Visteon (VC) Q3 2026 earnings call transcript

Good morning. I'm Ryan Gazeri, Vice President of Investor Relations and Corporate Strategy. Welcome to our earnings call for the third quarter of 2026.

Before we begin this morning's call, I'd like to remind you that today's presentation contains forward-looking statements within the meaning of the Private Security's Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed. Please refer to the page titled forward-looking statements in our earnings material for more detail. Presentation materials for today's call were posted this morning on the Investors section of Vistion's website. Joining us today are Sasha Lewande, President and Chief Executive Officer, and Jerome Rokay, Senior Vice President and Chief Financial Officer. We have scheduled the call for one hour and will open the lines for questions after Sasha and Jerome's prepared remarks.

Please limit your participation to one question and one follow-up. Thank you for joining us. I'll now turn over the call to Sasha.

Thank you, Ryan, and good morning, everyone. Vistion delivered strong sales growth in the third quarter despite a challenging industry production environment. Customer-weighted vehicle production declined approximately 5 percentage points during the quarter, yet our sales grew 6% year-over-year to $970 million, resulting in approximately 10 percentage points of market art performance, excluding the impact of memory recoveries and pricing. During the quarter, we recorded $77 million of specific warranty charges related to two instrument cluster programs with separate customers. The charges follow customer decisions made in the quarter and relate to two unrelated issues. In one program, we expect to remediate affected vehicles through software updates, in the other through product replacement. The root causes have been identified and corrected, and the charges reflect our best estimate of the cost to complete these actions.

As a result of these charges, our adjusted EBITDA for the quarter was $46 million, compared with $123 million, excluding the charges. This represents an adjusted EBITDA margin of approximately 4.7% or 12.7% excluding the charges. While these charges had a significant impact on our profitability for the quarter, they relate to previously delivered products, and our underlying operating performance remained strong. We have made good progress recovering higher memory costs incurred earlier this year. As component costs continue to evolve, they're actively working with customers and suppliers to mitigate the impact consistent with the disciplined approach we have followed during prior shortages.

Adjusted free cash flow was neutral in the quarter, as we increased inventory of critical semiconductor components in response to emerging parts shortages. We ended the quarter with net cash of $136 million. Beyond the financial results, we continued to execute on the strategic priorities we outlined at Wednesday. We launched 21 new products across 14 automakers, including our first smart core high performance compute program with Cherry. We also secured approximately $1 billion in new business awards, bringing year-to-date bookings to $3.9 billion.

Finally, we completed our $200 million accelerated share repurchase during the quarter, marking the first step in executing the capital allocation framework we outlined at the investor day. Let me now turn to our third quarter sales performance on page three. This slide shows a regional sales performance in what was a challenging production environment in most markets where we operate. Overall, customer vehicle production declined during the quarter, most notably in China, yet our recent launches over the last few quarters enabled us to grow sales and outperform the market. In the Americas, our performance was impacted primarily by lower BMS sales to GM, compared with elevated demand in the prior year quarter ahead of the expiration of the EV tax credits.

This was partially offset by the ramp up of new programs with Ford and Nissan. Europe was the strongest performing region with sales growth of nearly 20%. Our panoramic multi-display and cluster program with Audi, display and cluster programs with Renault, and display launches with Mercedes all contributed to this growth. These more than offset roll-offs and lower volumes on legacy programs with BMW.

In Asia, excluding China, our sales grew approximately 14%, led by new launches of our smart core domain controller in India with Mahindra, as well as digital clusters on two wheelers with Royal Enfield and TBS. The strong performance in India more than offset the roll-off of a Mazda program in Japan and currency headwinds from the Indian rupee in Japanese yen.

Finally, in China, customer production declined approximately 17% in line with the broader industry, excluding exports. While lower domestic demand is impacting production at all OEMs, international OEMs are impacted more, including this demand such as Volkswagen.

