Lear Corporation ($LEA)

We'll kick off our company-specific series here today. We're really, really excited to have Lear with us, one of the top global seating suppliers and also a player in vehicle electronics. Lear typically generates a ton of cash, pays a good dividend, buys back a ton of shares and make strategic bolt-on acquisitions. And we're very happy to have Ray Scott, Lear's President and CEO; as well as Jason Cardew, Senior Vice President and Chief Financial Officer. We also want to thank Tim Brumbaugh for also attending the conference and being a great resource for us. So Ray, Jason, thanks a lot for joining us today.

I'd just like to start off by asking if there's an update on Lear generally and how things are progressing as we sort of approach the end of the first quarter here. What is your view on the production environment? Auto industry volumes are expected to decline modestly for the full year. Do you have any different assumptions across the different various regions where Lear operates but I just wanted to get a little bit of an update on how the first quarter may be progressing. Yes.

Yes. Well, thanks for having us on this St. Patty's Day and being here and talking about the business. I appreciate everyone in attendance. One, we feel really good. Despite what's going on in the Middle East, we haven't seen anything of any significance impacting our business. And on the earnings call -- the fourth quarter earnings call, for those that listen, I was very optimistic and very positive with the momentum we had established in '25. And I still believe we're in the same position today. 2025, we produced $200 million in net performance. That's really an important measurable on how we look at our business, how we're performing with restructuring IDEA by Lear, our operational performance, still feel really good on where we're at. We have a target this year. We achieved last year's target, beat our last year target significantly, and we've established a really solid plan this year for $135 million of improvement in net performance. And I still feel that we're in a very good position to beat that number. We talked about growth last year and Conquest wins. We had a significant win with the Orion facility, the onshoring with General Motors with the SUVs and full-size pickups. There was a competitor that did have a facility in that location. We were able to go in there and really through our innovation and technology, really secure that business, remain the sole supplier of the T1 seat business. We also won the largest Conquest win last year with a major North American OEM for their truck business. They'll launch in later 2029 but it was a significant conquest opportunity for us. There was 2 different competitors that we won their manufacturing facilities. And we won it based on our technology through automation and the digital enhancements we're making in our manufacturing plants. I mentioned that the customers that are very sophisticated on looking at how you're doing it, we talk about having a 200 to 500 basis point competitive advantage with the capabilities we put in place, the companies we've acquired around automation, robotics and AI and the digital tools we're implementing in our plants but they came in and audited our facilities, where we're actually using the production capabilities today, how we're getting there, very detailed reviews of our plans for our manufacturing plants. We're very impressed. And across every functional group, it was unanimous in the award for Lear Corporation. So that's a significant win. What that did was really drive what we're talking about in theory through this technology capability of where our customers are headed through modularity and capabilities within the manufacturing plant. So a really significant win for us. And in E-Systems, we had the decline in EVs. We've seen what's happened with our OEM customers here in North America. We pivoted nicely and had $1.4 billion of wins last year and a good chunk of that in conquest wins. And what was exciting after the earnings call, right after the earnings call, I was like, man, we should just pause a little bit. We had some great conquest wins in Asia and China, really -- Jason will talk a little bit about it. That will launch later this year. And so what we're seeing is the speed to market really benefiting Lear Corporation. And so we'll launch 2 significant programs this year with Chinese OEMs. And then we just recently were awarded with a North American customer, a significant platform that we'll launch later next year. And we can't talk about that one. When we get approval, we'll talk a little bit more about it, but it was a major conquest win. So that's new news. And again, it just validates the momentum I talked about on the earnings call. And so we're going to continue -- we focus. We -- with the discipline on driving profitable growth and then making sure we're expanding our margins in a relatively flat to down market. And both of those are going extremely well, and we're going to continue with our capital allocation. We've targeted $300-plus million of share buyback. So despite what I mentioned earlier, what's going on with the geopolitical situation, which we haven't seen anything of any significance, we're doing really well and feel really good about where we're at.

