Versigent PLC Q1 FY2026 Earnings Call

Good day, and welcome to the Versigent Q1 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Annalisa Bluhm. Please go ahead.

Thank you, and good afternoon, everyone. I'm joined today by Joe Liotine, our Chief Executive Officer; and Doug Ostermann, our Chief Financial Officer. Today's call includes forward-looking information reflecting our current view of future financial performance and may be materially different for reasons that we cite in our Form 10-Q, earnings materials and other filings with the Securities and Exchange Commission, including the Risk Factors section of our registration statement on Form 10 and 12B&A filed on March 6, 2026. Our guidance reflects management's current expectations and should not be relied upon as a guarantee of future performance. We undertake no obligation to update these statements, except as required by law. We may also reference non-GAAP financial measures during the call. Reconciliations to the most directly comparable GAAP measures are included in today's earnings release and are available on our Investor Relations website. I will now turn the call over to Joe.

Thank you, Annalisa, and good afternoon, everyone. Today marks an important moment for Versigent. On April 1, we entered the public market with clarity about who we are, how we compete and how we create value. Versigent launched from a position of strength, generating close to $9 billion in annual revenue, not as a concept, but as a scaled, profitable and disciplined business and I'm pleased to be here speaking with you today on our first earnings call as an independent company. Before we get into the numbers, I want to take a moment to thank the hundreds of customers, thousands of suppliers and our incredible employees, nearly 140,000 of them around the world who made this historic moment possible. As we begin, I want to take a moment to outline how we will spend our time this afternoon. I'll start by describing what Versigent does and the problem we solve, then walk through how our business model drives sustained growth and margin expansion, outline our strategic imperatives as a stand-alone company and then provide a brief update on how the first quarter unfolded. Doug will then walk you through the financials in more detail. As a reminder, the financial information we will discuss today reflects results from a period when Versigent operated as part of Aptiv and is presented on a carve-out accounting basis. Versigent exists to solve a challenge that is intensifying across many sectors, including mobility, industrial and energy systems. Today's innovations are creating products with more autonomy, more connectivity and more features, resulting in increased power demand, increased sensing capabilities and much more sophisticated and complex products. Customers need to deliver these innovations while still finding ways to reduce complexity and create productivity opportunities. That's where Versigent comes in. Power and data distribution are critical to unlock advanced functionality. It is the nervous system of modern products, and that shift plays directly to our strength. At its core, Versigent designs, manufactures and delivers low- and high-voltage power, signal and data distribution architectures. Each architecture is unique. These advanced systems connect and power the critical components that enable modern vehicles and equipment to function safely and reliably. Increasing complexity means these architectures must be carefully designed early, optimized holistically and executed consistently at scale. That is where Versigent operates. What differentiates Versigent is not just scale, but how we apply it. Our systems are embedded in the design of leading OEM programs globally. And we work with every major auto manufacturer, including growing automotive leaders in China. More than 75% of our revenue comes from solutions our engineers influence, often early in the program life cycle when architecture decisions matter most. While Versigent is often categorized alongside other automotive suppliers, we operate as a highly engineered design-driven company supported by an intelligent and proprietary design and engineering tool suite. These tools allow us to model, simulate and optimize complex electrical architectures, helping customers reduce weight, cost and risk, while accelerating development and improving quality and the efficient manufacturability of these products. Importantly, they are deeply integrated into our engineering workflows and customer engagements creating a sustained competitive advantage. Our unique engineering capabilities provide expertise that differentiate us from others. As architectures evolve, simplified systems remove pass-through content such as copper and increase the value of optimization with elegant systems and digital design capabilities. That is where Versigent leads and why our new architectures are margin accretive over time. This shift towards greater capabilities played directly into our operating model. We combine design influence, proprietary tools, disciplined manufacturing and automation to drive structural margin improvement through execution. Versigent is fundamentally resilient. Our growth is content driven, supported by long-term secular tailwinds, including electrification, connectivity and software-enabled functionality. We are platform agnostic, whether customers deploy ICE, hybrid or battery electric architectures. The complexity of these programs continues to rise and Versigent benefits. We also see attractive opportunities beyond automotive, adjacent markets face many of the same pressures we already solved for, more content and features, greater reliability and tighter tolerances. We are approaching these adjacencies selectively, extending proven capabilities into areas such as commercial vehicles, energy storage and selected industrial applications without changing our operating model, our execution discipline or our technical expertise. As we begin this next chapter, Versigent enters the market with clear priorities, strengthen our market-leading position by leveraging our full service capabilities, continue optimizing our cost structure through automation and footprint discipline, deliver consistent financial results through execution, allocate capital in a disciplined manner to drive long-term shareholder value. These priorities reflect how we operate as an independent company, focused, accountable and execution driven. With those priorities as our foundation, the first quarter provided clear evidence of how they are taking shape in the business. The progress we delivered across launches, customer wins and quality reflects disciplined execution and reinforces our positioning with leading OEMs and global programs. During the first quarter, our teams executed across a broad set of programs globally with a high level of launch activity and complexity. We successfully delivered multiple launches across regions and programs including complex premium and high content vehicle programs requiring advanced electrical architectures in close coordination with OEM engineering teams, all with stable ramps, with more than 99% quality and more than 99% on-time performance. We also continue to build go-to-market momentum through new program wins and extensions with leading OEM customers. These awards span regions and programs and reflect continued demand for Versigent's low- and high-voltage solutions as electrical content and system integration requirements increase. Quality and delivery remained a clear differentiator in the quarter. Customer recognition and quality awards reinforced Versigent's reputation as a partner that executes consistently, particularly on complex global platforms where reliability and performance are critical. In addition, we made tangible progress in nonautomotive markets, beginning production on an energy-related power program. This program expands our served applications beyond traditional vehicle architectures while leveraging the same engineering, manufacturing and systems capabilities that underpin our automotive leadership. Together, these execution outcomes supported the volume growth achieved in the quarter and demonstrate how our priorities are translating into results. From a financial standpoint, the quarter was a strong start to the year for Versigent. Revenue increased 9% year-over-year to $2.2 billion with 3% adjusted growth, adjusting for foreign currency and commodity pass-through, reflecting solid underlying volume performance across the business. Doug will walk through the financial details in more depth. But at a high level, the results reflect strong execution and demand across the business. In addition, we had a strong start to the year with $2.6 billion in new bookings this quarter and the start of 24 new programs, putting us on track for the most new major launches in our history, including the production on an energy storage program. Regionally, performance was strong in the Americas where adjusted growth was 6% year-over-year, supported by higher volumes on key programs and new business wins. In Asia Pacific, adjusted revenue growth of 12% was driven by new platform launches, including a greenfield program in India and continued momentum with both global and regional OEMs. In EMEA, revenue was down 12% on an adjusted basis, consistent with the softer production environment. We continue to see progress through incremental program wins and successful launch of our premium vehicle mid-cycle refresh. Overall, the regional results reinforce the strength of Versigent's global footprint and customer relationships with the volume growth driven by launches, program execution and expanding content on key programs. Taken together, the quarter reflects a solid operational and financial performance as we move into the rest of the year and reinforces our confidence. As Versigent enters the next phase, we do so to unlock greater value. We are highly engineered, globally scaled and cash-generative industrial company, supported by clear priorities, strong execution capabilities and disciplined capital allocation. With that, I'll turn the call over to Doug Ostermann, our Chief Financial Officer, to walk through the financial details of the quarter and our outlook for 2026.