While our international OEM customers continue to face lower demand, we are successfully repositioning our China business toward domestic OEMs that are gaining share.

Domestic OEMs now account for approximately half of our China sales compared with just over one third a year ago. This is important as our strategy is increasingly aligned with premium segment brands of Chinese domestic OEMs that are gaining share in that market. With the anticipated launches of high-performance compute systems with leading domestic OEMs, Jili and Saik, we expect our China sales to return to growth in the fourth quarter. Overall, the quarter demonstrated that while customer vehicle production declined, our launch execution and diversified customer portfolio enabled us to deliver strong sales growth and position the business well for the fourth quarter and into 2027.

Turning to page 4, we launched 21 new products across 14 automakers in the third quarter, continuing a year of high-launch activity that sets the stage for 2027.

The highlight of the quarter, shown on the right, is the launch of our smart core high-performance compute cockpit domain controller on the Cherry Freelander 8 in China. The system consolidates more than 10 electronic control units into a single system and brings integrated edge AI capabilities into the cockpit, addressing one of the fastest emerging areas of product differentiation in the Chinese automotive market. This launch with Cherry is the definition of China speed as it represents the first two markets system on a new fifth-generation Qualcomm chip with a booking to start off production timeline of approximately 13 months.

The program is following its planned launch ramp with volumes expected to increase in the fourth quarter and through 2027 as additional vehicles are introduced. With BMW, we launched our cockpit domain controller in Europe on the new i3, one of the first vehicles built on BMW's next-generation electric vehicle platform. This is an important high-volume program for with launches in additional markets planned later this year, followed by expansion to other BMW models in 2027. Also in Europe, we expanded our panoramic display and cluster program with Audi through the launch of the A3, adding another vehicle to the successful program that has been an important contributor to our market our performance this year. Beyond Europe, we launched a driver display for a new Lexus electric SUV serving the Japanese and North American markets.

This is one of the several planned launches with Toyota that we highlighted at Wednesday, supporting our strategy to expand our business with this important customer.

We also continue to expand our presence beyond passenger vehicles with launches of connected digital clusters for Royal Enfield and Honda two-wheelers, as well as cockpit domain controllers for Volvo construction equipment excavators in Korea and China. These programs demonstrate how we are leveraging our proven cockpit technologies to capture growth opportunities in adjacent mobility markets. Overall, these launches reinforce several important trends.

First, our portfolio continues to migrate toward higher-value cockpit computing and display technologies. Second, our high-performance compute business has moved from new business awards into production. And finally, we continue to expand in adjacent mobility segments, supporting a more diversified growth profile.

Turning to page five, new business bookings were just under a billion dollars during the quarter, bringing our year-to-date total to 3.9 billion dollars. Several significant sourcing decisions that we anticipated in the third quarter shifted into the fourth quarter as car makers evaluate changes in memory technologies and product architectures. These opportunities remain in our pipeline, although some final award decisions may extend into 2027. Importantly, we have not seen a corresponding change in the underlying demand for our products. Based on our current pipeline of opportunities and anticipated customer sourcing decisions in the fourth quarter, we continue to target six billion dollars in new business bookings for the full year. Looking beyond 2026, we also see opportunities for new product designs and platform upgrades as customers transition to newer memory technologies, which we expect will further strengthen our pipeline.

Our wins in Q3 also support a strategic objective of growing our business with targeted customers in Asia, including Toyota, Maruti Suzuki, and Tata Motors. Furthermore, reflecting the shorter time from award to launch, about half of our Q3 new business awards will launch in 2027, with another 25 percent launching in 2028. Let me highlight a few of the strategic new business wins from the quarter.

First, we secured a cross-car platform display business with a Japanese OEM for its premium brand covering multiple markets. The first launch is in China on an electric SUV in 2027, followed by a global launch on a hybrid crossover in 2028. Vistion is the sole supplier for this product and is well positioned to win follow-on opportunities.

