Visteon Corporation (VC) Earnings Call Transcript & Summary

Welcome to Visteon's Annual Meeting of Shareholders. Today, we would be hearing from our Chairman of the Board, Francis Scricco; and CEO, Sachin Lawande. With that, I'd like to turn the call over to Fran.

Thank you, Nicole. Good morning, ladies and gentlemen. I'm Fran Scricco, Chairman of the Board. I'm pleased to welcome you to Visteon's Annual Shareholders Meeting. I've been informed by the inspector of elections that a quorum is present or represented by proxy. And therefore, I call this meeting to order. I would like to note that this year we've added an audio call so that shareholders can listen to the meeting if they prefer not to attend in person. While the COVID situation is improving and much better than at this time last year, we do appreciate your continued support for the health and welfare of Visteon's employees and fellow shareholders. To begin today's meeting, I'm pleased to introduce the other members of the Visteon Board who are joining the meeting via conference call: James Barrese; Naomi Bergman, Jeff Jones, Joanne Maguire, Bob Manzo and David Treadwell. CEO and President, Sachin Lawande; CFO, Jerome Rouque; General Counsel, Brett Pynnonen; and Company Secretary, Heidi Sepanik, are participating from Grace Lake's Corporate Center, our physical meeting location. I would like to briefly outline the format of the meeting for this year. First, I'll cover the formal business of the meeting as described in the agenda, and then Sachin will provide a few general comments about our business. Let us now proceed to the matters to be voted on today. Broadridge Financial Corporation has been appointed as the inspector of election for this meeting. After we finish discussing the matters to be voted upon, those of you who wish to vote your shares at the meeting may do so using the ballots provided. I now declare the polls open for voting. The first item to be voted upon is the election of 8 directors. These individuals have been designated by the Board of Directors as candidates for election based upon the recommendation of the Corporate Sustainability and Governance Committee. Additional information about each nominee is included in the proxy statement. The Board of Directors recommends a vote for each of the 8 nominees named in the proxy statement. The next item of business is proposal 2, which relates to the appointment of the independent registered public accounting firm. The Audit Committee has selected Ernst & Young to audit the company's books for 2021. Angie Kelly, the partner in charge of the Visteon audit, is with us today. The Board of Directors recommends a vote for this proposal. We will now proceed to proposal 3, relates to advisory approval of the company's executive compensation programs and practices as described in the proxy statement. Our executive compensation programs seek to align management's interest with our stockholders' interest to support long-term value creation and pay for performance. This philosophy and the compensation structure are essential to our ability to attract, retain and motivate individuals who can achieve superior financial results in the best interest of the company and its stockholders. Our program also aligns the financial interest of our senior management team with those of our stockholders by delivering a substantial portion of their total compensation in the form of equity awards and other long-term incentive vehicles. The Board of Directors recommends a vote for this proposal. We will close the polls immediately following discussion of the last proposal. So if you've not voted or wish to revoke a previous proxy, now is the time to cast your ballot. If you mailed in a proxy or if you voted over the telephone or by Internet, you don't need to vote now unless you wish to change your vote. To vote your shares at the meeting, you should use the ballot provided to you when you entered the meeting. The final item of business today is proposal 4, which relates to approval of the company's Amended and Restated Certificate of Incorporation. The Board has adopted the Amended and Restated Certificate of Incorporation subject to your approval. We're proposing amendment of the company's existing Certificate of Incorporation to remove provisions that are no longer applicable or operative. The existing certificate was adopted in 2010 when the company emerged from bankruptcy. And as a result of the Board's ongoing review of the company's corporate governance policies and practices, we believe that the Amended Certificate of Incorporation more accurately reflects Visteon as it exists today. For these reasons, which are discussed in more detail in the proxy statement, your Board of Directors recommends a vote for this proposal. There being no further discussion related to these proposals listed in the proxy statement, we will now close the polls. I now declare the polls are closed. Heidi, at this time, may we please hear the preliminary voting results?

Sure. Fran, just one second. We just have one question.

Mr. Chairman, my name is [ Mike Barnwell ] and I represent the Carpenter Union Pension Fund that holds shares in Visteon Corporation. The Carpenter Pension Fund collectively have assets of [ $70 million ] and holds 527,922 shares of the company's common stock. Our fund as long-term shareholders believe that 2 of the most important roles that the Board of Directors play is in the area of business strategy development, strategy implementation monitoring. Currently, the Board has a Finance and Corporate Strategy Committee dedicated to these tasks. The committee will be dissolved with the amendment of the Certificate of Incorporation. If you speak to how these important [indiscernible] work function will be handled following the change. Specifically, you see more or less more attention on the past strategy development and strategy implementation monitoring.

Well, thank you so much for your questions. It's a great one. The way we ran that committee was, while it had official committee members, as a practice, every Board member attended those committee meetings because of the importance of the subject, because it was strategy development, strategy implementation. So we basically didn't need a separate committee because the whole Board is doing it. And when we look back, the committee was put in place in bankruptcy, as I understand it, largely because the shareholders at the time were concerned that the existing management team were inclined to go do acquisitions, which we had a lot of work to do on existing businesses. So it was put in as a safeguard. That safeguard is no longer needed, but the work of the committee is being done by the full Board and will continue to be done by the full Board.

Thank you.

You're quite welcome. Are there any other questions? Okay. Heidi, go ahead.

Okay. So I will proceed with the preliminary voting results.

That would be great.

