Visteon Corporation (NASDAQ:VC) Q2 2023 Earnings Call Transcript August 6, 2023
Ryan Wentling: Good morning. I am Ryan Wentling, Vice President of Investor Relations and Treasurer. Welcome to our earnings call for the second quarter of 2023. Please note that this call is being recorded and all lines have been placed on listen-only mode to prevent background noise. Before we begin this morning’s call, I would 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 factors, risks and uncertainties that could cause our actual results to differ materially from those expressed in these statements. Please refer to the page entitled Forward-Looking Information for additional details.
Presentation materials for today’s call were posted on the Investors section of Visteon’s website this morning. Please visit investors.visteon.com to download the material if you have not already done so. Joining us today are Sachin Lawande, President and Chief Executive Officer; and Jerome Rouquet, Senior Vice President and Chief Financial Officer. We have scheduled the call for 1 hour, and we’ll open the lines for questions after Sachin’s and Jerome’s remarks. Please limit your questions to one question and one follow-up. Thank you for joining us. Now, I will turn the call over to Sachin.
Sachin Lawande: Thank you, Ryan, and good morning, everyone. Thank you for joining our second quarter 2023 earnings call. Page 2 provides a summary of our results for the second quarter. The company continued to deliver strong results and execute on our growth strategy. Second quarter sales were $983 million, an increase of 18% year-over-year excluding currency. Our underlying product sales outperformed industry vehicle production as a result of the strong demand for our digital cockpit products and the emergence of our electrification business. Our sales now have outperformed industry vehicle production for 17 consecutive quarters and demonstrate that the digital transformation is in full effect in our industry. Adjusted EBITDA was $90 million or 9.2% of sales, an increase of $11 million when compared to last year.
Our EBITDA grew year-over-year despite a $15 million exceptional recall charge, resulting in a 150 basis point impact to our margin for our product recall with one of our customers. The issue is related to soldering of a memory chip on the printed circuit board used in 2 newly-launched clusters with a customer. The combination of the packaging material used for the chip and the surface finish used by the printed circuit board resulted in solder joint failures in a small number of units. This issue was detected after a few months of production in Q1 of this year was quickly fixed in early Q2. It’s important to note that the combination of the particular chip with the finish of the circuit board surface was only used in these 2 products that are subject to the recall.
Excluding the charge for this isolated issue, Visteon was able to expand its adjusted EBITDA margin in the second quarter. The team continues to demonstrate excellent operational and commercial discipline in dealing with the evolving semiconductor supply chain environment, which has improved from prior quarters but remains challenging nonetheless. Adjusted free cash flow was a positive cash inflow of $32 million, bringing our first half total cash outflow to $5 million. This is a $94 million improvement versus the same period last year. Our operations and engineering teams launched our products on 35 new vehicle models in the second quarter, which will help support our sales growth for the rest of the year and beyond. The second quarter marked an important milestone for our electrification business as we secured our first win for an EV power electronics product with a luxury European OEM.
The smart battery junction box system integrates a Battery Management System controller with high-voltage battery junction box in a compact and lightweight package. We were proud to showcase this product at CES earlier this year, and this win validates our go-to-market strategy for EV power electronics. We also won a record level of $2.5 billion in new business for the second quarter, bringing our first half total to a record $4 billion. The pipeline of new business opportunities for the second half also looks robust, and we expect to exceed our original target of $6 billion for the full year. In the second quarter, we delivered on our capital allocation commitment that we announced during our Investor Day in March of this year and repurchased $30 million of shares.
In summary, the company performed very well in the second quarter, while building a solid foundation for further growth in the years ahead. Turning to Page 3. The second quarter continued to demonstrate robust demand for our digital cockpit products. When excluding the unfavorable impact from net pricing and foreign exchange, Visteon’s sales in the second quarter grew 27% year-over-year. Semiconductor supply in Q2 was an improvement over prior quarters with fewer chips negatively impacting our production. As a result, we were able to come closer to meeting the full demand from our customers in the second quarter. Q2 was similar to the first quarter in terms of product sales. Digital clusters led product sales, driven by the ramp-up of recently-launched programs with General Motors, Volkswagen and Nissan.