Second, we won two display programs with a leading Indian OEM, marking our first display wins with this customer. This OEM has traditionally offered small displays in its vehicles and the move to 12.3 and 12.8 inch displays represents a significant shift in its cockpit strategy. These displays go into production in 2028 on two vehicles with opportunities to expand to additional models. We also won a 10-inch center information display for a light duty commercial vehicle with a North American OEM. The initial launch is for the European market with follow-on opportunities in other regions. And finally, we secured a center display and infotainment system with integrated vision processing across multiple vehicle models with an Indian OEM, further strengthening our position in one of the fastest growing markets in the world.

The program includes a 10.25-inch display along with a silver box that provides infotainment functions, rear-view camera processing and visualization. Overall, our third quarter and year-to-date bookings reinforce the strategy that we presented at Investor Day. As we continue to diversify our customer base across Japan, India and on passenger vehicle markets.

Turning to page six, let me now turn to our outlook for Q4. Demand for our advanced cockpit products remains healthy, supported by recent launches and increasing content per vehicle, even as industry vehicle production and component availability remain challenging.

Our recent launches, including the Audi cluster and display system, the BMW cockpit domain controller and our Cherry high-performance compute program continue to ramp with volumes growing sequentially.

We also have additional launches in the fourth quarter, including high-performance compute systems with leading domestic OEMs in China, a high-volume digital cluster program for the Japanese OEM in the North American market and cluster programs for two wheelers in India. Together, these programs are expected to more than offset normal program roll-offs and lower customer production volumes, driving strong market art performance in the fourth quarter.

Turning to the supply environment, memory and other electronic components have remained tight throughout the year. So far, we have successfully managed these constraints without impacting customer production, working closely without supply chain partners. However, we are beginning to see greater industry wide supply headwinds, particularly for memory and printed circuit boards, which could constrain vehicle production in the fourth quarter. To mitigate these challenges, we have taken several proactive measures. We have entered into strategic supply agreements with memory and printed circuit board suppliers, expanded a supplier base for DRAM and NAND memory and undertaken product redesigns to reduce reliance on constrained components. These actions are already delivering benefits, helping us maintain supply continuity, positioning us to finish the year with meaningful growth over market.

Looking ahead to 2027, we expect memory costs to exceed the assumptions we outlined at Investor Day in June. We have made significant progress securing additional memory supply through strategic agreements with established suppliers and commitments from new suppliers. These actions have substantially improved our visibility into memory availability for next year, although this additional supply is coming at higher cost. We are actively working with our customers to address these increases and expect to provide greater clarity when pricing and commercial discussions progress as we are still finalizing pricing with suppliers.

Jerome will provide our current planning assumptions at the end of our presentation based on the visibility we have today, but ultimately the financial impact will depend on product mix, customer production volumes, and our commercial arrangements with customers.

Turning to page 7. Let me conclude by summarizing what we accomplished this quarter. First, we delivered strong market our performance of approximately 10 percentage points driven by some high value product launches with OEMs primarily in Europe and Asia.

Second, we maintained commercial and operational discipline in a difficult supply environment. We are working on securing the components we need to support our customer demand while working to offset cost increases through recovery agreements.

Third, our growth pillars continue to build momentum. We launched new next-generation products in China India two-wheelers and commercial vehicles as well as global programs with our Japanese customers.

And finally, we completed our $200 million accelerated share repurchase program continuing to execute the capital allocation framework we outlined at investor day. Overall, this quarter provided another proof point that the strategy we outlined at investor day is translating into market our performance. We are addressing near-term operational challenges while continuing to execute our growth strategy with a strong pipeline of product launches and new customer opportunities heading into 2027.

With that, let me turn the call over to Jerome who will review our financial results in more detail.