And Alex, I'll just add a couple of points to Ray's summary there. In terms of the impact of these new business awards in wire, it's really pretty significant, about $250 million in average annual sales just in the 3 awards that we've received between the earnings call and today. And so -- and about $100 million of that is in China. And so we had $120 million of awards in wire with the Chinese domestics all of last year on the wire side. And this year, we've got $100 million just in the first quarter. So we're off to a really great start. The momentum around growth is really continuing in E-Systems. In terms of the outlook for the quarter, we didn't provide formal guidance but we did share a framework of what we expected in the first quarter on the earnings call. We talked about revenue of about $6 billion and operating income of $260 million, Seating margins in the low 6s and E-Systems around 5%. And pretty much across the board, we're seeing a little bit better outlook at this stage than what we shared on the earnings call. Volumes have held up, but our performance has improved from what we saw just 45 days ago or so. And so now we expect Seating margins to be approaching 6.3%, 6.4%, maybe a little bit better depending on how some of our commercial negotiations play out for the balance of the year and E-Systems margins of around 5.5%, maybe a little bit higher. There's a little bit of a nuance that I want to just explain so investors are not surprised by it. But the way the tariff regime is playing out, it will lead to lower revenues for us than what we had embedded in the guidance in the first quarter and for the full year. So you have a couple of things happening. You have our customers sharing the export credits that they receive with us, allowing us to import without paying tariffs. And so last year, you may recall, we had about $200 million of tariff costs. We got full recovery for that. So that was both in the revenue line, and then there was no impact in terms of earnings. For this year, a portion of that is going to unwind because you have not just export credits allowing us to import tariff-free but our customers had credits from last year that they've now granted us that we can pursue recovery on a retroactive basis. I don't want to get too far into the weeds but the net effect of all of that is going to lead to a reduction of revenue somewhere between $100 million and $200 million in the first quarter. And so the headline number may be a little bit lower than what we had initially guided to but it's for a good reason. In the end, the most important change that comes with the new tariff regime is that these export credits allow us to avoid paying the tariff and having to seek recovery. Now you just avoid that upfront. And so there's a cash flow benefit that we expect to see. I'm not going to put a pinpoint number on it but last year, we had a cash flow headwind for that 1 quarter lag on the tariff recoveries that impacted last year's free cash flow.

Sorry, just one follow-up on that. So revenue is a bit lower on the tariff and then operating income, no impact to...

Yes, no impact on operating income. And then just to round out the comments on the quarter, we're expecting to be at least at $270 million, probably a little bit higher. We still have some commercial negotiations that are in process that could move that up a bit. I don't know exactly how those will play out in the last couple of weeks of the quarter but we're feeling pretty darn good about how the year is starting out.

Yes. No impact.

And that's really also allowed us to get off to a bit of a faster start on our share repurchases than what we've done in the last couple of years. So we're on track to buy back $65 million to $75 million in the first quarter to ensure that we remain on track for that $300 million or more for the full year. And that $300 million, just to kind of level set on that, that target is based on the low end of our free cash flow guidance range, which was $550 million to $650 million. So to the extent we get to the midpoint or higher, we would expect to do a little bit more than the $300 million.

That was really helpful. Jason, if you could maybe double-click on China a bit. That is the most dynamic market we're seeing globally. You've got kind of heritage domestic players that are maybe a little bit out of favor and you've got some of the bigger domestic players are just blowing up with tons of demand. How is Lear positioned within the Chinese market? You've navigated very well, and we're just curious of why you're doing so well in China.

Yes, it's a very important market, and we have an incredible team on the ground that is looking at this very strategically. And we've done a nice job. I mean the most recent awards that we just mentioned with -- is Geely and SAIC, and we have relationships with every one of the major customers. And where we've done a really nice job is our innovation and technology. One thing with the Chinese domestics that they -- particularly in the, say, the C and D segments in the premium areas of the business, the capabilities we have around thermal comfort, the ability to have modular components, how we're delivering innovation on the plant floor is something that is very, very critical to the Chinese OEMs. And it's why we've been so successful. We're the leader in premium products within the China market, and we continue to -- continue to see that those opportunities grow. And we're also seeing a continuation of those thermal comfort features going across different car lines to differentiate their own vehicles, and that gives us additional opportunities. And so we have been very successful. And I'd say most recently, we've been extremely successful with our E-Systems business. I mean these 2 conquest wins are launching later this year. And that's what I love about the speed to market. We've usually go on the cycle of what is a 3-year launch cadence. We're launching much faster. And our ability to launch products fast to market really differentiate us. And I think one thing that we're being very selective on and strategic on is as the Chinese OEMs start to embed themselves outside of China, looking at who's going to be successful, what the product lineup is, how they're looking at onshoring or localizing suppliers. And we're not going to go after a price game where you're just chasing it down to the bottom. We believe we can differentiate ourselves because of our innovation and technology where others can't. And so we are going through that. We look at this frequently. We study it where we want to position ourselves, who we want to position ourselves with, who we think the winners are going to be, what segmentation are we looking at? And we've been, like I said, very good at getting nice returns in the luxury segments, and that's really what our focus has been. But this new evolution of E-Systems growth has been really somewhat surprising but refreshing because it's because how we can deliver with speed to market and technology.

