Visteon Corp (VC) 2016 Q1 法說會逐字稿

Good morning, I'm Bob Karkowiak, Vice President, Treasurer and Investor Relations for Visteon.

Welcome to our first quarter 2016 earnings call.

All lines are placed on a listen only mode to prevent background noise.

As a reminder, this conference is being recorded.

Before we begin this morning's call I'd like to remind you 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 factor, risks, and uncertainties that could cause our actual results to differ materially from those expressed in these statements.

Please refer to the slide entitled Forward-looking Information for further details.

Presentation materials for today's call were posted on the investor section of Visteon's website, please visit www.visteon.com/earnings to download the material if you have not already done so.

Our Form 10-Q was filed earlier this morning with the news release.

Joining us today are Sachin Lawande, President and Chief Executive Officer, and Bill Robertson, Interim Chief Financial Officer.

We have scheduled the meeting for an hour, and will open the lines for your questions after Sachin and Bill's remarks.

Please limit your questions to one question and one follow-up.

We appreciate your interest in our company and, again, thank you for joining us.

Now, I will turn it over to Sachin.

Thanks, Bob, and good morning, everyone.

Earlier this morning, we released strong results for the first quarter.

Our company continues to execute well, and I am pleased with our continued progress on our key metrics during the quarter.

On page two, let me briefly cover our quarter first consolidated 2016 results, which include our other operations.

Sales with $802 million, adjusted EBITDA, was $89 million with a margin of 11.1%.

Adjusted free cash flow was negative $28 million.

Our adjusted earnings per share was $1.22, our balance sheet is strong with cash and debt of $808 million, and $382 million, respectively.

Looking at our first quarter 2016 results for our ongoing Electronics business we have sales of $793 million, adjusted EBITDA was $94 million with a margin of 11.9% and adjusted free flow was negative $22 million.

In addition, we won new business in the quarter totaling $1.2 billion in lifetime sales.

This increases our business backlog as of March 31 to $15.6 billion an increase of $400 million since the start of the year and an increase of $1.1 billion over the last nine months.

We have several key accomplishments during the quarter.

Our year over year sales increased from volume and new business, net of currency, was 4.4%, versus the industry (inaudible) production growth rate of 1.3%.

We achieved Electronics EBITDA margins of 11.9% as compared to 10.8% for the same quarter last year, and signed a definitive agreement to acquire AllGo Systems.

In addition, we paid a special cash distribution to our shareholders of $43.40 a share.

Finally, we received a net $340 million inventory tax proceeds from the HVCC transaction and committed $500 million of capital to buy back our shares.

Based on the strong first quarter performance, and despite some head winds that are appearing on the horizon with respect to vehicle sales, for 2016 we are re-affirming our guidance for our key financial metrics.

Sales of approximately $3.2 billion, adjusted EBITDA in the range of $305 million to $335 million, and adjusted free cash flow in the range of $110 million to $150 million.

On page three we provide a break down of our first quarter 2016 sales by region, customer, and project.

As noted on the chart on the left, global vehicle production increased by 1.3% in the first quarter year over year largely due to good growth North America and Europe.

This year production slowed down due to slowing growth in China, and the stoppages in Japan due to steel supply issues.

South America continues its free fall with a 27% reduction in production.

Visteon sales by region remain very balanced and continue to generally align with vehicle production around the world and we saw better than market volume growth across all regions in the first quarter.

As I mentioned on prior calls, I'm very pleased with Visteon's diversified customer base that's also very well balanced from a regional viewpoint.

The fact that we have significant business with 11 of the top 15 OEM customers, who make up 80% of the market for car cockpit electronics, is an extremely solid foundation to build upon.

We are making headway, expanding our business with existing customers, and while working on expanding our overall customer base.

Page four shows our Electronics revenue growth versus global production volumes.

As you can see, our quarter over quarter electronic sales grew at 1.5%, slightly above the global vehicle production rate of 1.3%.

However, if you look at our revenue on a constant currency basis, volume and net new business, net of pricing, was strong during the quarter, growing by 4.4% in our electronic business year over year.

This has been a very solid, well executed quarter for volume and net new business.

I am very pleased that volume, net of price, in our Electronics business, grew over three times than the global production volumes during the quarter.

This is consistent with our outlook for cockpit electronics growth over the next several quarter.

Page five gives you an over view of our Q1 2016 China domestic sales.

China is the largest automotive market and is also the fastest growing market for Visteon.

As we have discussed on prior calls, Visteon is extremely well positioned in China.

I would like to remind you that we have joint ventures with the so-called big four domestic manufacturers in China, SAIC, Dongfang, FAW, and Chang'an.

This gives us excellent access to a large portion of the automotive market in China.

As shown on the chart, China light vehicle production volumes increased during the quarter compared with the previous year.

Visteon sales grew at 13% during the same period, significantly faster than the overall market.

Excluding currency, our sales increased by 17%.

We remain confident that our sales in China will grow at two to three times the production growths as we have stated previously.

We are very focused on China as we believe it represents a unique opportunity for Visteon.

As the market stabilizes and grows over the long-term, we believe our assets and capabilities will serve as a significant competitive advantage, and we expect our domestic China sales to grow at an even faster pace for the remainder of the year then the 17% year over year growth, excluding currency, that we achieved in the first quarter.

Turning to page six, I am pleased with the rate at which we're winning new business from our customers.

I am also happy to report that we expanded our customer base in the latest quarter by adding a new EV vehicle manufacturer.

Our backlog was $15.2 billion as of December 31, 2015.