The company has managed the industry transition from analog to digital very well, starting with digital clusters, which now represent 70% of our total cluster sales. This compares with less than 20% in 2019 when the transition to digital first started to accelerate. Our SmartCore sales grew at a robust 45% year-over-year, driven by vehicle launches at Geely, Mahindra and Mercedes. SmartCore is now our second largest product after digital clusters and continues to grow rapidly. As the industry transitions to software-defined vehicles, our SmartCore business puts us in an excellent position to take advantage of that trend. As previously mentioned, 2023 is a transition year for our displays business with ramp-up of recently-launched large and multi-display systems, mostly offsetting the ramp-down of our displays business with BMW.
We expect our displays business to start to grow again in 2024 as the recently-launched products start to ramp up in volume. Our infotainment business saw double-digit growth in Q2 due to strong demand for our Android-based system with Volkswagen and the ramp-up of new launches with Stellantis. Lastly, our electrification business started to ramp up in Q2 although at a slower pace than we had anticipated earlier as our customers’ electric vehicle production has ramped more slowly than they predicted. We expect our BMS business to grow steadily in the second half of this year as our customers ramp up their EV production to achieve their targets. In summary, Q2 turned out to be very much in line with our expectations with strong demand for our digital cockpit products, reflecting the ongoing digital transformation of the industry.
We expect to continue to outperform the market as the underlying demand for our product portfolio remains strong. Turning to Page 4. Semiconductor supply continued to show improvements in the second quarter with supply improving modestly compared to the first quarter. The combination of increased capacity in semiconductor supply chain and lower demand from other industries, most notably consumer electronics, has resulted in supply for automotive to increase for two consecutive quarters. There are still a few analog and power chips that are in short supply. And while chip supply is expected to continuously improve going forward, there will still be lingering shortages for the foreseeable future. Nevertheless, the increased semiconductor supply, combined with product redesigns to use alternate chips, resulted in Visteon having to depend less on open market purchases in Q2 to meet demand from carmakers.
On the right side of the slide, you can see the effect of the chip shortages and the need for open market purchases, which peaked in the second half of last year. Since then, the number of semiconductor parts in critical shortage has significantly decreased and the supply challenges have become more manageable, resulting in a major reduction in open market purchases thus far in 2023. In addition to the lingering shortages of some analog and power chips in Q2, there was a disruption in supply of a microcontroller that is widely used in digital clusters at Visteon. While the cause of the disruption has been fixed by the supplier, the resulting supply outages constrained our digital cluster production in Q2, which will also likely linger into the second half.
We’ve started work on redesigning some clusters to mitigate the anticipated supply constraints for this microcontroller, which we expect to launch by the end of the third quarter. We expect semiconductor supply to continue to improve modestly throughout the year. Together with product redesigns, I’m confident that we can achieve the growth we are expecting in the second half. I’m proud of how the Visteon team has navigated the semiconductor shortages over the past two years. The work is not over, however, as we are actively engaging with our suppliers to support our growth for the remainder of the year and into 2024. I’m optimistic in our ability to secure the supply needed based on the improvements in the supply chain and the actions we have taken.
Turning to Page 5. At our Investor Day earlier this year, we discussed our plans for extending our electrification business beyond Battery Management Systems. The need for faster charging, higher power conversion efficiency and greater safety of electric vehicles offer interesting opportunities for Visteon for the midterm. I’m very pleased to report that we have secured our first EV power electronics win with a European luxury OEM for an integrated battery management and high-voltage junction box, what we refer to as our smart junction box. This system will be used for all vehicles based on the next-generation luxury EV platform with this OEM, and the first launch is in 2026. The smart junction box integrates battery management functionality with high-voltage junction box features in a more compact and lightweight package.
This integration enables the implementation of more sophisticated diagnostic and safety features that are not possible with the traditional discrete approach. In addition, the reduced size and weight of the combined system contributes to weight reduction for these next-generation electric vehicles. In addition to the smart junction box, we also won the Cell Monitoring Controller portion of the Battery Management System for this platform. There’s one Cell Monitoring Controller per battery module with multiple modules making a battery pack. This win is a significant milestone for the company and gets us started with our power electronics strategy. As we highlighted during our Investor Day, power electronics provides an incremental content per vehicle opportunity for Visteon.
This program will give us over $700 per vehicle of electrification content between the smart junction box and Battery Management System and will ramp up in volume throughout the rest of the decade after initial launch in 2026. This win is also a great example of the dynamic nature of electric vehicle powertrain technology, which continues to evolve rapidly. We expect further integration of other functions that would offer similar opportunities for Visteon to grow in this domain. Turning to Page 6. New business wins in the second quarter were very strong at $2.5 billion, which is a record for the company and brings our first half total to $4 billion. The strong first half and the robust pipeline of opportunities in the remainder of the year gives us confidence that we will surpass our $6 billion full year target.