I think the other point I'd add is that we made an organization change in 2023, where we put the head of our Seating business over E-Systems. And that -- we're starting to see the results of that. We had the $120 million of wins with the C-OEMs in wire last year, another $100 million to start this year. And so his leadership, his relationships with the customers there has been extremely important. Now we're still underrepresented in the market on C-OEMs. We ended last year with 44% of our revenue was with the Chinese automakers. And so we're a little bit under-indexed relative to the market overall. We are on track to meet or likely exceed the 50% target that we established for 2027. And these new business wins likely accelerate our path to getting to at least 50% Chinese domestic customer representation within our China business. And we were extremely successful last year, both in Seating and E-Systems. I think we had almost $800 million of new business awards with the C-OEMs in Seating and over $100 million in E-Systems. So strong momentum in that market, but very targeted. As Ray said, we're spending a lot of time as a leadership team studying that market, studying platforms and customers, trying to understand their export penetration in different markets, how those vehicles are going to perform in the markets they're targeting, both within China and outside of China and not going after everything, but being very targeted in what we pursue.

So the 50% target for the Chinese domestic share within your Chinese business, where you now used to 40%...

44% last year, will probably be a little bit higher than that this year and 50% is what we're expecting next year is what we had shared a couple of years ago as a target. We're ahead of that. So we'll be in the low 50s in '27.

Those are big moves. It's great.

Yes.

So I wanted to talk about IDEA by Lear. So the benefits have already begun to materialize, I think, contributing $70 million in 2025, $75 million expected in 2026. What are some examples of automation and digital tools you're implementing? How will those investments impact the capital intensity of the business? And how do you foresee the benefits growing over time?