Thank you, Sachin, and good morning, everyone. Our third quarter results reflect three key themes. First, strong sales growth and launch execution. Second, resilient underlying profitability despite two distinct warranty charges and the timing of some customer recoveries. And third, deliberate working capital investments in inventory to improve supply chain resilience and support upcoming launches. For the quarter, sales were $970 million up 6% from the prior year. We delivered growth of a market of 10%, relative to customer-weighted production, driven by strong launch execution, most notably in Europe and India.

A just city bid that was 46 million or 4.7% of sales, including approximately 77 million for two specific warranty-related charges, Sachin mentioned earlier. Excluding these charges, a just city bid that would have been 123 million or 12.7% of sales compared with 12.1% in the second quarter. This demonstrates the resilience of our underlying performance despite additional inflation pressures beyond memory, mostly in PCBs and other electronic components for which customer recoveries are still being negotiated. Adjusted free cash flow was almost to build inventory to secure more strategic supplies, increase safety stocks of selected components and support upcoming product launches. At the same time, we continued to execute our capital allocation priorities. During the quarter, we completed a 200 million accelerated share repurchase program and paid 9 million in dividends, returning a total of 209 million to shareholders.

We have now returned approximately half a billion to shareholders since our 2023 investor day in the form of share repurchases and dividends. We ended the quarter with net cash of 136 million near the target outline at our June investor day. Overall, the quarter demonstrated strong market outperformance and launch execution, resilient underlying profitability and discipline deployment of our balance sheet while being able to manage near term cost pressures and withstand working capital pressures, turning to page 10. Sales for the quarter were 970 million up 53 million or 6% from the prior year. It is now the second quarter this year that Vistion posted absolute year over your growth. You three customer weighted production declined approximately 5% with the most significant declined in China.

Against that backdrop, we delivered growth of a market of 10% excluding pricing and recoveries. This outperformance was driven by the continued ramp up of recent launches with Audi, Renault, Nissan and Mahindra, partially offset by lower BMS volumes with GM and the roll off of certain legacy programs. Net customer recoveries for electronic cost inflation, including both legacy costs and 2026 inflation, contributed approximately 50 million to sales a year of a year increase of approximately 20 million, more than offsetting normal pricing reductions.

Adjusted BDA was 46 million or 4.7% of sales, including approximately 77 million for two specific warranty related charges highlighted earlier. Excluding these charges, adjusted BDA would have 119 million in the third quarter of 2025, demonstrating the resilience of Vistion's underlying performance. The EuroVir EBITDA bridge reflects higher volumes from recent launches, customer commercial recoveries, operational efficiencies and lower accruals for incentive compensation. These benefits were offset by elevated warranty charges, higher supply costs and negative exchange rate impacts.

Inflation related recoveries remain an important driver of our 2026 results. In the third quarter, customer recoveries fully offset memory cost increases, consistent with the progress reported in Q2. However, we incurred approximately 10 million of cost leakage from a second wave of inflation in PCBs and other electronic related components that began in the second quarter. We are actively negotiating with customers to recover this cost along with ongoing memory inflation. Overall, the quarter reflects strong growth of market performance and launch execution, resilient underlying profitability excluding the specific warranty related charges and continued progress on recoveries and cost initiatives, turning to page 11.

Adjusted free cash flow was negative 1 million in the quarter and negative 4 million for the first 15 million in the same period last year. The EuroVir decline primarily reflects three factors, lower underlying earnings, a deliberate investment in working capital to strengthen supply resilience and support launches and the timing of cash taxes and other annual payments.

First, EuroVir EBITDA was lower by 116 million compared to the prior year period. This primarily reflects 77 million of two specific warranty charges taken in Q3, which did not impact cash with quarter, cost inflation and the timing of customer recoveries, as well as non-recurring commercial items that benefited prior.

Second, trade working capital was a use of cash of 99 million a year to date. Inventory increased as we built safety stocks of critical components, absorbed higher component costs and supported upcoming launches. This is a deliberate investment to improve supply chain resilience as the supply of certain components, including memory and other electronic components, is tightening while costs continue to rise. Receivables also increased due to higher sales and the timing of certain customer collections, which we expect to improve in the fourth quarter.