We continued our momentum in electrification with an additional $1 billion in new business bookings in the second quarter. The electrification bookings for the quarter included a follow-on extension win for an existing Battery Management System program in addition to the new smart junction box and integrated BMS discussed on the prior slide. New business wins on electric vehicles have steadily increased over the past few years. And in the first half, about 1/3 of our digital cockpit new business wins were for electric vehicles. While the share of EV business is expected to grow going forward, we also see strong demand for new cockpit electronic systems for ICE vehicles. The challenges faced by most OEMs in transitioning to electric vehicles are public knowledge, and these OEMs will continue to rely on their high-volume and profitable ICE business for several more years.
Visteon’s powertrain-agnostic digital cockpit products are well positioned to support these OEMs across all their vehicles, and we’ve highlighted some Q2 wins on the right of the slide. The first win highlighted is an extension of a high-volume, high-content all-digital cluster currently in production for trucks and SUV platform for a North American OEM. The extension of the program secures revenue contribution through our midterm targets and demonstrates the ongoing commitment our OEM customers are making with their highly-profitable ICE vehicle lines. The second win highlighted demonstrates the ongoing momentum we’re building in the 2-wheeler segment. This win is for an 8-inch display-based digital cockpit system with a European OEM for their sport 2-wheeler line.
The display is touch capable and uses Visteon’s proprietary local dimming technology to provide enhanced display visibility in varying level of sunlight and weather conditions. The third win highlighted is a new display win for a high-volume European customer for a multi-display system with 20 inches of screen area under a V-shaped glass cover lens. This is the first multi-display win with this OEM, following the recent conquest wins for single displays. This large display will be featured on the higher trim of the OEM’s B-segment vehicle, which is indicative of the multi-display trend starting to move downstream into mass market vehicles. The last program win highlighted is a 12.3-inch digital cluster display for a large Japanese OEM. This cluster will be equipped on a global vehicle for the OEM’s premium brand and is expected to go into production in 2025.
This program represents the third cluster win with this customer in the last 2 years, and we believe there’s a good runway for further growth opportunities with this OEM. Turning to Page 7. The company launched its products in 35 new vehicle models across the globe in the second quarter, demonstrating exceptional operational execution. Every new launch requires customization of the product to fit unique requirements of each vehicle and market in addition to ensuring sufficient supply of critical components to support dynamic customer production plans. We had several follow-on product launches across all regions. In Europe, we launched a digital cluster program on several high-volume SUV nameplates for Mercedes, including the GLE, GLC and the GLA.
In the Americas, we launched a 10.25-inch display audio infotainment system on the Citroen C4 Cactus for Stellantis in Brazil. This existing program supports smartphone projection and was initially launched on the Peugeot 208. In China, we launched a 12.1-inch center infotainment display with JMC for their flagship electric pickup truck. We have an active commercial relationship with this domestic Chinese OEM, having launched several display programs now and supporting the automaker with several other products that we will be introducing to the China market in the future. Lastly, I would like to highlight the launch of our SmartCore cockpit domain controller with Harley-Davidson on their touring cruiser 2-wheelers. This SmartCore system uses a 12-inch display to offer a rich set of digital cluster and connected infotainment features that are comparable to that offered by any passenger vehicle.
This program is introduced first in North America and will be followed by launches in other regions around the world. While this system is the most advanced of its kind in the 2-wheeler market and probably appropriate only for the top end of the two-wheeler market, this product and the 8-inch digital cockpit win with a European two-wheeler OEM discussed on the previous page highlight the fact that the two-wheeler industry are starting on their own digital and connected transformation similar to passenger vehicles. The transition to electric powertrain for two-wheelers is also adding more fuel to this trend. We believe that this emerging two-wheeler trend presents an interesting opportunity for Visteon to extend our digital cockpit products into an adjacent market.