Yes. For those that aren't aware, IDEA by Lear really is a cultural change that we've institutionalized in our company. It's innovation, it's the digital. It's the engineering, which is critical to how you look at the manufacturing and the automation. And so hence, IDEA by Lear. And it's really gained incredible traction within our company. And we've been at this for 10 years. I mean we've been really working how you look at the manufacturing plants, how you combine engineering product advancements for automation and digital change and efficiencies in the manufacturing plants. And so we've also -- at the same time, we've organically grown our in-house capabilities. We have over 700 people dedicated to IDEA by Lear, the digital changes and the automation and the robotics in our manufacturing plants. We have over 600, I'll call it, user cases right now that we're implementing around the world that we've been very successful. So last year's target was very, very important to us to really identify and talk to investors and analysts on the success that we're having. And we have $75 million of savings that we're going to see this year, and I see that moving quickly. At the same time, we are moving organically. We went out and we acquired companies that help us really advance and accelerate our capabilities. And so on the product side, we acquired Kongsberg and IGB. We had to have the engineering capabilities to really construct and design our own in-house modular concepts for automation of a thermal comfort solution, which we did. We have it up and running, and it's in place. And then we acquired several leading technology companies. ASI, which is really focused on the key ingredients for online material handling and inventory management through robotics and digital enhancements. Thagora, which is really a software program about nesting and capabilities of driving better utilization with our leather and even our textile because it's very complementary. We have inTouch, which we -- that's all end-of-line capabilities for automation through visual systems, camera systems, lasers, other capabilities that were in-house and inTouch. And we launched our first end-of-line successful program with the Jeep Wagoneer, and now we're spreading that across all of our facilities. There's a significant savings in the manufacturing plants. And then we just recently announced StoneShield, which is one of the most labor-intensive parts of wire harnesses, the taping. And now we're up and running and have seen very, very good success with that right now. And WIP Automation, which is -- we're writing our own AI algorithms and software to continue to help with detection systems, other quality systems within our plant. So I want to separate. We had our organic strategy and have been at this for 10 years, and we've done a really nice job of great tuck-in acquisitions that are getting an accelerated payback for us, even better than what we anticipated. And so now just to give you a couple of examples on how we have been successful. One is cycle time deviation. We're up and running with foundry. We've talked about it with Palantir. It's incredible applications where we're looking at cycle time, real time, being able to save -- this is real money, 3% to 5% of balancing the line in real time. We're spreading that across all of our plants. Last year, we saved $10 million on this tool within our manufacturing plants. And this year, we have targeted $15 million. The tariff recovery process that we went through, it was amazing what we did with our software capabilities and how we got at that extremely quick. And anything, even if we have to reverse and get credits on how we're going to move forward with those inside capabilities is going to help us. It's helping in non purchasing, production purchasing. There's a lot of different examples that we've been successful at. And in addition to it, we built this innovation center. And again, I think the important thing is one thing is to talk about it. Another thing is to have it in production. And we have key modular components in production today. We're not just advertising, here's the advertising. It's important that investors understand where we're at. And I always say, it doesn't matter showing a pretty advertisement or a marketing screen on what you're doing. It's about contracts. It's about POs. In our modular concepts, our thermal comfort, we've won 35. I got to get this right because every time I'm out, we're talking about new contracts, purchase orders. Of the modular ComfortFlex, ComfortMax, FlexAir. Those are real. I mean it was $80 million that we won in component business last year, $170 million, and Jason will talk a little bit about it, of real production contracts in the modular concepts that we've talked about, real production PO. So we're moving fast. We just had a really good review. And if anyone is in Michigan, I'm going to invite you out to our Rochester Hills facility. We had a head of a major OEM purchasing come through our facility. We showed them a couple of different facilities. And she walked out and she said, "I've never seen -- there isn't a seating company that is doing what you're doing. I need to get my CEO back here." And so we are hitting on all the -- I think the key ingredients that they're talking about they want their suppliers to think about with technology, innovation, quick to market, manufacturing capabilities on the platform around automation, digitalization, modular concepts, that's where you really get the savings. That's where you really see the benefit. So this 200 to 500 basis point competitive advantage that we have is real. And we're being very selective on how we pick and choose different programs, really looking at the longevity or traditional production rates of what the program look like, and that's where we're placing our bets. And so right now, it's going extremely well. We have more work to do. We're still continuing to look at different opportunities. But if there is an acquisition out there, they're going to be just like the ones that we've been seeing, these smaller tuck-ins that get us really quick paybacks and accelerate our need to change our manufacturing plant floor.

I'd just add a couple of points to Ray's explanation on IDEA by Lear. There's questions about how that impacts the capital intensity of the business. And we continue to run this business with 2.5% to 3% of revenue on CapEx each year. And I think this year's guidance, we're at 2.8% or $660 million. And our CapEx is a little bit higher this year than last year but that's largely driven by the Orion award and facilitizing that plant to get ready to launch next year with General Motors. We're spending about $150 million on CapEx related to automation and IDEA by Lear this year. We spent about $115 million last year. We continue to see really strong paybacks in Seating, 1 to 2 years. In E-Systems, it's a little bit longer given the lower labor rates but 2 to 3 years. So we have a lot of attractive opportunities within automation. But IDEA is broader than that. It's a combination of the digital benefits that we're achieving through foundry and other tools as well as automation. Last year, 2/3 of our savings were through automation but 1/3 of it was through the digital side, which has very little investment. That investment is effectively fixed and in place in the run rate and has been for the last 2 years. And now we continue to generate new savings off of that investment that we started a little bit more than 2 years ago. So I think that we have a lot of momentum in this area, and this is a key -- is really a key factor for us in driving that sustainable 40 and 80 basis points of net performance in C and E-Systems, respectively, over not just this year but next year and into the future.