Third, cash taxes were 14 million higher year over year, including the one-time settlement in India related to prior years that we discussed in the second quarter. As in prior years, first half cash flow also included the annual incentive compensation payments.

Finally, year-to-date capital expenditures were 103 million, reflecting continued investment in new program launches, vertical integration and capacity expansion in India and other growth markets. We ended the quarter with net cash of 136 million after returning 209 million to share orders this quarter. This included the completion of our 200 million accelerated share repurchase by quarter-end, which reduced outstanding shares by approximately 2 million or 7.5 percent, turning to page 12. We are updating our folio guidance to reflect our year-to-date performance, integrating our strong sales performance, the two distinct warranty related charges discussed earlier, and our current outlook for component inflation and inventory.

We now expect sales to be between $3.8 billion and $3.85 billion, with the midpoint being 25 million above where we were trending two in the second quarter. This outlook reflects our year-to-date performance, successful third-quarter launches, and confidence in our strong fourth-quarter launch cadence. Key launches include displays with several of our fastest growing OEM customers, and the continued ramp-up of our high-performance compute programs in China. These benefits are partially offset by softer customer production. Overall, for the full year, we expect sales to grow low single digits year-over-year, resulting in growth of a market in the mid-single digits.

For Just City Bida, we now expect 370 million to 410 million compared with our prior range of 455 million to 495 million. The revised outlook primarily reflects the 77 million warranty-related charges highlighted earlier. As discussed in the second quarter, inflation initially concentrated in memory has broadened to other purchased electronic components, and we now anticipate that these combined incremental costs will represent approximately three-and-a-quarter percent of total sales for the full year. We are in active negotiations with our customers to recover these costs. However, we do not expect to fully offset these cost pressures in 2026, largely due to recovery timing. The estimated margin impact to our full year EBITDA represents approximately 85 basis points of margin, including dilution and leakage.

Elevated memory and other component costs are projected to continue in 2027, and while vehicle volumes, content decision, supply dynamics and other factors will drive the ultimate cost based on current visibility. We anticipate additional cost in 2027 to be similar to the levels we saw in 2022. As a result, given the higher cost levels we now anticipate, both the associated recoveries and the resulting margin dilution are expected to be mentioned by Sachin. We continue to be actively engaged with our suppliers and customers, and we will be providing an update in February 2027. Turning back to Q4-2026, even with these headwinds, we expect margins to improve in the fourth quarter, supported by additional customer recoveries, and the continued ramp-up of cost initiative across product, vertical integration and engineering range of 170 million to 210 million.

The revision primarily reflects higher inventory as we secure supply of critical components with our customers, along with the timing of customer collections for cost inflation recovery agreements expected to be finalized in the fourth quarter. We continue to expect strong fourth quarter cash generation driven by higher EBITDA and a cash inflow from working capital, mostly as a result of collections for receivables and customer recoveries.

Turning to page 13. Vistium remains a compelling long-term investment opportunity. We are well positioned for long-term top-line growth, margin expansion and free cash flow generation, while our strong balance sheet provides us with significant flexibility to pursue our capital allocation priorities.

In summary, the third quarter reflects a strong growth of market in a challenging production environment. We remain confident in the long-term opportunity to head as we execute on the plan that we outline in June. Thank you for your time today. I would like now to open the call for your questions.

Good morning. This is such an I'll take that question first. What we are seeing here is some volatility in production call-outs from some of our customers related to component shortages, not related to VISTI on by the way. We have taken that into account as we are looking at our outlook for Q4.

If those component shortages could be addressed and if the customers are able to cover that production disorder, then we may have some tailwind in terms of what we have currently given as our outlook.