During the quarter, new business (inaudible) amounted to $1.2 billion, exceeding our quarterly sales by $400 million, and increasing our backlog to $15.6 billion.

Over the last 9 months, since I joined Visteon, our backlog has increased by $1.1 billion or 8% and our goal is to achieve double-digit growth for the full year.

Our core product lines, of instrument clusters, displays, entry and mid-infotainment, and SmartCore, head up displays are very competitive, and doing well in the market.

The strong increase in the backlog is a clear indication of the confidence that customers have in our products, technologies, and points to higher sales and market share going forward another quarter.

Turning to slide seven.

We had another quarter of strong program engineering execution with 17 product launches globally that cover the full range of (inaudible) electronic solutions that Visteon provides to the marketplace.

Some of the key launches are the GM Cadillac CT6 cluster which is an extension of our eight inch reconfigurable cluster platform that has now been launched across multiple vehicle lines at GM.

We also computed the development and launched the Ford Escape cluster in North America, with launches in Europe and China to follow later in the year.

Another innovative product is the heads-up display launched with the Peugeot Traveler and the Citroen Space Tourer, shown at the top of the slide..

This product will be launched in additional vehicles in 2017 at TSA and Opal.

As you can see from the charts on the right, the vast majority of our product launches in 2016 are occurring in Asia, and mostly in China.

The market in for China for cockpit electronics is still evolving with more vehicle specific solutions than in other, more mature, markets where the sourcing is done on vehicle platform bases, 2016 will be another strong year for launches with 61 currently planned.

Turning to page eight.

Visteon regularly receives awards from our customers for our technologies and innovations.

We highlight a few recent examples on the slide as we will do each quarter.

I'm pleased that customers continue to recognize Visteon as a technology driven company.

We look forward to showcasing additional awards throughout the course of 2016.

We're very proud of our team's accomplishments during the quarter and very pleased to see that our performance and capabilities are also recognized by our customers, as shown by the awards we have received.

Moving to slide nine, Visteon used to be the best kept secret in the industry when it came to cockpit electronics but that's changing now.

We are increasing our technology marketing and business development activities with a particular focus on technology seminars at customer locations, which is the most effective way to market our products and technologies, in my experience.

The Consumer Electronics Show in January was a big success for us, not only on account of the meetings during the show but the follow-up customer events that have resulted from it.

We took our show on the road first to Japan, where in March we have six separate customer event with over 400 people attending them.

We are continuing with addition technology seminars in Europe and China and this week we're also participating in the Auto China Show in Beijing.

While we have had a strong for many years this is the first time that Visteon is participating in the auto show in Beijing.

We are investing significant resources in marketing and business development and I am confident that these initiatives will show results in the coming quarters in terms of new business events.

And it's important to note that we are doing this while reducing our SG&A costs at the same time.

Since joining Visteon and announce our strategy, we have made it a priority to upgrade our capabilities across people, process, and tools to allow us to achieve our goals.

Turning to page ten, with respect to talent, I'm happy to report that we've made several key hires that add to the strength of the company.

I am particularly pleased that we're able to attract seasoned leaders from the industry to join us on our mission.

Our new Chief Technology Officer, Marcus Schupfner, brings a wealth of experience in infotainment and (inaudible) technologies and is highly regarded by many OEMs in Europe and the US that he has worked with in the past.

Marcus will report to me and will be based in our office in Germany and his mission is to help Visteon emerge as a technology leader in infotainment and autonomous driving domains.

We are already well on our way with the new infotainment platform development based on the three focus areas of cyber security, HTML-5 user interface and advanced smart phone integration.

However, there's more work to do in the area of (inaudible) and autonomous driving.

Our new General Consul, Brett Pynnonen is also an industry veteran who brings a wealth of experience around intellectual property, compliance, corporation transactions and risk management.

In addition, we have hired top-notch talent to lead sales and business development activities in Germany, and also in China, and also recruited technology experts in cyber security and V2X technologies to lead our efforts in these technology domains.

It's a very competitive environment for talent in this industry, globally, and it's very heartening to see that the vision and the culture that we are developing at Visteon is attracting such talent to the organization.

While we have made talent acquisition a priority at Visteon, I want to assure you that we are going about it in a fiscally responsible manner.

We remain focused on reducing our SG&A and engineering spend as we've outlined in prior discussions and the new hires will not affect our plan.

Slide 11 provides the summery of our full year 2016 outlook.

Overall we are re-affirming our initial 2016 guidance for sales, adjusted EBITDA, and adjusted free-cash flow.

With respect to sales, we feel good about the outlook for product launches during the year.

Off setting this favorability we foresee some head winds due to South America and potential slow downs in North America due to sluggish retail environment.

Although no customer has significantly their production releases thus far.

We are currently assessing the impact of the earthquake in Japan on our revenue projections for the balance of the year.

We're pleased with our first quarter, adjusted EBITDA performance and expect continued strong product mix and cost performance going forward.

and despite the potential head winds we are comfortable maintaining our range of $305 million to $335 million for adjusted EBITDA for the full year, 2016.

Finally, we are also maintaining our outlook for adjusted free cash flow for the year.

Overall, our results for the first quarter were strong and inline with our expectations and gives us confidence to maintain our outlook for the balance of the year.

Turning to page 12, in closing, I am pleased with our achievements during the quarter

We continue to deliver strong sales and profitability performance in our core business with sales growth outpacing global production.

With a strong start to the year, even with the potential head winds that I mentioned on the prior slide, we are comfortable re-affirming our 2016 full year guidance.