Yes. I think it's important, Jason mentioned, though, when we can actually manufacture our own capital, what this has been an area, I think, has lacked a lot of attention is that there's capital that's out there for universal consumption that it's not built for purpose-built capital for specific needs on the plant floor. That's where manufacturing integration when I talk about that is so critical. we have those capabilities, that is the actual capital that we're manufacturing in-house. It's very specialized for our own consumption, and we don't share it. And customers come in and say, listen, can you share this with your -- no, we're not sharing it with anyone. We're going to keep it in-house. And even the companies that we acquired, we canceled the contracts with any one of our competitors so we could keep all that technology and innovation in-house. And to give you an example, I've used this before, is when we put -- launched the plant in Detroit for the Jeep Wagoneer, we manufactured almost 80% of the capital at a significant savings of 20% to 30%. And it was specifically built for our consumption and our needs around manufacturing and around automation and around the digital enhancements. And so we're keeping all those very selective capabilities in-house, and we're seeing a savings. Now what we've established now that we've seen this I think capital has somewhat been -- I don't want to say neglected. You do a good job of purchasing what you're using on a universal spectrum. But now that we have purpose-built capital for us, this 20% to 30% savings, I think we're scratching the surface. Now we have like what we call a VAVE team working on capital, which used to focus on the product side, and we have these queues of different ideas that can save the customer money. Now we're working on the capital side that I think we're going to continue to see reduction in our capital spend. And I think Jason is absolutely right. I want to be very clear on that, that we're looking at paybacks. And we're seeing paybacks that when you're seeing less than 2 years with a great IRR or a great return, that's what we're pushing. And so we re-prioritized a little bit of how we're looking at restructuring last year to get the greater payback sooner. But now we're seeing a queue of ideas that we can continue to see great savings through idea. through our cultural changes and through what we have implemented with our capital deployment. So I think there's more. I'm excited, like I said, about this year. I think it's a matter of connecting the dots. When you have 260 different manufacturing plants, you have a great idea is how quickly you can do it because you still have the plants running, you still have to deploy the capital. You still have to engineer the product in some cases but it's prioritizing that and getting at the quickest returns and making sure they're being prioritized in a way that we can implement them this year for next year's benefits.

Maybe I wanted to just pivot to the EV slowdown that we've seen and the demand just isn't in North America materializing as we kind of predicted it a few years ago, you guys have been very nimble of being able to navigate. What are some of the biggest challenges you have or opportunities in this kind of EV shift?

It's really just the way we're looking at it at this point, it's a lost opportunity and disproportionately impacted E-Systems. We did anticipate meaningful growth, particularly in our electronics business, through the battery disconnect unit programs that we were awarded with General Motors and with Stellantis on the RAM BEV. That program has been canceled and the volumes, obviously, in the full-size electric trucks are meaningfully lower than what was anticipated. So it did lead to a challenge in our growth narrative in E-Systems. When we initially embarked on our portfolio rationalization strategy in E-Systems, what we had anticipated at that point is that the growth in EVs would offset the wind down of the products that we decided to exit. And so obviously, the EV growth didn't fully materialize, although there is still some benefit in Europe and China where there is more demand, particularly in the U.S., it didn't materialize. And so that's kind of exposed the impact of the products that are winding down. But you're right, I think we pivoted quickly, and that's helping us secure some of the new business wins that we just announced this morning. We have some excess capacity in highly competitive low-cost regions that allow us to capture business maybe at a little higher margin than we ordinarily would. And we have had significant success in new business awards in the E-Systems side and on the Seating side. So I think the biggest challenge over the last 18 months was really around the product planning process at our customers. The lack of demand for EVs really forced them to rethink their product strategy, and that led to a lot of delays in program awards and program sourcing. We finally saw towards the tail end of last year that logjam break free a little bit. And that led to the important awards that we announced in Seating at the end of the last year. And we're seeing that momentum continue into this year, a return to a more normal sourcing cadence and gives us a little bit more confidence and visibility on what the medium-term, longer-term growth potential of the business is and allows us to really leverage the cost advantage that Ray talked about that we built on the Seating side and to take share in both Seating and E-Systems through conquest opportunities. So we're seeing a lot of great growth opportunities. I think we've finally bottomed out the EV volumes. So there's really not any risk left. I mean the volumes are very negligible in the U.S. in this year's outlook. So we bottomed out. We're at the trough and now we're building back up.