Thanks, Joe. I'll begin with a review of our first quarter financial results. As a reminder, results for the quarter are presented on a carve-out basis, reflecting Versigent's operations as part of Aptiv through March 31. The separation was completed on April 1 and financial information for periods prior to that date have been prepared as if Versigent had operated as a stand-alone entity derived from Aptiv's historical accounting records. With that context, I'll walk through the quarter starting with revenue on the next slide. Overall, Versigent had a strong first quarter. First quarter revenue was $2.2 billion, representing 9% growth year-over-year on a reported basis and 3% growth on an adjusted basis, excluding the impacts of foreign exchange and commodity pass-throughs. The quarter reflected solid underlying volume performance driven by sustained demand from core OEM customers. Despite the lower global vehicle production environment, volumes increased across a number of key programs and demand remains strong. Growth in the quarter was supported by Versigent's solid position on global platforms where electrical architectures are becoming more complex and increasingly integrated into vehicle performance and functionality. We continue to work closely with our OEM partners in the early stages of design, which supports both volume growth and durability of business over time. In the Americas, we achieved adjusted growth of 6%, driven primarily by higher volumes on truck and SUV platforms and strong execution across ongoing programs. Versigent continues to be well positioned with leading North American OEMs, particularly on large truck and SUV platforms where electrical architectures require high levels of reliability, scale and integration. In Asia Pacific, adjusted growth was 12%, reflecting growth with both global OEMs and domestic customers. Performance in the region was supported by launch activity, program extensions and continued demand across China, India and other growth markets. One area where we continue to see growth is with customers in China that are benefiting from the increased demand for vehicles exported to different countries. As architectures evolve and regional platforms become more differentiated, customers increasingly value Versigent's distinct engineering depth and local manufacturing capabilities, which contributed to the quarter's volume growth. In EMEA, revenue declined 12% on an adjusted basis, reflecting lower production levels in the region and the end of production of certain programs. Customer engagement across the region remains strong, and the program portfolio continues to support future growth as production normalizes. Across all regions, the quarter reinforced the importance of Versigent's global footprint and its ability to consistently support OEMs across continents, platforms and vehicle segments. Adjusted EBITDA for the first quarter was $203 million. That's an increase of 3% year-over-year with an adjusted EBITDA margin of 9.2%. Adjusted EBITDA reflects contributions from higher volumes, alongside ongoing operational execution, offset primarily by foreign currency exchange and commodity headwinds. As you can see on Slide 10, the increase in sales specifically related to foreign currency exchange and commodity pass-through was $122 million. This increase alone drove a degradation of about 50 basis points of margin in the quarter on a year-over-year basis, but we believe we are on track to meet our full year margin targets. EBITDA performance in the quarter was driven by operational execution and certain cost dynamics, such as material productivity from supplier negotiations, value-add engineering and content reduction initiatives. The quarter also reflected higher commodity costs and foreign currency exchange impacts, including the timing of customer pass-throughs. You can see on Slide 11, an unfavorable impact of $46 million on a year-over-year basis. This primarily reflects 2 factors: first, an increase in the copper index of over 25%, driving about 2/3 of the impact; and second, a strengthening of the Mexican peso of about 15%, which is the primary driver of the remaining impact. For copper, we have escalation agreements that cover roughly 3/4 of our exposure. However, there is a lag on average of about 3 to 4 months between when our costs increase and when we update the pricing with our customers. This causes temporary margin dilution when indices increase rapidly as we saw in Q1. Assuming copper indices stay consistent with Q1 average rates, we expect the lag impact to cease as our prices will be adjusted to align with our costs. We factor both higher copper prices and stronger Mexican peso into our planning for the year. We will continue to manage these risks through customer agreements, financial hedges and cost reduction initiatives. Looking ahead, margin performance is expected to continue to be driven by profitable growth, execution on manufacturing and materials initiatives with cost actions in place to manage external pressures. Turning to income taxes. The U.S. GAAP income tax benefit for the first quarter was $9 million compared with an income tax expense of $29 million in the prior year quarter. The quarter-over-quarter change was driven almost entirely by a favorable tax reserve adjustment during the first quarter of 2026. For full year 2026, we expect an adjusted effective tax rate of approximately 23% with a comparable cash tax rate. Operating cash flow in the first quarter was $36 million, and free cash flow was an outflow of $30 million. Cash flow in the quarter reflected several timing-related factors. Capital expenditures totaled $66 million. In addition, the quarter included restructuring cash outflows aligned with actions already underway as well as $26 million of onetime separation costs. Working capital was also a use of cash during the quarter as we experienced our typical seasonal build required to ramp back up from customer shutdowns during the last couple of weeks of the calendar year. As the year progresses, continued execution and working capital normalization will support significant free cash flow generation. From a financial position standpoint, Versigent ended the quarter with $282 million of cash on hand, $1.1 billion of overall liquidity. This is supported by an $850 million revolving credit facility that remains undrawn. Our cash balance at quarter end reflects the timing of certain separation-related cash settlement with our former parent company, much of which has been settled after the quarter end, bringing our cash balances directionally in line with the $400 million pro forma level outlined in our Form 10. Turning to our outlook for the full year. We are reaffirming our financial guidance for 2026, for the year, we expect revenue of $9.1 billion to $9.4 billion, which represents approximately 2% adjusted growth despite a production environment that is expected to be down about 1% year-over-year. From a profitability standpoint, we expect adjusted EBITDA of $950 million to $1.03 billion, with an adjusted EBITDA margin of approximately 10.7% at the midpoint. This outlook reflects profitable sales growth and continued progress on operational and performance initiatives. This includes manufacturing efficiency, material productivity, and automation, which are expected to drive continued margin expansion. From a cash flow perspective, we expect free cash flow of $200 million to $300 million for the year, which includes approximately $70 million of separation-related costs. Our free cash flow outlook reflects the expected cadence of earnings growth, working capital normalization and the reduction of separation cash outflows as the year progresses. Turning now to capital allocation. Versigent remains committed to a disciplined and balanced capital allocation framework. Prioritizing continued growth while returning cash to shareholders. As part of our capital allocation framework, we intend to return a portion of future earnings to shareholders through a regular dividend. This policy reflects our confidence in the durability of our cash flow profile and our ability to support recurring returns to shareholders. The initial dividend is expected to be declared following the end of the second quarter in the range of $0.13 per share per quarter. Of course, any dividend is subject to the approval and declaration by our Board. In addition, our board approved a share repurchase program for up to $250 million. The program does not have an expiration date and may be amended, suspended or terminated by the Board. Under the program, we intend to repurchase shares opportunistically from time to time subject to management's discretion. Our intention will be to fund share repurchases with operational cash flows, which typically are weighted towards the latter half of the year. Together, the dividend policy and share repurchase program reinforce our commitment to returning capital to shareholders while enabling continued execution of our business priorities and maintaining a disciplined balance sheet. With that, I'll turn it back to you, Joe.