We won $1.2 billion of new business during the quarter and have increased our backlog to $15.6 billion, improving $400 million during the quarter, and $1.1 billion over the last nine months.

Confidence in Visteon continues to grow at OEMs and we're on track to achieve the revenue targets we have outlined for 2016, 2018, and 2020.

We're focused on building a strong team across all functions, and I'm pleased with the progress we have made in hiring key talent to the organization.

Successful program execution is the lifeblood of this business and I'm pleased with how they have stepped up to the challenge.

We launched 17 new products during the first quarter, and are on track with another good year from a new product launch perspective.

We also increased our marketing and business development activities starting with a successful Consuming Electronics Show in January, and continuing with multiple tech shows at customer locations.

We are also participating, for the first time, at the auto show in Beijing, China, which is happening this week, and it's off to a great start.

And finally, we signed a definitive agreement to acquire AllGo Systems, a leading provider of multimedia and smart phone connectivity software for automotive infotainment.

And now, Bill will walk you through our financial results for the quarter.

Thanks, Sachin.

On slide 14 we present our key financial results for first quarter 2016 versus the comparable period in 2015.

As we have explained on prior calls, our financial results are impacted by a number of items that make year over year comparisons difficult.

The adjusted financial information presented on this slide excludes these items and represents how we manage the business internally.

As non-GAAP financial measures, this adjusted financial information is reconciled to U.S. GAAP financials in the appendix on pages 25 through 34.

As we have also explained previously, we have reclassified the majority of our climate and interiors business as discontinued operations in our financial statements.

As a result, our income statement has been adjusted to exclude both climate and interior specific income and expense.

Climate and interior net profit has been combined and reflected on one line as discontinued operations.

The financials on this slide exclude discontinued operations with the exception of free cash flow and adjusted free cash flow for consolidated Visteon.

Sales for the first quarter of 2016 were $802 million, $14 million lower than first quarter 2015.

The year over year decrease is more than explained by the sale of the German interiors facility in the fourth quarter of last year.

Sales for our core Electronics business increased by $12 million versus last year, reflecting higher production volumes and the impact of new business wins which more than offset unfavorable currency.

Adjusted EBITDA was $89 million in the quarter compared to $78 million for the same period last year.

Adjusted EBITDA for Electronics was $94 million, $10 million higher than first quarter 2015.

The $10 million year over year increase largely reflects increased production volumes, including the impact of new business.

Adjusted free cash flow was an outflow of $28 million in the quarter.

It should be noted that year over year comparisons are difficult for adjusted free cash flow, as first quarter results last year included cash flow generated from our climate business, which was sold at the second quarter of 2015.

Adjusted free cash flow for the Electronics in the first quarter of 2016 was an outflow of $22 million.

I will cover each of these metrics in more detail on the following pages.

Turning to slide 15, we provide 2015 and first quarter 2016 sales and adjusted EBITDA for the Electronics product group, other operations, and total Visteon.

Beginning this quarter, we have combined Electronics product group results in Corporate SG&A, as we have divested the majority of our climate and interiors businesses.

First quarter sales for Electronics were $793 million, $12 million higher than last year.

Adjusted EBITDA for Electronic $94 million in the first quarter, compared with $84 million in the same period last year.

Sales for the other operations declined from $44 million in the first quarter of last year, to $9 million in the first quarter of 2016.

This decrease primarily reflects the sale of the German interiors facility, which occurred last December.

The remaining business, still classified as other operations, relates to legacy operations in South America and South Africa, previously associated with the climate business which are not subject to discontinued operations.

I'll go into more detail on the year over year sales and adjusted EBITDA comparisons on the following slides.

Moving to slide 16, electronic sales for the first quarter of 2016 were $793 million.

Adjusted EBITDA for Electronics was $94 million.

Sales increased versus 2015 by $12 million, largely driven by higher production volumes and new business, partially offset by unfavorable currency impacts related to the Euro and the China RMB.

Adjusted EBITDA increased $10 million in the first quarter versus 2015.

Again, the increase is largely driven by the flow through of the positive volume of new business which improved profits by $12 million.

Unfavorable currency, primarily related to the Japanese Yen, was a partial offset.

The business equation was consistent year over year, material and manufacturing cost savings offset customer pricing and productivity.

Our second quarter business equation did include a one time $3 million warranty benefit related to supplier recoveries for warranty charges incurred during the second quarter of 2015.

We anticipate a smaller supplier recovery later in 2016.

The 2016 recovery is partially offset by the non-recurrence of a one time patent sale benefit of $2 million, recorded during the first quarter of 2015.

SG&A performance is also part of the business equation.

Adjusted SG&A for the quarter was $51 million, or 6.4% of Electronics sales.

We continue for focus on achieving our forecasted SG&A reductions in 2016.

On slide 17, we highlight Electronics, adjusted EBITDA and adjusted EBITDA margins for the last several quarters.

As you can see continue to see significant improvement in adjusted EBITDA quarter over quarter.

That said, Q1 adjusted EBITDA should not be considered to be a run rate as our operating results are seasonal.

First and fourth quarter results tend to be the strongest reflecting the typical calanderazation patter for engineering recoveries.

In addition, first quarter results benefited from the warranty good news, previously discussed.

None the less, as Sachin said earlier, first quarter results were strong and a nice start to the year.

Adjusted EBITDA, as a percent of sales for the quarter, was 11.9%, compared with 10.8% for the quarter of last year.

Even excluding the $3 million warranty, adjusted EBITDA was11.5% as a percent of sales.