Makes a lot of sense. So I wanted to dig a little more into margins. So -- and I think some of this plays off of the IDEA by Lear that you were talking about earlier. But at the beginning of the year, you guided for margin growth despite a decrease in production volumes. Can you just maybe walk us through what drives this expansion? What are the upside and downside scenarios to your assumptions? What is the incremental margin each segment can achieve if volumes are a little bit better than expected?

Yes. So Alex, as you just highlighted, we did guide to higher margins in both segments this year versus last year and for the company overall. And that's really underpinned by the net performance commitment that we've made. And that's the basic business equation that we start each year with. You have customer price reductions contractually or otherwise, you have inflationary increases on wages and overhead. And then you have our normal cost reduction toolbox of commercial negotiations, plant efficiencies, purchasing negotiations with our suppliers. And then you add on to that what we're doing with IDEA by Lear and restructuring. And that portion is really what's driving the 40 and 80 basis points of net performance. The rest of the business equation is sort of a wash. And then you're seeing the benefits of restructuring and IDEA by Lear fall through to the bottom line. Now unfortunately, we've seen lower volumes on existing Lear platforms and the impact of the wind down of products that we're exiting in E-Systems that's offset a portion of that. But the net result is a modest improvement in operating margins this year in both segments. And I think just kind of going back to what we talked about on the fourth quarter earnings call, we tried to be very balanced in our approach to setting the guidance range. And if our customers can produce what they want to this year, if the Middle East conflict or other factors don't disrupt that, that's sort of what's embedded in the high end of the guidance range. Some level of disruption and new issues that maybe aren't on the radar screen is what takes you to the midpoint and then protecting against maybe some economic weakness on the low end of the range. And so as we sit here today, the way the first quarter has started and our customer production schedules out into the second and third quarter now, that's all trending in the right direction, sort of see revenue in the kind of midpoint to high end, similar to what we saw when we issued guidance on the fourth quarter earnings call. I'm not resetting guidance but I'm saying as we sit here today, absent any continuing effects from the conflict in the Middle East, if that's extended, then obviously, that may change things. We're not ignoring that obvious issue. But the core business itself and the way our customers are performing would suggest revenues are going to be pretty strong. And you heard Ray talk about what we're doing on that performance. We expect to meet or exceed the targets that we established there. And so if revenues do come in above the midpoint of the guidance range, we typically convert at 15% to 20% on that. Now some of that may be backlog revenue. Ray talked about one of the Chinese OEM awards that we received in water that actually launches this year. That's typically going to roll on at 10% to 12% as opposed to your variable margin on existing program being sort of 15% to 20%. And of course, a lot of it depends on which programs are increasing and decreasing. So the mix of programs can have an impact on the variable margin, the underlying profitability of the program, the nature of how the volume comes off or is added, if it's a short-term disruption and you're not able to take the labor normally variable cost out, that could impact the level of vertical integration we have in both in C and E-Systems can impact that variable margin. But all things equal, on average, it's going to be in that 15% to 20% range.

Just one quick one on capital deployment. So I think current liquidity is enough to operate the business. Leverage is at target levels. You're on track to deliver $550 million to $650 million of free cash flow in 2026. Share repurchases are a big part of it. Can you just remind us your capital allocation priorities? I think you briefly touched on acquisitions but just remind us how we should be thinking about that.

Yes. I think that this is a little bit of an underappreciated part of the Lear investment thesis and the way we create value for shareholders. We have consistently returned excess cash to shareholders through share repurchases. And so first, I'll just start out with kind of the framework itself. Our first priority is investing in the business through CapEx. So supporting the programs in production to improve our competitive position and the growth that we have in the backlog. After that, it's tuck-in acquisitions, Ray listed off the 4 or 5 acquisitions we've done on the manufacturing integration and automation side. We'd love to do more of those sort of $10 million to $20 million transactions. They're not significant in terms of cost but they are significant in terms of the impact on the business. And then beyond that, we don't see any significant acquisition opportunities that would provide a better return than buying back our own stock. And so the remaining excess cash that we're generating in the business is going to be returned through dividends, which is a consistent dividend of just over $3 a share today and then the balance is through share repurchases. And over the last 3 years, we've returned more than $1.5 billion to shareholders through dividends and share repurchases. We took out 5% to 6% of our shares, both in 2024 and again in 2025. We're on target to do that again this year. So I think we're creating real value through our share repurchase program. And when we talk to our -- some of our largest investors, this is something that they're very focused on. And I think there are some new metrics that we can share with investors more broadly on a future earnings call to help really illustrate how impactful this can be. One is revenue per share. We are growing revenue per share over the last 3 years, in line with the S&P 500 and well above our peer group. We're growing earnings per share by almost 50%. I think it's 47% over the last 3 years. That's a result of both the earnings growth of the business, but also the benefit of our share repurchase program. So it's a meaningful contributor to the value that shareholders can expect to see from Lear in the coming years, too.