I will discuss this opportunity further on the next page. Turning to Page 8. Two-wheeler OEMs have traditionally offered very basic equipment for driver information that has lagged the passenger vehicle side of the automotive industry. The relatively higher cost of advanced electronics as a share of the total vehicle cost and the perceived lack of compelling features for their customer demographic resulted in the industry making slow progress on this front. However, the connected and digital lifestyle, made possible by consumer electronics, is changing consumers’ expectations for all forms of mobility when it comes to technology. Dials and gauges are just not acceptable anymore to the emerging consumer all around the world, and two-wheelers are not immune to this global trend.
Copyright: dolgachov / 123RF Stock Photo
Visteon’s digital cluster, Android-based infotainment, displays and SmartCore technologies are very well suited for the needs of both four-wheeled and two-wheeled vehicles. Our platform-based technology development approach enables us to build products for two-wheelers quickly, leveraging the extensive work we have done for passenger cars. Additionally, we can also bring the benefit of scale by leveraging the semiconductor and display components from our traditional business. The 2-wheeler industry produces nearly 40 million vehicles each year, excluding the very low end of the market. We believe about 10% of this market is currently addressable by Visteon, and we expect this segment of the market to grow rapidly through the rest of the decade.
Much like with passenger cars, the trend of digital cockpit in two-wheelers is starting at the high end of the market with cruiser and touring bikes. Our SmartCore launch with Harley-Davidson is a good example, which features a 12-inch display that offers a rich set of cluster and connected infotainment features that are comparable to that offered in premium passenger vehicles. Sport bikes form the bulk of the higher-value 2-wheelers, and we’re starting to see more digital content in the cockpits of these bikes. Premium sport bikes are now being equipped with larger displays and embedded digital cluster and infotainment, while the rest of the sport bikes are using smaller five-inch displays and smartphone projection for apps. The recent 8-inch display-based digital cockpit win in Q2 with a European OEM is a good example of the trend in premium sport 2-wheelers.
Also similar to passenger vehicles, we expect high content systems to migrate quickly from the upper to middle and lower segments of the 2-wheeler market. Prices for cockpit domain controllers and digital clusters for two-wheelers are similar to the prices offered in passenger vehicles as the content is also similar and ranges from greater than $350 for cockpit domain controllers with large displays to about $200 for digital clusters and about $100 for displays with smartphone projection. While the current market size is relatively small at just over $0.5 billion, we expect it to grow rapidly with greater penetration of digital content across all segments. The launch with Harley-Davidson and the recent win with the European OEM puts Visteon in a great position to move quickly and take leading share of this fast-growing market.
Turning to Page 9. Industry vehicle production in the first half of the year has been strong due to the pent-up demand from consumers and the need for inventory restocking. As a result, demand from our customers has remained strong and the acceleration in sales growth over the last few quarters is due to the easing supply constraints that have enabled us to deliver on a higher portion of the demand. As we look towards the second half, we expect consumer demand to remain fairly resilient but against a backdrop of decreasing order backlog for OEMs. In China, passenger vehicle production has improved gradually, following COVID lockdowns last year. However, the slowing growth in the region has resulted in a slower recovery in vehicle production.
Further, Visteon’s customer production has been impacted as the domestic Chinese OEMs have taken share from global OEMs. We believe this will continue to be the case in the second half and likely remain a headwind to our customer production in the near term. Within North America and Europe, inventory restocking and order backlog fulfillment supported production growth to start the year. With inventory levels beginning to normalize in North America and with orders slowing in Europe, we expect pent-up demand to be less of a contributor to vehicle production going forward. For Visteon, we expect our sales to continue to outperform the market and grow in the second half. Our product launches to date and planned launches over the next few months will accelerate growth in the back half of the year.
Additionally, our battery management sales have been slowly increasing and will continue to ramp up as our OEM customers introduce more electric vehicles to the market. With the product ramp-up, as well as lower headwinds from the display program roll-offs mentioned on the prior slide, we expect our growth over market to remain strong in the second half. Our new business wins to date reflect the high demand for our digital cockpit and electrification products and the increasing size of programs as OEMs continue to shift to a more platform approach for their [EE] architecture. The investments we’ve made in our digital cockpit and electrification capabilities are paying off as we have seen an uplift in our win rate this year. Our commercial traction reflects our technological leadership and OEM recognition of the value we provide in the next generation of vehicle architectures.