And we're happy to report that approximately 97% of the shares voted this year, which is a very high number of participation rate, so with respect to one, the election of directors, each of the director nominees received a majority of the votes cast. On proposal 2, relating to the appointment of independent auditors, a majority of the votes cast were in favor. On proposal 3 relating to advisory approval of the company's executive compensation, a majority of the votes cast were in favor. And on Proposal 4 relating to approval of the Amended and Restated Certificate of Incorporation, a majority of the votes cast were in favor.

Thank you, Heidi. So in view of the results, I declare that each of the nominees for director has been duly elected a director of the company and that proposals 2, 3 and 4 have been approved. That takes care of the official business of the meeting. Now Sachin will provide a few brief comments regarding our business operations. Sachin?

Thank you, Fran. First, I would like to thank our shareholders for their investment in Visteon. We value your trust and work hard every day to deliver sustainable shareholder value. I would also like to acknowledge and thank the 10,000 Visteon employees across the world who work hard every day for our customers. Visteon remains steadfast in its mission to support the digital, electric and autonomous evolution of the automotive industry. We also strive to balance profitable growth with the need to protect our environment and support the global communities where we have a presence. Although responding to challenges created by the pandemic and despite the supply chain disruption that has consumed much of our attention and energy during the last several months, we continue to execute on our growth strategy by launching new products and winning new business with vehicle manufacturers. Despite the low vehicle production by car manufacturers that was caused by the combined impact of the pandemic and the supply chain disruption, we managed to continue the momentum of a strong second half 2020 performance into 2021. Our first quarter sales of $746 million represents a 14% year-over-year increase when excluding the impact of currency. And our balance sheet remained strong with $137 million in net cash at the end of the quarter. 2021 is expected to be another year of more than 50 new product launches. We anticipate this high number of product launches will enable us to continue to grow faster than the market for the near future. Visteon booked $1.8 billion of new business in the first quarter. Among the highlights is our first win for our microZone display technology, a recent market introduction that offers automakers an innovative option for their premium vehicles. We also won significant SmartCore business in the quarter, accounting for nearly 50% of our total wins, with approximately $850 million in lifetime value. The transition to cockpit domain controllers with integrated Android-based infotainment and digital clusters is accelerating across the industry. Approximately 1/3 of our first quarter new business wins are for electric vehicles, reflecting our customers' prioritization of investment in new electric vehicle platforms. The shift will also drive increased digitalization of the cockpit, provide more opportunities for our wireless battery management systems. In fact, we added 2 [Audio Gap] industry-first wireless battery management solution, and we continue to present this technology to other EV manufacturers globally. In closing, the fundamentals of the industry and our place within it remains strong. We have been actively transforming Visteon over the past several years into a global leader in automotive cockpit electronics through leadership in technology, innovation and cost. Visteon is well positioned with the right products and technologies to capitalize on the key trends in the industry. Now I would like to turn it back to Fran.

Thank you, Sachin. Let me ask [ Mr. Barnwell ] if he has any other questions.

I do. On the topic of stakeholder capitalism and in terms of the shareholder capitalism and ESG performance factors have received considerable attention recently. As long-term pension fund investment, we appreciate the sentiment of [indiscernible] the stakeholder capitalism formulation. I feel that execution could be compensated. If we discuss the Board's perspective on the concept of stakeholder capitalism and what principles the Board uses to balance the interest of various stakeholders as it develops and implements the company's long-term business advantage.

Fran, do you want to start? Or would you like...

Yes. It's something that -- stakeholder capital is something we've always paid attention to. I mean my belief, and I think the belief of the rest of the Board, is that you can't be successful as a corporation unless you pay attention to all of your stakeholders. So while shareholders are important to us, they're very important to us, we have other stakeholders. I mean we spend a lot of time and effort sort of on our employees, on the communities in which they live. So we're pretty much doing what we've always been doing. And I think there is heightened interest, and I think the only thing that's changed now is that there are outside services measuring how a company is performing in this regard both with respect to its stakeholders and with respect to the environment. And it turns out that on those formal measures right now, we're doing quite well. And not unexpectedly, because as I said, we've always paid attention to these matters. Sachin, maybe you or Heidi can sort of quote some of the reviews we're getting on our performance with all of our stakeholders.

Absolutely. And I would like to further add to what Fran has said by noting that ESG is also good for business. So we have been, for the last few years, focusing on how we can do better with reducing our greenhouse gas emissions in our operations, reducing waste, water usage, energy usage. And we've set targets already for the company across all of these. And the interesting thing about it is not only is that good in terms of improving our ESG scores, it's actually good in terms of our cost management and also serves our customers' interest in terms of being able to meet their ESG targets. So we are really focused on, across the board, environmental, social and governance topics. Fran mentioned some of the progress that we have made. And ISS recently gave us some scores here that I'm just going to read in terms of the latest score in the rating. And we are in the top quartile across their entire set of ratings, but especially in environmental, we have made tremendous progress since last year, gone from a score of 5 on a 1 to 10 rating to a 3. In terms of social, we were in 2020 at a score of 7 that has now improved to 3 again. And in terms of governance, we were always considered very good in terms of that metric, and that has remained at 1. So overall, this puts us in the top quartile, as I mentioned. And our focus is going to be on continuing our efforts to improve our practices and also reporting so that the investors and other stakeholders are aware of what we are doing.

Any other questions? Okay. Thank you. So on behalf of everyone at Visteon, I wish all our shareholders good health, and the meeting is hereby adjourned.

This concludes our Annual Meeting of Shareholders. Thank you for participating in today's call and your ongoing interest in Visteon. You may now disconnect.