Maybe we want to open it up to the audience for a moment. Question towards the back.

Congratulations on the execution in the last couple of years. If the Middle East conflict persists, and we see that dynamic of high oil prices and then the flow-through into other commodities and so on, maybe just a quick reminder of your pass-through some of the delays in that in terms of lags, just as a reminder of if this does persist for 4 to 8 weeks and not 4 weeks, that type of dynamic. And then from your perspective, is that the more manageable part and the bigger issue is demand destruction in terms of what could happen from an economic standpoint. And maybe just kind of how you're kind of preparing for that in terms of the flexibility of your business model.

Yes. I agree with that characterization. And so we have been -- we've worked diligently over the last 7, 8, 10 years now to put pass-through mechanisms and indexing agreements in place. And so for the vast majority of the commodities that we buy, they're on either a direct pass-through where the customer is responsible for the purchase or there's a 1-quarter lag. In some cases, there may be a 2-quarter lag. But for the most part, things like foam chemicals, it's generally a 1-quarter lag. And so if the spike in oil leads to higher chemical prices, you could see a modest impact in 1 quarter but that should be about it. Obviously, we're watching more closely what happens with demand. And I think that there's not a lot you can do at this point in time other than study the market and be aware of what's happening, build the playbook or reopen the playbook that we have that we've used pretty much consistently over the last 5 or 6 years, whether it's COVID, the chip shortage, EV decrease.

I think what's -- say good and bad, the bad is obviously what's going on in the East. The good is from a Lear perspective is that through everything we've seen from COVID to the chip crisis, to labor economics to commodity increases to the EV decline, we've done a nice job of going in and really rereviewing contracts and purchase orders. And so there might be a lag in some respects on how we look at recovery if commodity increase. I think the question that you have on demand, I think we could all -- we're all reading the same stuff and trying to understand what's going to happen there. But internally to the things that we can control, we've built a number of, I'll say, key mechanisms that protect us. And it's through everything we just mentioned. And so I do feel better on how we'll protect ourselves. We -- like I said, we're seeing minimal impacts from supply disruptions, those type of things. But we've seen some of this before in some respects in other areas that we can apply the tools that we have in place. I think foundry is a great tool that we're using right now to get ahead of some of this stuff. And then the contracts that we've kind of reestablished with our contract with our customers should, in some respects, protect us. There might be a lagging issue but we've done some of this before. And so I feel good on the things we can control. It's the question that you have that I think everyone has is what's really going to happen with what demand looks like around the world. And I don't have that answer. But I know that the things that we can control, we're doing a really nice job in reviewing all of that right now, looking at different potential issues and then trying to divert or reevaluate how we're positioning ourselves, but it's good right now.

Just a quick follow-up on that. What you do control is the pace of the stock buyback. So when you think about this uncertainty now, how do you think about that dynamic of...

We just talked about this.

Yes, I think you may have walked in just after we -- yes. So we're on track to buy $65 million to $75 million back in the first quarter. And so we're well ahead of the pace that we ran at last year where we started off a little slower than ramped up. And if we see a dislocation in value, we will take advantage of that. And we typically don't generate cash in the first quarter, just kind of the normal cyclicality of the working capital side of the business. But the second quarter should be a little bit better. We do have the revolver. We are committed to the $300 million, and that sort of aligns with the low end of our guidance range. And so if we do more earlier, then that's, I think, would be the right thing to do to take advantage of this.

Well, perfect. I think that is all the time we have. I want to thank Ray and Jason for an excellent conversation, and thank you all for attending. So thanks again.

Thank you. Thank you.

Exciting stuff. Thank you.