Maybe such to add some color on Q4 numbers. We've put in our guidance close to 940 million in sales. That's fairly flat year-over-year and sequentially down by 3%. Customer production is expected to be down by approximately 6%. Our growth in market will still be overall in the mid-single digit. It's still a very good performance, despite these comments from such. We see very strong launch cadence, including the HPC China. We have also these new launches with Gilly and Psyche over there. Overall, a pretty strong performance, which allows us to finish the full year on a strong note.

Yes, and I'll take that, Mark. We've seen, as you know, earlier this year, a lot of cost increases on the memory site. And we've done a very good job in recovering at the end of Q3. So we are pretty much set on that side. What we've seen, unfortunately, has accelerated since Q2 is inflation on other, what I would call, electronic components, PCB and even SOCs. And these costs have developed quite fast in Q2 and accelerated as well in Q3. So we've obviously started negotiation with customers for what we call the second wave of cost increases. And we are very committed to recover the large majority of these. But given the timing, we do think there's going to be some level of leakage in 2026.

And we have, therefore, assumed that our guidance would be lowered as a result of this leakage. But generally, very committed. We've also started to talk to our customers on cost increases and recoveries for 2027. And that's where we are in terms of status with customers.

Yeah. And let me start maybe because we're just describing how we see the cost develop. There are really two parts to the cost. One is the memory. And the other is the other electronics components that Jerome mentioned. Let me first address the memory topic because I think besides just the cost, I think it's important to understand where the industry is at with the sourcing of memory. But whiskey on is that and what we then think of the cost. So just taking a step back. DDR4 supply is more constrained next year than it is this year. We're already starting to see some constraints built in the fourth order. And the main reason for that is that some suppliers have exited the market for DDR4 for auto.

Now, as we look at 2027, the first challenge is to secure sufficient supply to meet the anticipated customer demand. And we have in that regard made significant progress as we started to address this challenge early in the year, working with our established suppliers while also qualifying additional new suppliers. So what we can say is that for the 2027 anticipated demand, we believe that we have secured the substantial portion of that demand already through this combination with strategic supply agreements plus commitments that we have from new suppliers.

Now, in terms of cost, we expected the cost to go up as we indicated on our investor date. And that cost for DDR4 memory in particular has continued to see significant upward pressure this year. And we expect that to continue into next year.

And especially as we talk about the additional new suppliers that we are doing on board to complement the supply that we have from micron. I should mention though, it's still in the process. We're working on it as we speak to finalize pricing with micron and other suppliers. So it would be premature for us to give you exact quantified more precisely.

And what we've said is in combination with the other electronics components, PCBs in particular, but also some other components. We believe that the cost increase is going to be in the range of what we saw in 2022. If you go back to that year, it was roughly $500 million of incremental cost that we saw back at the time. And we believe that it's going to be somewhere in that range. It will depend on the content at our customers as well as of course production volumes. So these should only be taken as very indicate. So I would say just a range that you should take as indicative of what we think is the likely outcome.

Anything more to add? I would add as well that we are essentially from a sliced and formed back to what we saw in 2022. And we've demonstrated at the time, I think, so recently that we're able to recover this kind of cost. Obviously, the fact that viscous are so large, it will become imperative to recover. So our objective for 2027 will be to maintain our EBITDA dollar per our original guidance.

There's going to be obviously some dilution on the margin percentage, but we want to keep the dollar intact. That's the objective for next year.

Yeah, thank you. So as you mentioned, the domestic market in China is, I would say, even more than ever, driven by tech content and AI in the cognitive emerging as one of the biggest areas of product differentiation. And with the launch that we just had with our cherry on the Freelander, are we really encouraged by the level of interest that we are seeing from other OEMs, in addition to the two additional OEMs that we are going to launch in Q4?

The experience that we have gained in launching this first program is obviously helping us in making our technology platform that much more mature. It also allows us to demonstrate this technology to the other customers. So we see really three distinct opportunities for expansion. One is this additional Chinese OEMs that we are now able to demonstrate and have constructive discussions about how we can accelerate their own plans to bring AI in the corporate. And the second is with the three customers that we are working with, Cherry, Dr. Bartseich and Glee, who we are in the process of launching with as we speak, helping them take AI to export markets, in particular, initially for Europe. And the third are global OEMs that are evaluating AI for the stages of maturity.