On slide 18, we take a look at cash flow.

Total adjusted free cash flow was a use of $28 million in the first quarter.

This (inaudible) generated $139 million in adjusted cash flow in the first quarter of last year, but $133 million was related to [Holit] Climate which was sold at the end of the second quarter.

On this slide, we separated the Electronics cash flows from the cash flows related to other operations in our discontinued operations.

Our core Electronics adjusted free cash flow was a use of $22 million for the quarter, $28 million lower than first quarter last year.

As we explained on the year end call, our 2015 adjusted free cash flow benefited from $55 million of items that will not repeat in 2016, the most significant item, related to tax payment timing in certain jurisdictions.

You will notice that the cash taxes in the first quarter totaled $32 million, $26 million higher than prior year.

This increase in cash taxes explains most of the year over year decrease in the Electronics adjusted free cash flow, and is in line with our expectations.

I would like to point out that the first quarter 2016 adjusted free cash flow use was expected.

Just for comparative purposes, our 2015 full year adjusted free cash flow was $212 million for Visteon Electronics, $206 million was generated in the last nine months of the year with only $6 million generated in the first quarter.

Free cash flow is seasonal and we continue to project that our 2016 full year adjusted free cash flow will be inline with our guidance of $110 million to $150 million.

Cash and short-term investments, at the end of the quarter, were $808 million, this represents a decrease of $1.975 billion from year end, which is summarized in the lower right portion of the slide.

The decrease include the January $1.47 billion special shareholder distribution and the $500 million for share repurchases.

The $356 million Korean withholding tax refund, received in January, was a partial offset.

Moving to slide 19, we provide an update on the company's share repurchase activity.

To recap, we repurchased about 15 million shares between Q4 of 2012 and year end 2015.

Adjusted for the impact of the special distribution, the average price for those repurchases was $43.85.

As Sachin mentioned earlier, and as we communicated in the year-end call, we had authorization for $500 million in additional share repurchased through 2016.

That authorization has now been exhausted with the execution of a $105 million, 10b5-1 program, which ran from last January through February and the subsequent entry into a $305 million, accelerated share buyback or ASB program on March 1, 1.6 million shares were repurchased under the 10b5-1 program and at an average price of $65.05.

An additional 4.4 million shares have been delivered under the accelerated share buyback, which was 80% of the expected amount under the program based on the March 1 closing reference price of $72.30.

The final amount of shares will be determined based on the volume weighted average price of the shares over the repurchase period, less an agreed discount.

The program will complete no later than December 15, 2016, but may be terminated any time after August 2 based on our counter-party's options.

Based on current share price, this implies an approximately one million shares will be total repurchase of seven million shares in 2016.

This will reduce our share count in total by the end of 2016 to about 33 million shares, approximately 20% less than at the end of 2015.

Turning to slide 20, as Sachin said earlier, we are re-affirming our full year 2016 financial guidance.

These amounts relate to our Electronics operations only and exclude our other operations as well as our discontinued operations.

For the full year, we are projecting sales of $3.2 billion, adjusted EBITDA of $305 million to $335 million, and adjusted free-cash flow of $110 million to $150 million.

Now let me turn it back to Sachin for some closing thoughts.

Thanks, Bill.

Moving to slide 21.

In closing, I want to reiterate that we are very pleased with our performance in the first quarter.

We delivered strong sales growth, which outpaced industry production volumes and grew our backlog to $15.6 billion, a $1.1 billion increase in the last nine months.

And we achieved the highest quarterly adjusted EBITDA margin since our acquisition of JCI's electronic business in late 2014.

We also continue to reward our shareholders by substantially completing our previously announced, $2.75 billion capital return to shareholders.

Visteon has been committed to driving shareholder value and that focus will continue in the years to come.

I'm really proud of the work that everyone at Visteon has done during the quarter to drive our vision and mission, and I'm confident that we have the right team in place to execute our strategy.

I see significant long-term opportunity for our employees, customers, and shareholder, as we continue to drive strong growth by investing in our core products and by expanding our customer and geographic footprint.

Thanks for joining us today.

Now I would like to open the call for any questions.

Thank you.

(Operator Instructions).

And your first question comes from the line of Brian Johnson with Barclays.

Please go ahead.

Yes, hi.

Good morning, team.

This is actually Steven Hempel on for Brian Johnson.

Just wanted to touch base on slide nine here.

It looks like you're definitely stepping up your engagements with some Japanese customers.

I'm just wondering what the strategic rationale is, what's your thinking behind such the emphasis on Japan and Japanese customers.

Is this where, kind of, the most opportunity is for Visteon moving forward?

Any color you could provide there would be helpful.

Yes.

Good morning.

We have a significant amount of business today with Japanese OEMs, with customers such as Mazda, Nissan, and Mitsubishi.

So we think that's a market that is very good for us, today, and also going into the future.

As you know, with all of these new technologies, especially in infotainment, and our new SmartCore platform, have opened up.

Japan is one of the areas where we believe there is a lot of interest in looking at these technologies and that was further validated by the response that we saw with our actuals.

We had over, I think about six technology shows in Japan with 400 plus attendees, so pretty good response.

And is that part of a function of the call to local supply base just not up to speed, so to speak, on more advanced cockpit electronics and infotainment devices or is there another reason for the overall emphasis on Japanese customers?

I think it's twofold.

One, as far as Visteon is concerned, we've been in Japan for a long time.

So it's not like Visteon is new to the OEMs there, and vice versa.