Thanks, Doug. Versigent launched into the public market with a strong vision. We delivered solid performance with strong revenue growth, all while reinforcing our position as an industry leader. Above all, our team remains focused on the right things, driving revenue, increasing cash flow and executing with a high level of operational discipline across the business to unlock greater value for our customers and our shareholders. With that, we are happy to take your questions. Operator, please open the line.

Operator provided instructions. We'll now take your first question coming from the line of Chris McNally with Evercore ISI.

Congratulations on the first quarter out of the box. Maybe just one housekeeping item and then we'll go a little more strategic. On housekeeping, could you give a sense of the three to four months on copper you mentioned, with Q1 seasonally light and taking the copper hit? Could you tell us how we may see that earnings cadence over Q2 to Q4? And at roughly a $6 level, in which quarter should we expect to be fully recouped?

Yes. Thanks for the question, Chris. We saw a pretty significant move up in the copper price during the first quarter, and it seems to have stabilized a little in the last week or two. With the roughly 3- to 4-month lag built into the contract escalation, we'll typically start to see that play out in the first month of the second quarter and it should be largely normalized by the end of the second quarter or the beginning of the third quarter, assuming copper prices remain stable. In addition, we hedge the portion of our copper exposure that is not covered by contract escalation, which gives us time to discuss amounts and price changes with our customers. That accounts for the remaining 25 percent, and it has an immediately offsetting effect.

No, that makes sense. We’ve seen that smoothing effect in years past, like 2024 when there was the copper strike. Okay, that all makes sense. Maybe a little on the strategic side: I think we talked a bit about it in your parent or former parent, Aptiv, around the secondary TAM extensions we’re seeing in industrial. You had some exciting news during marketing Versigent about roughly $150 million of wins in battery storage and a $3 billion TAM. Is it fair to think that a couple of years out you could be a significant player here, with a similar mid-teens to 20% market share that you’ve had in auto? I just think investors—many of us don’t know much about wire harnesses in that market, so can you add some color on who is playing in that market now, because it seems like there’s a lot of runway for you to grow?