And I believe that this is going to be a really important long-term growth driver for this beyond just in China, but also outside of China. In terms of the volumes that we are seeing, I would say that the Cherry program is following its launch volume plan as I then indicated to us initially. And there are more vehicles coming online next year. We'd like to see how they perform in the market. But I think this is a trend that we believe is kind of irreversible in terms of that market for sure. And then we see a lot of good signs that it will likely also come into other markets outside of China. Awesome.

Yes. My comment was mostly oriented around recoveries and the fact that we would maintain our EBITDA by recovering essentially the amount of cost that we are incurring with minimal leakage. That's essentially where my comment was. Now, as we go into next year, there's going to be a lot of puts and takes and we'll be obviously looking at productivity, material cost, other material cost, benefits, commercial recoveries. So there's a handful of tools that we'll be using obviously to make sure that our EBITDA dollar amount stays untouched.

One more comment I would like to add to what Jerome has just said. We do need to understand that the memory change that has happened is a structural change. It is not an increase that we expect to impact the industry for one year. The industry is going to shift away from DDR4 to DDR5. That's going to come at a higher cost.

So as we go forward, the way to think about it is that industry across both suppliers and the car makers have to just accept this as the cost of doing business going forward. So we fully expect that we'll be able to recover all of that incremental cost. And yes, the cost may moderate as we go further beyond 2027, but for 2027, there is no option other than to use this DDR4. We will have greater flexibility as we go forward to have greater mix of DDR5, but the costs are not going to go back to the 2025 levels.

Yes, it's seeing a very significant shift. And the industry will just have to cover tops with it. And therefore, it will be very embedded in our cost of the product.

Yes, it is different. I think in that particular case, it is a timing issue. There is a shortage of some specific components that go into making of the higher layer PCBs. In fact, you can think of the PCBs as essentially having two ones higher density, which are affected by the shortages. And that's where we see the higher prices. And then the more normal automotive PCBs are not quite affected the same way. We expect that to correct as more supply comes online. So that may be more of a 2027 issue than the memory doc.

Yes, we will still see some level of last time by next year that will probably put some strain early in the year, in the early month of next year. But for the full year, at this point, we and obviously, we'll give more updates in February 2027. But at this stage, we are comfortable with what we have for 2027.

Just to give more color to our room said, so that as we buy different memory chips of 25 plus in DRAM, so low and then land. And some of those chips are essentially going out of production. And so we are securing our 2027 supply by buying the full year's demand. And that requires some cash outplays early in the year. Obviously, we will recover that through the year. And for the full year, it was not going to have an impact on the cash flow, but it will be lumpy on account of this dynamic.

Good. So essentially, what happened in Q3 was on account of this memory topic, as we can imagine, as car makers are looking at the next generation of their corporate systems. Previously, they were on a product architecture that still relied on the old DDR4 memory. Now they have to take into consideration what they want to do in this interim period, whether they stay on DDR4 or go to DDR5, which comes with other applications such as what is the micro that is associated with the memory. So that, in short, becomes a bigger product architecture decision. So that has caused some delays in timing. It's important to understand that these are again timing delays, not necessarily the same thing as the vehicle, land, vehicle production delays.

They should not be linked. And we continue to pursue those opportunities and they are part of our new business pipeline in Q4. On top of that, one thing that I would also like to highlight is because of this dynamic with memory, shortage situation, and this need to shift to more favorable architectures in terms of supply. That's creating additional opportunities that were not part of the pipeline that is starting the year. So we're going to see a lot of dynamic changes that will happen in the industry from that perspective. And the platform approach a speed of delivery and our ability to launch products quickly. I think we are in a great position to capitalize on what we see as this opportunity that will arise for due to the suspension as we go forward.