As a result of the new business wins so far this year and the robust pipeline for the remainder of the year, we expect our full year bookings to exceed $7 billion, positioning us well for future growth. Turning to Page 10. In summary, the company performed well and delivered another quarter of growth that outperformed our customers’ vehicle production. Our disciplined execution of our growth strategy plans resulted in strong sales growth of 18% excluding currency, while our commercial discipline generated an adjusted EBITDA margin of 9.2%, or 10.7% when excluding exceptional recall charge. We have continued to build a strong foundation for further growth through new product launches and $4 billion in new business wins. Our ability to deliver on challenging production cycles and our product portfolio that is well aligned with the industry trends positions us to continue to outperform the market going forward.
With our performance in the first half of the year, we are on track to achieve our full year guidance that we issued at the start of the year, and our new business wins support our targets that we provided at our Investor Day. Now, I will turn the presentation over to Jerome to review the financial results.
Jerome Rouquet: Thank you, Sachin, and good morning, everyone. Visteon’s second quarter financial results were solid and demonstrated our ongoing focus on commercial and operational discipline. Despite an exceptional charge that we took in the quarter for a product recall with one of our customers, we are executing per our plan, and we are on track to achieve our full year objectives. Q2 sales were $983 million and grew 18% compared to prior year when excluding foreign exchange. Sales benefited from higher customer volumes, as well as from recently-launched programs, supported by an overall improvement in semiconductor supplies. Growth over market, net of pricing, was 15% and represents our 17th consecutive quarter of growth over market.
Semiconductor supplies have continued to improve, and our reliance on open-market purchases has reduced significantly compared to the end of last year. The associated pass-through recoveries have, therefore, followed the same trend. However, we continue to see elevated prices from our traditional Tier 2 suppliers, and we’re continuing to share the higher costs with our customers. While I’m pleased with the progress made in securing agreements with customers in the first half of the year, there are several agreements that still need to be finalized in the second half. Adjusted EBITDA was $90 million for the quarter and included the exceptional recall-related charge of $15 million and negative impact of 150 basis points to EBITDA margin, as Sachin discussed earlier.
Excluding this charge, our EBITDA improved by $26 million or 140 basis points versus prior year. Our run rate EBITDA margin, therefore, remains above the 10% mark. Adjusted EBITDA benefited from higher base sales and improved operational efficiencies. This was partially offset by unfavorable exchange impacts, as well as increases in net engineering and SG&A expenses as we continue to strategically invest to support our growth. In the quarter, we secured additional recovery agreements with customers that were retroactive to the beginning of the year. As a result, the net impact in the second quarter from semiconductor and other material cost leakage was relatively neutral and in line with prior year. Adjusted free cash flow was $32 million in the quarter, resulting from a strong operational performance.
As Sachin highlighted, we began to execute on our share repurchase authorization announced in March with $30 million in share repurchases at an average price of just under $142. We ended the second quarter with a net cash position of $111 million, in line with our targeted net cash number. Overall, our results in the first half provide a strong foundation for the second half of the year. We remain on track to achieve our targets for sales growth, margin expansion and cash flow generation this year. Turning to Page 13. Sales were $983 million for the quarter. When excluding customer recoveries, base sales were slightly above $900 million, representing growth of $195 million or 27% compared to the prior year. This increase in base sales was primarily driven by higher customer production volumes and our continued market outperformance, fueled by recent product launches.
Visteon customer vehicle production volumes increased 12% from the prior year, driven by improved semiconductor supply, supporting strong customer demand in both North America and Europe. Visteon customer production in China also improved year-over-year, but this was primarily due to the lower production levels that we experienced in Q2 last year as a result of the COVID lockdowns. We delivered another quarter of double-digit market outperformance, thanks to the ongoing demand for our digital cockpit products and recent launch activities. Large cluster programs across all regions, as well as various SmartCore programs in Europe and Asia continued to drive sales growth and outperformance. Customer recoveries, which are illustrated in the dotted boxes, declined year-over-year by 40% to approximately $75 million, driven mostly by a decrease in recoveries of open-market purchases.
We expect to open-market purchases and, therefore, customer recoveries of these specific purchases to remain low for the remainder of the year. This is a welcome development for both Visteon and our customers, and it reduces the total input cost for semiconductor parts and reinforces the return to a more stable semiconductor environment. Recoveries related to higher costs from our traditional Tier 2 suppliers are expected to remain stable over the rest of the year. As a reminder, recoveries, although bucketed as pricing, are pass-through in nature, increasing sales and neutral for adjusted EBITDA but dilute margin percentages. Adjusted EBITDA was $90 million for the quarter and included the $15 million exceptional recall charge. Excluding this charge, adjusted EBITDA increased by $26 million versus prior year, or 140 basis points, primarily driven by higher base sales, operational efficiencies and a few million dollars of net positive one-timers.