So, that's one thing.

The second is exactly what you referred to, which is some of the new technologies, whether it is smart phone integration or this domain integration through (inaudible) are new, and it's very evolving and it's a challenge for the entire industry, including the domestic suppliers in Japan.

We do see, by the way, a slight opening for non-Japanese suppliers in traditional, what used to be considered the traditional Japanese supply domains.

So we see that the market over there is opening up.

And we want to be looking at the opportunities that would present very closely.

Okay.

And then just touching on the SmartCore technology.

I believe we last had an update back in January, at the Consumer Electronics show, but just trying to gain a sense for what your traction with un-penetrated customers or even current customers.

I know back at our conference in November you provided a nice slide that listed all your current customers, where there was potential opportunities and also un-penetrated customers.

Just wondering if you can give us an update on how that SmartCore technology is progressing with customers.

Yes.

This quarter, or I should say the first quarter was a very busy quarter for us from a business development perspective, and especially with respect to SmartCore.

We met with over six different OEMs across Japan, Europe, and Asia, specifically now talking about SmartCore and this concept of domain integration is very exciting and interesting, and we had really good discussions with all of them.

That doesn't mean that all of these OEMs will translate or convert into Visteon customers, but we are in fairly advanced stages of discussions with a couple of those, which we expect to be making a decision, I would say, in the second or third quarter of this year.

But the fact remains that there is a lot of interest in this new technology, and while I fully expect that there will be other solutions that will emerge in the marketplace, because the industry necessarily won't just allow a single source in the space, we are ahead of the competition.

So we are getting a lot of interest.

There's a lot of discussions that are happening in the space.

Even this week in China, of where we are present at the Beijing auto show, and we demonstrated SmartCore, that was one of the products that garnered the most interest.

And I expect to see, also, new guess I opportunities open up in China as a result of that.

Okay.

Great.

Thanks for taking my questions.

Thank you.

Your next question comes from the line of Itay Michaeli with Citi.

Please go ahead.

Great.

Thanks, guys.

This is actually Justin on behalf of Itay.

I just wanted to touch, real quickly, upon the backlog, the $1.2 billion that you quoted.

Can you give us color, maybe, on the break out between existing and new customer split, the location of the business wins and maybe give us a sense of what product lines those, kind of, came from?

Yes.

We'd happy to.

So the $1.2 billion of new business, you can imagine that the breakdown of the product mix there reflects fairly closely the product mix that we shared with you on slide number three in our quarterly sales.

So the breakdown still reflects what we currently see in shipping, new business, which is good.

One thing I would say is that I am extremely happy with how our new business wins have developed over, not just the last quarter, but over the last nine months since I've come here.

With over 8% of the backlog growth over that period, I think that's a really strong, sort of, statement of our customers confidence in Visteon and our technologies and our products.

I would like to remind everyone that if you were to go back a couple of years the backlog and the new business wins at both Visteon and then JCI was fairly challenged on account of the situation that the two companies found themselves in at the time.

And I'm very happy to see that in the short period of time that we have been able to really rebuild confidence in Visteon amongst the customer base, and an 8% growth over a three-quarter period, I think, is a tremendous accomplishment on part of the team, and I'm really happy about that.

Now, the question about the breakdown, and where we stand with respect to the product mix, I would say that our core products of instrument clusters, displays, heads-up displays, SmartCore, and, also, entry in mid-infotainment are extremely competitive.

We continue to win really good business in these product category, even infotainment, that most people don't imagine or don't link to Visteon, we won five new awards over the last nine months.

And I'm very confident with the new emphasis that we have put on infotainment with the new platform that we are developing, that we'll continue to see more wins, which to us is upside.

The revenue guidance that we have given you for 2016, 2018, and 2020 doesn't necessarily count on any significant new product wins in those categories, so I'm pretty happy with where we stand.

This is a strong, sort of, momentum that we're accumulating here, and I think the outlook, as a result for that, for the year of the year should be pretty good.

Excellent.

Thank you so much.

If I could sneak in one more quick question.

When I'm thinking about the technology profile you have for cockpit electronics, how dependent is Visteon on like mid-or upper trim level mix, so within a given car, the higher mix versus low.

How dependent are you guys with regards to the technologies on the mixed distribution?

You know in general, higher trim levels obviously drive more content.

That's generally the case.

And that's true for cockpit electronics across the board.

It's not just for Visteon, I would say that's true for all suppliers in the space.

So, having said that, we have, more than other suppliers, more products that go across all trim levels.

The instrument cluster is a very good example of that.

The other thing that we are starting to see, which is very new and something that I think really adds to our story, is for products like the heads-up displays are starting to migrate into trim levels that, in the past, did not carry these products.

So combine the heads-up displays is one of the fastest growing new product segments in the industry, and we are extremely well positioned, with respect to this particular product segment.

So although, in general, we obviously benefit from higher sales at the higher trim levels, we're starting to see a reverse migration of these products into lower trim levels as well.

So net net, I do not look at that as either a benefit or a loss of any form.

I think, in general, the growth numbers that we have talked to you about of the industry as well as Visteon, we're pretty comfortable that.

I think there's a secular, long-term growth in cockpit electronics that's happening across all level which should bode well for the industry.

Perfect.

Thanks so much, guys.

I'll jump back into the queue.

Your next question comes from the line of Colin Langan with UBS.

Please go ahead.

Hi there, this is Eddie on for Colin.

Thanks for taking our question.

I had a quick question.

I was wondering if you can give an update on the connected technologies.