Yes, Chris. Just if we zoom out a little bit, we're focused there for a reason. We've looked at our engineering skills and capabilities, and they apply quite well there without a lot of change or adaptation. We've looked at our manufacturing and that applies as well. So from an asset intensity and a capability development standpoint, we really don't require effort there. What we have seen though is there is some go-to-market weakness and nuances that we need to kind of refine to make sure we're ready for all those opportunities. We're in quite a few predevelopment programs already. We have our first serial production here launched in Q1. So this is beyond just theory, we're seeing progress there. I think the competitive market there from a supply standpoint is pretty diverse versus battery storage or robotics or even commercial vehicles. So it's not necessarily one cohesive group. But everything we've seen points to either customers are coming to us and asking us to participate or we're engaging with customers and getting very good receptivity. Now again, the battery side and robotics side is quite small today. So even if the growth is big, the starting point, the absolute value is smaller. But we feel really good about both our applicability and the potential of those TAMs. So I would say early days, but we're just essentially reinforcing the strategy and the thesis that we laid out just a couple of months ago.

Yes. And the customer overlap is really, really encouraging.

We'll take your next question coming from the line of Joseph Spak with UBS.

This is Gabriel on for Joe. Doug, you outlined the $0.13 quarterly dividend. So maybe a 1.4% current div yield. Can you help us think about how that could evolve over time, especially given similar auto supplier peers generally screen somewhat higher? Is this more of a starting point that will be reevaluated. And I guess just more broadly with the new authorization, how should we think about the balance across your capital priorities going forward?

Thanks for the question, Gabriel. And really, what we wanted to do was we have stated previously that we would have a competitive dividend. We wanted to provide some additional definition around that. We think the $0.13 a share is a good range that we'll discuss with the Board at the end once we have kind of Q2 earnings in the bag. And we think that's a good way to start returning some capital to our shareholders. Of course, as earnings progress we'll revisit that with board from time to time. But I think that should help you get some order of magnitude on what we mean by a competitive dividend out of the chute. Now when we look, of course, at the authorized buyback program that we discussed with the Board, I just want to revisit the fact that really when we look at our overall capital allocation strategy, our number one priority, of course, is to continue to grow the business. And we have a lot of nice organic opportunities. Joe just discussed a few of those. But really, even running at kind of the 3% of revenue in terms of CapEx, we should be generating a lot of cash beyond that. And so we thought it was important to get a buyback program authorized by the Board. Of course, we would seek to time that in coordination when the cash is being generated by the business. And as you probably know from our history, cash generation is typically a second half. So I wouldn't see us getting or even thinking about getting active on that front until kind of that time period.

Got it. That's really helpful. And Joe, just following up on a question that was asked on the Aptiv call this morning on the conquest business, a competitor announced. I know there was a lot of color provided, but wanted to ask if you had any further comments on your own on that? And more broadly, can you discuss your competitive positioning going forward as a stand-alone company versus when you were a part of Aptiv?

Yes. Appreciate the question. Just to maybe clarify or reiterate a couple of things that were said by Kevin, again, we retain the vast majority of that program. A small amount was awarded to a competitor and on smaller, more basic harnesses. And so I thought Kevin did a really good job bringing facts to the discussion, in a comprehensive way and a well-constructed way, and not just hyperbole. I think it's important that GM took the time, so I'm appreciative of that, they took the time to say the things they did in sanctioned public remarks that they stand behind and they cited us as the gold standard in wire harnesses. They cited us as a company in which they expect us to have incremental opportunities. And then they also cited that we had 0 operational issues. So it's just a testament to, I would say, a very valued customer of ours to go out of their way to do that. And I think maybe the last thing I would say is if we zoom out and look at the facts, in 2025, our growth over market was strong and better than competition as was our bookings. In Q1, our growth over market was strong and better than competition as was our bookings. And then our future outlook in terms of what we shared in our Investor Day and our thesis was strong growth over market as well. And so if you take all of those, that's a comprehensive view of business. That's not just the shiny object to maybe distract from the broader dialogue. And I think that's important to keep that context together.

We'll now take your next question come from the line of Emmanuel Rosner with Wolfe Research.

Great. Could you give us a little color on how you’re thinking about the current quarter? What makes it complicated is understanding the cadence. These commodity headwinds were very large, and the subsequent recovery, I would think, makes performance more back-end-loaded when recoveries occur, particularly with respect to margins. Any thoughts on Q2 or the cadence of the first half versus the second half?

Yes. Thanks for the question, Emmanuel. We certainly started with a strong first quarter, and that gives us a lot of confidence in reaffirming our guidance. But in terms of cadence, as you know, in the automotive industry, typically from a volume perspective Q1 is a bit lower. So if you look at the seasonality of the industry, we would expect more production in Q2, Q3 and Q4. For us, our margins historically have peaked in Q3. When I look at this year, as we talked about, if copper prices stay relatively stable, we should see a majority of this copper headwind from a timing perspective that we saw in Q1 work its way through the system by the end of Q2 or the beginning of Q3. So we would expect margin progression. The other thing is, of course, that when we have higher volumes as we expect in Q2, Q3 and Q4, our business had a 23% contribution margin, and that also enhances our overall margin. So I would say when we think about the guide that we have, with the midpoint at 10.7% adjusted EBITDA margin for the full year, as we progress probably two-thirds of that would be additional volumes that we expect in the coming quarters above our current run rate, and maybe one-third of that would be related to this copper escalation as well as additional performance initiatives that will offset some of the headwinds that are a natural part of our business.

