibility, enabling us to meet increasing demand, particularly for clusters, due to our recent launches. We anticipate that these redesigns will help us navigate some of the shortages, and this consideration is incorporated into our forecast, especially regarding the growth we project for 2023.

Got it. That's really, really helpful. Thank you.

The next question is from James Picariello with BNP Paribas. Your line is open.

Good morning. Back to the supply chain, you're still taking some choppiness from a semi-supply standpoint through the first half, then assuming some demand weakness in the back half to get to your full-year LVP assumption of above just 1%. But again, from a chip supply perspective, if demand were to prove more resilient in the second half, to what extent do you think the industry can handle better production growth. Like relative to your up 1%, what's the supply chain limiting max growth for production this year as you see it?

Yes. First of all, I want to clarify that the demand we are experiencing today is stronger than what the supply chain can handle, even with improvements. However, if the demand remains strong, particularly in the second half of the year, I anticipate that vehicle production could exceed the 84 million units we have projected. It's difficult to determine exactly how much it might increase beyond 84 million. Looking back to 2021 and 2022, when the industry added approximately 5 million units of production, that range is what I expect the industry could achieve again if supply constraints are alleviated.

Got it. If we hypothetically add 5 million units of production growth, would that likely require Visteon to reenter the spot buy or broker market for chips? Or do you believe that your contracted supply could support that? What is your perspective on this?

Right. In general, we expect that it would be less even in the case that the demand is higher because of all the redesigns that we have done. So there are two dynamics that will help us in '23. One, we do expect the supply levels themselves to go up on account of the work that has been done by our suppliers. And that specific area that we are now highlighting, a bigger problem, which is the microcontrollers. With the redesigns that we are doing, I expect that we would be able to work around it in the second half. So overall, I expect that our spot buy demand to be lower even in the event where we see our supply increase and keeping up with the demand.

Okay. Super helpful. Just one quick one. Any chance to get a finer point on the cadence for the year? I know it's a sequential ramp similar to last year. Just maybe a marker on 1Q relative to 4Q or on a year-over-year basis, just to get a better feel for how the year starts off?

We won't give any guidance for Q1, but it's really impacted by two things. First, the recoveries and the cadence of the negotiation. And then the second point is production. I think IHS is already showing 5% down for Q1. So that's essentially what drives the quarters throughout the year, production levels as well as the level of recoveries.

The next question is from Colin Langan with Wells Fargo. Your line is open.

Great. Thanks for taking my questions. Just wanted to ask about the new business wins. When I look at the mix of this year versus last year, clusters is just 17%, I think it was like 41% last year. That would be about $1 billion swing, obviously, offset by other areas. Is there a reclassification that's impacting that? Is there something going on in that segment or timing this year that would cause the big swing? Just kind of wondering if there's any color there?

No, no. So Colin, this is Sachin. So I don't think there's anything structural there. It's just a timing issue. Last year, we had a pretty good year for clusters, but some of the other sectors were not as strong, and this seems to be reversed in 2022. So I wouldn't say that we are expecting anything different with respect to our go-forward views on clusters.

Okay. Got it. Looking at the guidance, it appears there is around a 16% increase in sales, not including the effect of recoveries. You mentioned a low 20s as normal. I want to ensure I understand all the offsets. The R&D is a challenge, and I'm curious about the scale of the expected input costs. Is there any information on those costs or any factors this year that might lead to a significant change? I'm just wondering if you could provide any details on that.

Yes, we are seeing a 26% incremental, but when excluding the recoveries, it's at 16%. Our volumes are converting at the usual levels in the mid-20% range. The offsets include engineering, not just because of the increases we are seeing in 2023 but also due to the comparison with last year, where engineering was lower in 2022 primarily because of the recoveries. Additionally, we have a slight increase in SG&A. However, these factors are balanced out by operational improvements. In terms of supply chain disruptions, we anticipate that the $20 million net leakage from 2022 will be consistent into 2023, even though the geographic impacts may change.

And that's related to this year being the same as last year because I thought last year's costs were more about semiconductors and the timing of those recoveries. Or is this related to labor since many other suppliers have mentioned it?

It's definitely more related to semiconductors. Absolutely, yes.

Okay. Thanks for taking my questions.

The next question is from Itay Michaeli with Citi. Your line is open.

Great, thanks. Good morning, everyone. I have a broader question about GOM sustainability. Achieving mid-teens this year is impressive. How sustainable do you believe that performance will be after 2023? What types of bookings are you targeting this year to help maintain that sustainability in the coming years?

Yes. Let's discuss this and see what happens with the market moving forward. We are aiming for $6 billion in wins this year, just as we did last year. With that level of success, we should be able to maintain our mid-teens growth on gross operating margin in the near term. As our base sales grow, there will be some impact on gross operating margin percentages due to the increased base. We will provide more insights on this during our Investor Day on March 7th, where we will discuss our outlook for the coming years.

Terrific. That's helpful, Sachin. And maybe just a quick follow-up. Back to the cadence of the settlements this year, to make sure I have it clear, so is that just a timing issue from kind of normal course price downs? Or are some of these recoveries proving to be more challenging early on here in the year?

It's very similar to what we had in 2022. So it takes some time to negotiate with the recovery. So the cadence we are anticipating in '23 will be similar to the cadence of negotiation and successful closing of the negotiation that we had in 2022. So no major differences between the two.

This does conclude our earnings call for the fourth quarter and full year of 2022. Thank you, everyone, for participating in today's call and your ongoing interest in Visteon. If you have any follow-up questions, please contact me, Chris Doyle or Ryan Ghazaeri directly. Thank you.

This concludes Visteon's fourth quarter and full year 2022 results earnings call. You may now disconnect. Thank you.