Looks like a lot more opportunities are opening up in the space.

And I'm just wondering if you are getting any traction with customers on your capabilities for over the air updates or vehicle to vehicle.

Yes.

So in general, Eddie, what we see happening is all of the products we offer, or virtually all, are affected by the cars getting connected.

So it's not specifically just the telematics product opportunity, but we see that over the air are big capabilities affecting instrument clusters, infotainment, and other products as well.

So the whole industry has to, essentially, re-engineer their products to be able to address these new requirements.

Now, along with the good, there's also some concerns.

And the concerns are largely on account of security.

So one of the things that we have done here at Visteon, where we will be absolutely at the cutting edge of this industry, is that all of our products will be built on very secure foundation.

As I have indicated in one of the slides in this deck.

We have recruited some of the top-notch talent to bring this capability in house.

We don't want to rely on third-party solutions because some of those solutions have to be built from the ground up.

So the new infotainment platform that we have already started work on, in fact, late last year, and will be ready by the end of this year to really talk seriously about it to customer, will be one of the most secure, connected, infotainment platforms out there.

So to us it's a big positive because it's creating opportunities.

It is dislodging sometimes, in-incumbent who do not have a strong technical solution.

And on the other side, the risk that the cyber security and others are creating, I think it also gives us an opportunity to showcase our capabilities and stance in this area.

Now, specifically with respect to telematics, that's a slightly different story.

There the issue is more on account of how the industry is able to keep up with the pace of change that's happening in the 4G technologies.

Here, we also have a platform that is a softer based platform for telematics.

We have a couple of programs that we are currently developing for Japanese OEMs, which brings security as well as the ability to keep up with evolving 4G requirements.

So all in all, as you can hopefully see from this discussion, we are, from a technology viewpoint, getting stronger and are looking at really breaking out here with respect to our capabilities and connected car is the trend of the date.

That's the one we're really focused on, but autonomous driving is going to come up in the near future.

You asked about V2X and car to car communication, we are looking at that closely.

We also indicated on the slide that we have recruited a technical expert to help develop the solution for us.

This is an area where Visteon has been involved in for the past several years.

But what we are doing, now, is really looking at how do we come up with differentiated solutions.

And I think you'll hear more from us in the later quarters on our progress on that front.

The commercial opportunities for that are slightly further out.

Connected car is here today.

The autonomous driving opportunities will be a little further out for Visteon.

Okay.

Great.

Thanks for that color.

And then another small question.

It looks like your SG&A, as a percentage of sales, was running a little bit higher than last year.

Do you have any update on your progress at getting this down?

I think that may not be exactly true.

I think our SG&A was 6.4%, if I remember right, which is below at the same level of last yea, it cannot be higher because we won't let it.

And we are very focused on this.

This is an area where we're putting in a tremendous amount management of time and effort to ensure we are in line with the guidance that we have given you earlier in the year, and I think we are on track to be able to achieve our guided number.

Okay.

Great.

Thank you.

Your next question from the line of Matt Stover of SIG.

Please go ahead.

Thank you for taking my question.

I just had a question about the potential impact of the earthquakes in Asia.

(Inaudible) provides its guidance.

And I am wondering if you could talk about the impact to the supply chain thus far, what you're hearing from suppliers, based on system related stock, when this likely manifests as an issue.

And I guess just generically, does the system being a little bit better prepared in light of what happened at Fukushima a few years ago.

Sure.

Sure.

Matt, what I would first say is that we are extremely thankful that none of our facilities have been affected.

That's the first thing I would say here, now with respect to the supply situation, there is an impact and at the same time we are just now really starting to understand the scope of the impact as well the backup and recovery plans of the suppliers.

So this is a very dynamic situation.

We are in daily calls, both with suppliers and our customers, and so this is a picture that will remain dynamic, I would think, for the next two to three weeks before some clarity will emerge with respect to when and how big would the impact be.

I don't expect to see an immediate impact on account of the product that we have in the pipeline, but we will start to probably see some impact in Q2 but I cannot, at this point, really put a scope and a size on if for you.

We will continue to communicate that out as we know more, and that's the best and the most accurate picture I can give you at this point in time.

Does it feel like the system has, sort of, adapted in light of Fukushima, not necessarily as big -- certainly going to be an issue, I don't doubt that -- but do you think it just feels as disruptive as it was at that time?

It's certainly not at the same level as the last.

Incident.

But it is still an issue because there are a few parts that, it's not just our direct suppliers but also the sub suppliers.

And sometimes the smaller suppliers may not be in a position to really take the actions necessary.

So I would say generally it's a smaller size or scope as compared to the previous ones, and so hopefully -- and I would just say this very open really -- it's hopefully, it's not something we see of a material impact.

Thanks, Sachin.

Matt, I should definitely call out, a great video, anyway, thank you.

Thank you.

Yes.

Your next question from the line of Ryan Brinkman of JPMorgan.

Please go ahead.

Hi, this is (inaudible) on behalf of Ryan.

Sachin, if I may ask you a strategic question.

When I look at the goal of being a top three player in cockpit electronics, and I look to the different sub segments in cockpit electronics, you are obviously there in the top three in a few of them, but also sort of far away from the top three in a few of those.

So, just thinking about it as, probably, like aggressively (inaudible) acquisition in the ones that you're not top three.

The way to get there eventually, is it even a target to be top three in each of those segments?

Maybe if you could share your thoughts on that.

Hi, (inaudible).

Very much.

This is a question we're discussing internally all the time.

So let me share with you what we, internally here, are setting ourselves up to do.