And maybe just to support the comments made by Doug, if you look at what we did in Q1, and maybe what we did operationally in 2025 in terms of improvements, we're essentially just continuing some of these things on the revenue side, the mix side and operational improvements. Obviously, the commodity side is a little bit more nuanced. And so there isn't a big change in business composition to achieve that. It's more a continuation.

Okay. Just one quick clarification, and then I've got another question, but Doug, when you're saying that by end of Q2 and start of Q3, most of it would basically be an offset. Do you mean that the entirety of the net headwind that we saw in Q1 would already be recovered sort of like by end of Q2, beginning of Q3 or that this is when it's no longer a headwind and then you have to recover it in the second half?

Yes. If copper prices stay relatively stable, we'll see the escalation built into the contracts; the commodity portion of the headwind will work its way through. Today it's just in our cost, but it would go into our revenue as the contracts escalate pricing. So what you're left with is a small dilution to margin, which should be relatively minor overall from the higher copper price. The majority of that headwind would have worked its way through.

Okay. And then just coming back to the color you gave and Kevin gave about this GM business and I think a lot of the fair points that you've highlighted. I think one of the things Kevin was saying was, hey, this is a sort of build to print type of business, sort of like lower margin. Can you clarify from a strategic and focused point of view on a go-forward basis. Is that still sort of like attractive business you're looking to win and capture and continue to grow? Or is there sort of like also a strategy, which is to sort of like refocus on a more profitable part of the business?

Yes. So I think it's a great question. I think if you come back to what we've talked about is our competitive advantage and what we've demonstrated over a long period of time, that really stems from engineering expertise. And I'd say a tool suite that's proprietary from an engineering standpoint. So we certainly want to gravitate toward the things that are most complex towards the things that are most innovative. So that's true. And maybe it's a bit of a bias in our strategic approach for sure. Having said that, we want to win all the business we can, in many cases. So I wouldn't say it was necessarily us deselecting but there is a bit of a natural bias for us. And sometimes, we're willing to do things a little more or a little less based on the margin profile that's certainly a consequence there. And so what Kevin was trying to share is 'hey, this is a little bit of the more basic things. And so it's not going to have the best margin and characteristics like that.' Having said that, we do a lot of that product as well. So I don't want to make it sound like we never do that because that wouldn't be accurate. But we certainly have a bias to the biggest, most complex and that will remain going forward, for sure.

Next question will come from the line of Colin Langan with Wells Fargo.

This morning, I think Aptiv said that commodities were about a 50 basis point margin drag relative to their expectations. I assume you were using a similar assumption on raw materials. So you were able to hold the guide. So how much worse was commodity and what are the offsets that you were seeing that enables you to hold the guide?

Yes. Thanks for the question. The 50 basis points really reflect the portion of commodity activity that has already been built into our pricing and costs. There was some copper movement prior to Q1 that has now worked its way into our contracts, so it shows up in both revenue and costs but without associated margin, which produces that dilutive 50 basis points. The more important headwind is the rapid rise in copper in the first quarter that has been built into our costs but has not yet flowed through contract escalations. We expect the majority of that to pass through in the second quarter, at which point that headwind will be significantly reduced. When you look at the roughly 210 basis points we discussed for FX and commodities, about two-thirds of that is commodity related; once those costs are passed through, that portion will drop to around 20 basis points. So this is a transitory, temporary headwind due to the way our contracts are structured and it simply needs to work its way through the system. It’s important to distinguish the margin profile in Q1 versus what we expect for the rest of the year, and as this works through, we remain confident in our ability to meet our full-year margin projections.

I have a follow-up. Shouldn't higher copper pass-through, which increases revenue, have diluted your margin? I'm trying to understand what the offset might be. On that point, is production lower now? Is lower production the offset to the higher copper?

No. When copper prices rise and those increases are passed through the contracts, it raises overall revenue. That's why we talk about adjusted revenue growth, where we strip out commodities and foreign exchange to show organic growth, which is the 3% adjusted figure we mentioned earlier. That's the primary driver of the revenue increase. As I said, once the cost impact moves into the revenue line, they offset each other, but there is no margin on that portion, so it is somewhat dilutive because the revenue base becomes larger. To understand our commodities exposure, 75% of our contracts include escalation clauses and the remaining 25% are hedged on a two-year horizon, so we do have coverage; it just takes time to work through the system.

Okay. If I look at Slide 11, you had really strong net performance of $31 million. And if I look at the Aptiv slides from this morning, they actually said something about favorable commercial. Is some of that a commercial settlement in there that's helping that? Or is that the run rate we should be thinking about for the rest of the year? It seems quite helpful.

Yes. What you're seeing in that positive $31 million of net performance is materials performance. I mentioned this a bit in the dialogue. Materials performance comes from negotiations with our suppliers and, importantly, value-add and value engineering by our engineering teams. This is a major differentiator Joe has discussed many times — the value our engineering teams add to our customers' products. That materials performance, along with some manufacturing productivity improvements and similar factors, is outweighing the labor economics and certain mix effects in the net performance figure. So it's a positive number overall this quarter, and we expect further gains in that category as the year progresses.

And just as a build, a little bit to my comments earlier, we had demonstrated that ability in full year 2025 as well. Much of that came out of North America, we will continue those efforts because we believe there's more value across the globe to continue that. And hence, that's part of our story as we talk about a 2-point margin improvement over the next couple of years, so part of that is the operational improvements along the way.