This was partially offset by negative foreign exchange impacts, higher net engineering and increased SG&A. Net engineering was higher compared to the prior year due to the timing of engineering recoveries and the investments we’re making in innovative technology around the software-defined vehicle and electrification. Adjusted SG&A was higher, mostly due to personnel costs. We continue to invest in our team to support our strong growth, but equally, we will leverage our cost structure as we scale up. Our net engineering and SG&A costs as a percentage of sales for the first half of the year were 6% and 4.5% respectively. Despite the exceptional charge we took in the second quarter, we delivered solid financial results that were in line with our expectations.
We continue to demonstrate our ability to overcome lingering supply chain challenges, while delivering on the high number of program launches, which support our future growth. Turning to Page 14. We continue to maintain one of the strongest balance sheets in the industry. Our balance sheet supports our growth and provides the flexibility needed to pursue our capital allocation priorities. We ended the quarter with total cash of $459 million and a net cash position of $111 million. At our recent Investor Day, we announced a $300 million share repurchase program that runs to the end of 2026. In Q2, we repurchased $30 million at an average price of just under $142 per share. We intend to continue utilizing the share repurchase program authorization and will remain opportunistic in our execution.
We generated $32 million of adjusted free cash flow in the quarter. In the first half, adjusted free cash flow was an outflow of $5 million, in line with our expectations and normal seasonality. Trade and other working capital items were an outflow in the first half, which we anticipated and which we expect will partially unwind throughout the remainder of the year. Cash taxes were higher than prior year due to the cash payments related to increasing profitability in some jurisdictions, also in line with our expectations and contemplated in our guidance. Interest payments remained low and primarily relate to our $350 million term loan that matures in 2027. We had our first amortization payment of $4 million in the second quarter of 2023. These modest amortization payments will continue on a quarterly basis through the maturity of the facility.
CapEx was 51 million in the first half. We expect CapEx to increase in the back half of the year, reflecting our ongoing investments in manufacturing and electrification to support our growth. We continue to expect CapEx of $130 million for the full year. Turning to Page 15. Based on our performance in the first half of the year and our expectations for the second half, we are maintaining our full year 2023 guidance. For sales, we are maintaining our guidance range of $3.95 billion to $4.15 billion. Since we initially provided guidance back in February, the industry produced more vehicles in the first half than anticipated, as improved semiconductor supply supported pent-up demand, particularly from strong European order books and inventory restocking in North America.
Aggregate industry production growth in the first half needs to be viewed at a more granular level, as much of the total increase is related to BYD in China and native EV OEMs that are not currently in our customer base. We expect these OEMs to increase production further in the second half. Based on the strong first half production in Europe and North America, as well as the ongoing customer mix headwinds in China, we anticipate Visteon customer production will be lower in the second half relative to the first half of the year. Lower Visteon customer production will be more than offset by our growth over market expected to be in the mid-teens in the second half. This will be driven by product launches that are contributing to our sales growth, as well as an increase of our electrification programs as compared to the first half, though at a slower rate than our OEM customers initially anticipated.
We are maintaining our adjusted EBITDA range of $405 million to $445 million to continue to track towards the midpoint of the range. We expect the flow-through of higher sales to be the most significant contributor to our EBITDA growth versus the first half of the year with SG&A and net engineering remaining flat compared to H1. Additionally, we continue to expect to meet our semiconductor and other raw material cost leakage target of negative $20 million for the full year. Our adjusted free cash flow range of $115 million to $165 million confirms our assumptions for the second half, including our adjusted EBITDA range, a moderate working capital unwind and higher CapEx spending. On the right side of the slide, you can see the 2026 targets we set earlier this year at our Investor Day.
With $4 billion of new business wins and continued strong customer demand across our product lines, we made a step in the right direction in the first half. Turning to Page 16. Visteon remains a compelling long-term investment opportunity. We have positioned the company for top line growth, margin expansion and free cash flow generation. We will continue to return cash to shareholders, while maintaining a strong balance sheet, which provides significant flexibility. As Sachin mentioned, our solid start of the year gives us confidence in our 2023 guidance, and we are on track to achieve these targets as well as our 2026 targets. Thank you for your time today. I would like now to open the call for your questions.
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