So in this industry, as I am sure you're aware, it's extremely important to have from a technology viewpoint an extremely competitive, that's number one.

But we also must have really great capabilities in product development and system integration.

Safe launch, as it is called, is one of the most important things that drive your future success and the third is cost.

So as it has been indicated already on account of the high number of launches that we've executed very well last year and also in this quarter, of Visteon's capabilities and product development, and system integration, are very strong.

On the technology front, it was a mixed bag.

We were strong in instrument clusters and are strong in instrument clusters, I would say strong in heads-up displays, in displays, SmartCore, but with infotainment we were strong in entry and mid but not in high.

And telematics is a different issue, I talked about it earlier, It's a issue of catching up and staying current with the 4G evolution.

So what we are doing here to really get to the top three, across the board, is really focusing on closing the gap in all of our product segments from a technology viewpoint, strengthening our product development and (inaudible) some integration capabilities..

And here, let me remind us all, that we're probably one of the only tier one suppliers that can build and deliver products in Europe, in Japan, in North America, in China, and India.

And I'll give you a great example of that.

As we speak, we are developing heads-up displays in all of the five markets simultaneously.

Very few companies can do that.

So we have the broadest portfolio of products as compared to our competitors.

We have a great footprint and a product execution capability that, after me coming here, that only strengthened and brought in the practices and engineering processes to be able to really control that.

And this is why you see, despite the high level of product launches, that our costs are under control and now we're also focusing on some new opportunities in high-level infotainment, which is where Visteon has not been playing in the past and also in ADOS.

Now, in infotainment, we have made more progress on account of the start we had last year.

ADOS we are just getting out.

Getting Marcus Schupfner is a big step in this direction.

Marcus is not only one of the few people in the world who is an expert in infotainment and ADOS but he has an excellent track record having been on been part of many of the systems that are on the market today from German OEMs.

So we're very optimistic that we will also be in a great position with high end infotainment, and with ADOS, just as we are in the other product segments.

Got it.

Very helpful.

Secondly, just on the margin that we have here.

I know you called out the seasonality of the margins for 1Q, and also benefit from warranty.

But, still, looking at the margin you delivered in this quarter, it does seem like when he go back and look at margin expectations were, which were like 12% for the business, it does look like you can sort of get there before sort of even a mid-term time period and probably if you can help with, sort of, your expectation from margin different now, and what is driving that, is it higher margin contained that you are now executing on, anything that you can help on that?

Sure.

Sure.

First of all, I'm really pleased with how margin has developed in this quarter.

I think it's a credit to the team for executing a clean and well run quarter.

Having said that, and we've talked about the seasonality of the business with the first quarter, and fourth quarter being stronger than the middle quarters.

But on a year over year basis, the actions that we have taken will continue to see results in improved margin.

However, when we talk about us achieving the levels that we have previously guided and then we might be able to achieve it, what we have said in the past is the way we get there is by half of the benefit coming through the cost-saving initiatives and the other half from scale.

Now, we controlled the first part of that in the sense that we have a good line of sight on controlling cost in engineering, SG&A, and we are already starting to see progress in those directions.

But when it comes to scale, this is anybody's guess is just as good as mine in terms of how the mark will develop.

Although, we are optimistic, we're also cautious on account of what we have recently seen with respect to the retail environment, and so since this is just the first quarter, and it's a very good first quarter, gives us a lot of confidence and hope.

But since it's just one of the quarters, the first quarter, I would rather leave it to that and say we will see how the second quarter develops and the outlook for the market.

So far, none of the customers have changed of their production plans in any significant manner.

But we just talked about the earthquake.

We have this retail environment that we need to understand better before we can really comment on how the margin may develop beyond what we have guided you at this point.

Okay.

Great.

Thank you.

Thanks for taking our questions.

Thank you.

Your next question comes from the line of Brian Sponheimer with Gabelli.

Please go ahead.

Hi, Sachin.

Thanks for having me on.

Hi, Brian.

I just want to spend a little more time on your thoughts on the retail environment in North America.

And, potentially, when you see softness, is it more of a mix issue where you have a little more exposure on cars than SUVs and trucks, or is this something that you think has a little bit more breadth to it, where you think the industry itself needs to -- or you're expecting some significant production cuts in the back half.

Right.

So from our viewpoint, Brian, as you know, we look more the production numbers than the retail sales, or sales in general, although we keep close tabs on it because there's sort of a leading indicator for us.

Having said that, in the first quarter, North America was really strong, both in terms of production and sales and at the level that we are at, I think we would be advised to just be cautious in terms of where the outlook for both sales and production may look like for the remainder of the year for North America.

We are, at the same time, more optimistic about the production levels in Asia, which were suppressed in the first quarter, we expect there to rise in the later of the year -- later part of the year.

But the other thing I would like to add here with respect to the general sales environment and the production environment, the level of our size that we are -- we are driven far more by product launches than the general market.

So this is something that we have.

internally, been very focused on, which is to try to execute and launch products on time because those product launches drive our revenues and sales.

And even in a flat (inaudible) environment I would expect that we can still drive sales growth on account of the number of product launches that we have in the pipeline and the new business wins that we are getting.

As long as we continue to win business at the rate or higher that we have been over the last nine months, I would be a little less concerned of how the retail environment, or the production levels are shaping up.

Okay.

Much appreciated there.

Regarding the teammates that you've brought on, how full do you think that line-up is now, and are there any specific areas where you think you might to want to add some talent, understanding that you're always looking for the best in the business.