Okay. But there's no reason to assume that, because I think the Aptiv slide said favorable timing of recoveries was a help. So we shouldn't expect this to be a one-off or that it will soften the rest of the year because there was some one-off recovery.

No, I would think of it as a relatively clean quarter in terms of income or profit. We did have obviously some onetime events related to the restructure or the separation. But from a profit standpoint, relatively clean quarter, nothing lumpy from a recovery standpoint, nothing that would subtract from Q2 to Q4.

Next question will come from the line of Itay Michaeli with TD Cowen.

I just wanted to start off by talking about growth versus the market and your outlook for the rest of the year. I think in Q1 you were roughly five points above the market. It sounds like the guide for the year is more like three. Maybe you could discuss the puts and takes we should consider for the rest of the year and whether there is any upside potential to that?

Yes. I think you're exactly right: our growth above market in the first quarter was pretty strong. Some positives in Q1, as you saw from the regional detail we shared, were that we over-indexed with customers in China who are very focused on exports and, frankly, outperformed some of the volumes we had assumed in the budget and business plan. That's a nice upside that may or may not continue through the year, but right now it's been pretty strong. When we look at overall growth and how the market is expected to progress in terms of volumes, we would need to run just a couple of percent above market growth to be well within the range of the guidance we provided from a revenue standpoint. So we feel pretty comfortable given the outlook, and we have pretty good visibility on schedules in Q2 at this point, so we feel comfortable reaffirming our guidance. As for puts and takes as the year progresses, there are a couple of things to keep in mind. One is whether commodities will stabilize or continue to move around; that's something we're used to and deal with regularly, but it could impact the cadence from quarter to quarter. We have some very significant launches this year; it's a big launch year for us, so our team is laser-focused on execution. We're also watching macro and geopolitical events and whether there could be knock-on effects on overall vehicle demand among our customers. Finally, we're focused on controlling the controllables, the things we execute on daily, so our team will deliver day in, day out. Those are the big hitters I see.

Very helpful. And then just to ask 2 quick follow-ups. First, it looks like kind of the gross incremental margin was more like 30%, just looking at the volume on EBITDA versus revenue. I'm curious if that potentially could be sustainable as well? And second, on the bookings in Q1, I think that was up year-over-year, but curious just any thoughts there and any perhaps target to share for 2026 for bookings.

You're just comparing the EBITDA contribution from a volume of 20 over a volume of 66? I think that's pretty much in line with the 23% we typically quote as our contribution margin. So I don't see anything; it's probably in that range. Sometimes there can be smaller recoveries or other items that slightly impact the number, though.

A little bit of mix in there as well. We did have favorable program growth in North America and a little bit on the export side. So a little bit of mix in there as well.

Got it. That's very helpful.

And the second part of your question was? Sorry, then back to bookings. Yes. So we did have a good Q1, frankly, exactly on plan. So we feel good about the bookings progress, and we feel good about the full year revenue forecast, as Doug shared just a few moments ago. So from that standpoint, I'd say exactly on track.

We'll now go to your next question coming from the line of Tom Narayan with RBC Capital Markets.

This is Thomas Ito on for Tom. So we've been seeing some improving electrification trends through Europe recently, especially with like hybrids and EVs, given the elevated energy prices. Can you just help us understand whether that's translating into any potential increased demand for your high-voltage portfolio?

Yes. So as it pertains to EVs, both hybrid and full battery electric. I think it's important to understand and remember that all BEVs have low voltage and high voltage. And all hybrids have both low voltage and high voltage. And so oftentimes, people maybe take a shortcut, assuming high voltage is just BEV. But a lot of the content on a BEV is low voltage. And so what I would say is we are seeing some of those trends. They vary a little bit by region, a bit more hybrid in America, a bit more BEV and maybe a lot more BEV in APAC, specifically China. And so as we've shared in other discussions, it's about a 50% increase of content for a hybrid and greater than a 70% increase for BEV. So as those trends continue, they also happened in unison, right, they always happen together with more autonomous, more connected and more features. So those things are all kind of moving at the same time. And so as that continues, we do think vehicles get more complex, architectures get more complex and the content per vehicle generally moves in those kind of heuristic trends. And so that is going to be beneficial if they continue to move maybe more than people expected.

Okay. Got you. Very helpful. And then as a quick follow-up. So on your APAC growth and maybe specifically to focus on China, are there any updates you can give us on maybe your overall exposure to the Chinese OEMs versus some of the global OEMs? And maybe is there like any target percentage of APAC revenues coming from the Chinese OEMs?

Yes. So for us, strategically, and this is true across every region, our goal, our aspiration is always to match the market with how the market is constructed. And then after that, what we do is we layer in our strategy and our strategic filters. And what that does is there's a natural selection toward more complex vehicles, as we talked about a little bit toward things that really fit for us. And so the China market, in particular, has greater than 110 or 118 brands. We don't necessarily need to match 118 or 110. So we picked the ones that kind of really have the right volume, have the right complexity, we think are most sustainable. We biased toward the OEMs that do a lot of export and they also want to localize in other regions because, again, as a global provider, we're a very good partner as they want to do those things. And so as we look at that, we're continuing to increase our local Chinese OEM share, and that's been true for the last couple of years. And I think we've shared publicly in 2025 greater than 75% of all of our bookings was with local Chinese OEMs. So essentially showing the trend, showing our competitiveness and our credibility in that market, and that will continue. But again, we will look to match the market but with our strategic filter in place as well.

Next question will come from the line of Edison Yu with Deutsche Bank.