Yeah, there has been a I would say an increasing realization at OEMs and we should separate China from rest of the world and more now this comment is regarding OEMs outside of China. There has been a greater awareness of the complexities of what we're talking about here but not only the underlying technologies are complexity increasing. The supply chain related complexities also starting to impact the OEMs realization of the challenges in bringing everything in house and therefore we believe that in this memory situation and other supply situations that have arisen that this could drive even a need to balance what they do in their internal development versus what they do putting the suppliers. And so we are starting to see this already, this dynamic starting to now play out where they were initially trying to insource everything.

They're now starting to work with us to understand how we can help them mitigate these challenges. And I think this is only going to become a bigger issue as we go forward. And when you think about Vistion, right, we have great cost structure, I would say best in class cost structure. We have in terms of our ability to source semiconductors, perhaps the best abilities amongst our peers. We are in a great position to help them navigate this near term challenges. And that will help us establish a better relationship, that balance between what they do internally versus what they rely on us for. And I think this will create more opportunities for us.

Yeah, with respect to China. So here's the piece that I would like everyone to understand, right? So the biggest opportunity for China, OEMs right now, it's not within China. The market is incredibly competitive. And that will be the case as we go forward. They're biggest opportunities exports. And Vistion is very well positioned to support them in large portion because of how successful they are in China and helping them with their HBC systems. So in China, the CDC is essentially whole technology now, the pocket of wind controllers. And where they are at now is AI into the cockpit. There are not too many players outside of China that have the capabilities that we have when it comes to HBC and AI to support their export ambitions.

And we are starting to really focus on that as it is this opportunity for Europe and for South America. So I feel like we are in a pretty good spot with respect to our replacement with China. We understand the overall market measures there, but we have a very specific strategy that is able to capitalize on what we can help them with.

Yeah. Hi, Dan. I'll comment on the 20 million. So we've booked 77 million in the quarter and we believe that this addresses both issues. We had a range for cost for one of the claims and we do not anticipate additional costs. But as additional costs could be possible, not probable, we were required to disclose the top-end of the range. So that's why the Q you have is mentioned of the 20 million. But to be clear, we believe that we are currently approved at the right level for these warranty items.

There's two warranty claims. We've got corrected measures in place and we anticipate additional charges for them.

Yeah. So I would say that if you look at 2027, our growth is actually quite diversified. Yes, passenger cars, which has been primarily the drivers this year will continue to grow our account of the launches. Mostly in the regions that we have been discussing, which is Europe, China is going to return to growth on the part of the launches there.

And India continues to be a very strong for us. In addition to that, we have some very high value and high volume, two-wheeler launches that are going to be coming on online next year, as well as commercial vehicles. So coming back to the topic that you asked about Europe and what's driving it, I think we have discussed this before, but just to reiterate, Europe is where we are seeing the north of demand for our display systems and cockpit domain controllers.

We talked about one launch in Europe at this quarter. There is another cockpit domain controller that's launching next year. That's also very high value. The combination of large displays, cockpit domain controllers and the pressure that the OEMs, their face on account of the competition from China, we expect to see content continue to grow. So yes, there is the market share loss of our OEMs, with the Chinese OEMs that, however, on the other side, helps us in driving greater content. But as I just mentioned on the previous comment that we fully expect to be able to business with Chinese OEMs in Europe. So net net, we expect to be able to exploit what's available to us as opportunities in Europe.

And Europe is going to be where the content growth will be the greatest from account of the competitive dynamics outside of China. And after that, we see similar dynamics in India with respect to content growth. So I think fundamentally, where we see the demand for our products really really strong. And that's continued this year. This is why Q3 has been so strong and Q4 also will be very strong. So I think what we talked about on an investor day, we're starting to see exactly that layout.

And we're very happy to see that despite the industry having challenges that we are able to execute to our plan.