Yes.

Brian, that's a really good question.

And the answer to that, obviously, isn't a simple answer in terms of number.

But I would like to share with you what we're trying to create here.

So as we have been talking about it for the past several quarters now, we want to emerge as a technology leader in the space.

This is a great time for a company like Visteon to do exactly that, the technologies are moving at a furious pace across all of our product segments.

I'll give you a small example.

Instrument cluster, which a lot of people think of as perhaps not such a sexy product is getting a lot of attention these days on account of the 3-D capabilities that are now emerging in this product category.

But that's the case for us across all products.

So what we want to do is to really bring in the kind of capabilities that allow us to achieve this technology, eminence in all of the product segments.

Now on top of that, we have to also get into the new areas of ADOS and autonomous driving.

So what we will be focused on doing here is that we will continue to bring new talent on board and upgrade existing talent.

We're extremely focused on our SG&A costs at the same time.

So we are doing it in a way that is extremely planned and that there shouldn't be any surprises.

So we, that allows us to invest in this new product platform that we've been talking about, infotainment, and ADOS, and so on.

At the same time keep our costs under control.

And I think this is how we will emerge in the coming quarters as one of the leaders in this industry.

Somebody asked the question earlier about how do you get into the top three.

You can note just do that by having a plan, you have to back it up with then the right people, process, and tools, as I call it, to be able to achieve that objective.

And so we will be on a continual sort of path improving our capabilities across people, process, and tools, and we just highlighted the few that we have already, the steps that we've taken with respect to people.

That we're very happy to report and the level and caliber of the people coming to Visteon.

I think it's a huge vote of confidence in the culture and the direction that we're headed.

Okay.

Thank you very much.

And one last one.

And apologizes to Bob for not asking this prior.

But with the balance sheet in $400 plus million in net cash, and the understanding that the repo authorization has been exhausted.

How do you think about the balance sheet going forward and balancing acquisitions versus even the opportunity for more buybacks here.

First thing, Brian, I would say this company has been extremely shareholder friendly when it comes to returning excess capital.

Over the last three years, I believe, if I am not mistaken, over $3.5 billion of capital that's been returned in a combination of share buyback and cash distribution.

So that should give everybody comfort that you have a company here that is focused on value, creation for shareholders.

That's number one.

Now the specific question you ask, how do we see it, let me also share with you what our philosophy is with respect to acquisitions.

Our philosophy is, with respect to acquisitions is really designed to achieve two objectives.

The first objective is to grow our technical expertise in areas of technologies that are critical to our future success.

Now AllGo, which is an acquisition that we have recently made, is a great example of that.

Now these acquisitions tend to be fairly small.

You can think of them as (inaudible) positions.

And we don't see a need for a high number of them either but that's one category of acquisitions.

The other category is of acquisitions where we can benefit through a increase of scale.

And here, again, the JCI, acquisition, it's a great example of that.

Where we have shown that we can acquire a fairly large sized acquisition and integrate it and deliver the synergies as we have shown in the past several quarters.

We are open to both.

But on the latter, we do want to make certain that the acquisition has to be accretive to the financials in the same year.

That rule will continue.

We will not do any large acquisition that is not accretive.

And so I would like everyone to understand, given the cash that we have on the balance sheet, that our philosophy of acquisitions hasn't changed, and, with respect to how I feel about the balance sheet and our capital allocation strategy, I do recognize that we will need to be looking at this very closely, and I will do that once we have a CFO on board.

This is going to be one of the things that will be my top priority as we go forward.

Perfect.

Thank you so much.

Thank you for running a little bit longer for me.

No problem.

We've got time for one more question.

Your final question comes from the line of David Leiker with Baird.

Please go ahead.

Thanks for squeezing me in.

This is Joe Vruwink for David.

Hi, Joe.

I'll hold my question to one.

You know, I am listening to NXP's analyst day side by side to your call.

And it's pretty telling in the chip space and the silicon space, automotive is one of the surest growth opportunities for the chip guys.

Is that allowing you to do more with your products than you might have otherwise have done in the past?

I'm just thinking it might have been fighting tooth and nail to get the silicon guys on your side historically.

Now they want to be working with but.

How does that change the go to market and what you can bring to market from a timing stand point?

That's a great question, Joe.

And the answer is we absolutely see that dynamic where the automotive is where the growth of the silicon industry is.

I might have said this in the past, automotive represents, now I think, 10% of the total silicon market, but it's growing the fastest within all of the segments in semiconductor space.

So we are getting a lot of attention.

And that's certainly helping us.

A great example is on how we are able to take advantage of the new silicon capabilities in terms of virtualization, in terms domain integration, and this is extremely good for the automotive industry at large, not just for Visteon, but the entire industry.

I've said this before that the silicon content, as well as in general cockpit electronics content, is growing at a rate that OEMs are not necessarily able to pass that cost on to their customers.

So overall, we are extremely focused on driving the cost of the capabilities and features that we're developing down.

And one way to do that is to leverage silicon because that is one of the largest cost factors of the overall solution.

So we're starting to see now the benefit of the investments that these large silicon suppliers are making, specifically for automotive, which was not the case in the past.

And that will really help in generally broadening and growing the market.

And this is where we expect to be at the forefront of, hopefully, taking advantage of some of that.

Very good.

Thank you.

Thank you very much, Sachin and Bill.

I would like to thank everyone for their participation in today's call.

If you have any additional questions please feel free to contact me at your convenience.

This concluded Visteon's first quarter, 2016 earnings call.

You may now disconnect.