Great. Congrats on the first quarter out. I want to come back on the growth. Is there anything you can kind of break down the growth for both the quarter and the full year for your expectations for high versus low voltage?

So yes, as we talked about, growth in the first quarter, year-over-year was 9%. Once we adjust out the FX and commodities, we're roughly at 3%. When we think about growth over market, the market was down 2% or 3%. So growth over market, probably 5% to 6% overall in the first quarter. When we look at our outlook and the guidance that we've reaffirmed, if we look at the step up in volumes, it's just part of the seasonality of the industry, right? We see volumes growing significantly as does IHS in Q2, Q3 and Q4. And really to hit our guidance, we would need to run at just a couple of percent above that, which is typical for us from a revenue standpoint to run a couple of percentage above just a standard vehicle production growth. So that's really where we need to run. It's just a couple of percentage above market growth. And then in terms of electrification mix, Joe, I don't know if you want to take that.

I would say continue growth there kind of with the market, nothing unique about the composition of our revenue in Q1 that was different than the market trends, again, different by region. So weighting that to our business in the region, but within region, fairly consistent with the IHS trends on electrification.

Got it. And just a follow-up on China. Anything you can point to in terms of the dynamics there, whether it's on high voltage versus low voltage or on the growth over market going through the rest of the year?

Just generally, I think what we saw, I would say, really in the back half of last year in 2025 in terms of trends, in terms of the export volume, in terms of electrification and BEVs specifically, less so on hybrid. Those trends continue, frankly, even accelerated a little bit in Q1, export in particular, I think as that local market has a bit more downward pressure. There on the market, you're seeing the export and the localization dialogue increase from the local Chinese OEMs and, frankly, from the global OEMs who are based in China. And so I think thematically, that's probably the biggest move in the last 6 or 9 months is that how will that dynamic play out? How long will those export trends happen, how much localization will happen in EMEA or South America or elsewhere. That's probably the biggest new news that really is kind of maturing.

We will now go to our next question coming from the line of Steven Fox with Fox Advisors.

I have two questions. First, structurally, regarding passing through and then recovering higher copper costs: is this an industry-standard approach likely to remain? I ask because in other industries like network and cable, recovery can occur within a month. What are the prospects for shortening that recovery time, and has it improved over the years? Second, can you explain how you are hedging? I have a follow-up.

Maybe I'll start with some of the contract and strategy and then Doug can complement on the hedging approach and strategy as well. I think on the copper, whenever there's big changes, everyone kind of wants to reevaluate the structure of everything as they should. So the context is quite different. We've not seen necessarily the amount of movement in a small window of time that we've seen in the last let's say, six or so months. So maybe there's going to be some changes that come. I would say there are some differences already by region, and there are some differences already by customer. And so it's really thinking about if the context is going to be a bit more dynamic, are there better mechanisms to do this, both from the supply standpoint as well as the customer standpoint, because those need to be kind of done in unison. And so I would say that's more an open question than it is maybe a commitment that something is going to be different in the future. But when there's times change, we should probably reevaluate and say there are better way to do things. So that's going to be more on the contract strategy side, and I'll turn it back to Doug on the hedge strategy side.

Yes. For the portion where we don't have escalation built specifically into the contracts, roughly 20% to 25% of our overall copper purchases, we hedge that position through the financial markets. We typically hedge on a two-year horizon and phase into those positions over time. That delays the impact of copper price moves on our financials and gives us time to discuss with those customers the effect on the cost structure of the products we provide. Those conversations are generally transparent; our customers understand how much copper is in their products and the indexes are easily observed, so they tend to be productive. Hedging gives us time to have those conversations and then work out the proper adjustment.

Great. That's helpful. And then just as a follow-up. I know build to print is not a big portion of your revenue base. But, I guess, how do we think about it? Is it a necessary evil to maintaining these customer relationships? Why can't you sort of move entirely away from that and focus more on where you have design control and can make a better margin?

Yes. So, to your point, about 25% of our revenue is non-influenced design. It's not necessarily synonymous with build-to-print because there are instances that are somewhere in the middle. I would say we obviously do those things today and we do them for a reason. There could be very complex build-to-print architectures that still fall into what we think are important and still can drive quality improvements and other design improvements along the way as we see them. To me, it's not as simple as build-to-print or not. What's more critical is the complexity and the value we can drive along the way. It's just common, though, that some of the more basic, simpler, shorter, smaller harnesses end up being build-to-print because there isn't much to solve for. They're not exactly synonymous. I would say we evaluate things based on our criteria: value creation and our ability to really make a better product for our customer, even better. And then sometimes there are consequences where build-to-print product just doesn't meet our criteria and they fall out, or we don't necessarily bid or maybe we don't necessarily win in some cases. And I think that's okay. Our goal is not to win everything. Our goal is to win the most value-creating businesses and support our business behind that, where we're adding the most value to customers.

We'll now take your next question coming from the line of James Picariello with BNP Paribas.

Hi, everybody. So I want to ask about the free cash flow for this year. So $250 million at the midpoint, the $70 million of separation costs go to 0 for next year. Is that right? And then is your restructuring cash spend also running elevated this year as well. Just any color on that amount for this year and the normalized run rate would be great.

Yes. I can give you some perspective on that. We talked about a one-time separation expense of about $70 million for the full year. Those expenses were about $26 million in the first quarter within cash flow, so we're running a little higher than the $70 million pace, but we expect them to decline over time and feel we're pretty much on track for the $70 million I mentioned. We expect those to drop to about half that amount next year and then disappear altogether, so the one-time total across the two years is about $100 million, but declining from the roughly $26 million we saw this quarter. Restructuring can be lumpy year to year. This year we expect restructuring to be higher than normal, around the $100 million range, and we saw roughly one-quarter of that as a cash impact, about $26 to $27 million in cash flow this quarter, so that's right on track. Another thing to recognize when looking at year-over-year cash flow is CapEx. Last year CapEx was relatively low for the business at about $160 million. This year we expect roughly 3% of revenue, around $240 million, so you should expect that $80 million difference to play out over the year — roughly $20 million more per quarter. Because of launch expenses, this quarter we were about $30 million higher than the year-ago first quarter, which brings us back to a more normalized level of CapEx. Looking forward, next year you would see the $70 million separation expense drop to about half; we don't have a full restructuring plan for next year, but this year will be unusually high and I would anticipate that could come down somewhat. In terms of cadence, typically we ramp up from the seasonal downtime with customers at the end of the calendar year, so the first quarter tends to be an outflow of working capital. We also typically see a step-up in use of working capital in the second quarter, and the third and fourth quarters are where we generally see stronger cash generation.

Perfect. No, that's really helpful. And then just to go back to Colin's question, maybe it's addressed in other questions as well. But on the full year FX and commodities margin dilution, right, the first quarter combined, it was 260 basis points dilutive, right, which speaks to the great underlying profitability that you guys showed in the first quarter. Is the full year expectation still at that 50 basis points dilution target? Or is it running a little heavier with some offsets?

Yes. I think if commodity prices stay roughly in the range where they're at today, I think we might see another, say, 15 to 20 basis points of headwind as we work it into the revenue picture. So you're talking about total headwinds from just the larger revenue base of maybe 70 basis points overall. But we do feel like there's a real opportunity to offset that. And so we are still holding our guidance at the 10.7%. We have a lot of productivity initiatives that we're working on. We feel pretty good about the margin outlook as volumes increase later in the year. And we think that the 10.7% that we've guided towards is still very achievable.

Your final question is coming from the line of Dan Levy with Barclays.

I wanted to ask more of a strategic question. And sort of in light of the copper prices that continue to go up and could just be structurally going up. You're 75% pass-through. Now we've also heard that on the performance side, you've talked a lot about automation. I guess the question is, where are you on the automation journey? How much more is there to unlock on automation? And is that effectively sort of the structural hedge against the higher copper prices that as it just becomes more expensive, you're going to lean more heavily on the automation side?

Good question. I think of it slightly differently. The automation side is more of a natural hedge for labor wage inflation because we're able to essentially do the work differently, and as a consequence, have less direct labor. So I think that's more the natural hedge. The copper side of things is more on engineering design, engineering optimization, potentially substrate and metallurgy changes. We can do with aluminum or other things. So that's more on the technical side for copper because you're really changing the product and the characteristics of the product have to meet performance requirements about thermal and peak and other things, whereas the automation is changing how we construct the product, not the product itself. Hence, it's more of a labor wage hedge. It's maybe the simple way to think about it, not perfect, but simple, I think.

Right. And so where are you in that journey on automation?

Yes. So I would say we've made a lot of progress. Most of our progress stems in our China model in plants. And so we've done a really good job there. We have essentially a strategic approach on how to tackle it. We have a lot of really productive ideas that we think have really short paybacks. And so we're really kind of amplifying that work and that scaling. And so that's one of the things, as we look at what conversion do differently and better as a separate stand-alone company. Frankly, capital deployment is one of the big value creators and part of our thesis to really fund these ideas that improve our operations that likely have a benefit to margin, as we talked about, 0.5 point over the next couple of years of the 2-point improvement. And then, frankly, quality and other benefits on top of that. So I think that's what you really see to date. We've made progress globally, but specifically, and maybe most in China and really our plan for the next couple of years is to accelerate that scaling throughout the globe because we think they're quite good in terms of payback standpoint.

Great. And then a follow-up, again, another strategic question. It was asked earlier on build-to-print and that on the flip side, 75% of your revenue is highly engineered. Can you maybe talk about where the booking trends are, especially as automakers are starting to revisit some of their architectures. How is that impacting that 75% rate of highly engineered versus 25%, that's a bit more sort of base content build-to-print?

Yes. The world is getting more complex, and architectures are becoming more complex with it. No matter what people want to do, there's a practical reality that sometimes you need help to optimize these complex solutions. Five years ago, we were about 20 percentage points lower in revenue influenced by our engineers than we are today. The trend over the last five years has grown dramatically. We were at about 50 to 55 percent, and now we're at 75 percent of revenue. I expect some continued appreciation, but we're not going to go to 100 percent. There are many reasons for that. I don't see it reverting back toward 50 percent anytime soon. As we enter adjacent markets, those needs are the same. If you think about autonomous, remote diagnostics, connectivity, the complexities are growing in those areas as well. That need for technical expertise and for joint development and predevelopment won't be dramatically different from today. It might not increase to 100 percent, but where we are today feels like a good equilibrium for the future. I have no reason to believe it will be different from what we're doing now.

And it appears there are no additional questions at this time. I will now turn it back to Joe for closing remarks.

Great. Thank you. Thank you all for joining us today and for your interest in Versigent. On behalf of our entire leadership team, we're pleased with the execution and progress delivered in the first quarter and remain focused on building on the momentum as we move in through 2026. We look forward to sharing further updates with you next quarter. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.