We'll kick off our company specific series here today. We're 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 makes strategic bolt-on acquisitions. 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. 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? Just wanted to get a little bit of an update on how the first quarter may be progressing.
Thanks for having us on this St. Paddy's Day and being here and talking about the business. Appreciate everyone in attendance. We feel really good. Despite what's going on in the Middle East, we haven't seen anything of any significance impacting our business. On the earnings call, the fourth quarter earnings call, for those that listened, I was very optimistic and very positive with the momentum we had established in 2025. I still believe we're in the same position today. 2025, we produced $200 million in net performance. It's really an important measure on how we look at our business, how we're performing with restructuring IDEA by Lear.
Our operational performance still feels really good on where we're at. You know, 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. You know, we talked about growth last year in conquest wins. We had a significant win with the Orion facility, the onshoring with General Motors, with the SUVs and then 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 2028-2029, but it was a significant conquest opportunity for us. There was Two 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 200-500 basis points competitive advantage with the capabilities we've put in place, the companies we've acquired around automation, robotics, and AI, and the digital tools we're implementing in our plants. They came 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, were very impressed. Across every functional group, it was unanimous in the award for Lear Corporation. That's a significant win. What that did was really drive what we were talking about in theory through this technology capability of where our customers are headed through modularity and capabilities within the manufacturing plant.
A really significant win for us. In these 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. What was exciting after the earnings call, right after the earnings call, I was like, "Man, we should just pause it a little bit." We had some great conquest wins in Asia and China, really two. Jason will talk a little bit about it, that will launch later this year. What we're seeing is the speed to market really benefiting Lear Corporation. We'll launch two significant programs this year with Chinese OEMs.
Then we just recently were awarded with a North American customer, a significant platform that will launch later next year. 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. That's new news. Again, it just validates the momentum I talked about on the earnings call. We're continuing. We're focused. We've with the discipline on driving profitable growth and then making sure we're expanding our margins in a relatively flat to down market. Both of those are going extremely well, and we're gonna continue with our capital allocation. We've targeted $300+ million of share buyback.
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.
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 Lear, it's really pretty significant, about $250 million in average annual sales just in the three awards that we've received between the earnings call and today. About $100 million of that is in China. We had $120 million of-
Of awards and wire with the Chinese OEMs all of last year on the wire side. This year we've got $100 million just in the first quarter. 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%. 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. Now we expect Seating margins to be, you know, 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. 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. 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. 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. Last year, you may recall, we had about $200 million of tariff costs. We got full recovery for that. That was both in the revenue line, and then there was no impact in terms of earnings. 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 that is going to lead to a reduction of revenue somewhere between $100 million and $200 million in the first quarter.
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. Not gonna put a pinpoint number on it, but, you know, last year we had a cash flow headwind for that one quarter lag on the tariff recoveries, that impacted last year's free cash flow.
Sorry, just one follow-up on that. Revenue's a bit lower on the tariff, but operating income, yeah, no impact to-
No impact on operating income.
Yeah.
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, you know exactly how those will play out in the last couple weeks of the quarter, but we're feeling pretty darn good about how the year is starting out.
No impact to what? Yep.
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. We're on track to buy back $65 million-$75 million in the first quarter to ensure that we remain on track for that $300 million or more for the full year. That $300 million, just to kind of level set on that target is based on the low end of our free cash flow guidance range, which was $550 million-$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 your kind of heritage domestic players that are maybe a little bit out of favor, and you've got some of the bigger domestic players that are just, you know, blowing up with tons of demand. How is your position within the Chinese market? You've navigated very well, and we're just curious of why you're doing so well in China.
Doug, I think Ray Scott can touch on that.
One, it's in 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 Geely and SAIC, and we have relationships with every one of the major customers. Where we've done a really nice job is our innovation and technology. One thing with the Chinese domestics, particularly in, 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. You know, how we're delivering innovation on the plant floor is something that is very critical to the Chinese OEMs.
It's why we've been so successful. We're the leader in premium products within the China market, and we continue to see that those opportunities grow. 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. We have been very successful. I'd say most recently, we've been extremely successful with our E-Systems business.
Yeah.
I mean, these two conquest wins are launching later this year. That's what I love about the speed to market. You know, we've usually go on the cycle of what is a three-year launch win cadence. We're launching much faster. Our ability to launch products fast to market really differentiate us. 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. We're not gonna go after a price game where you're just chasing it down to the bottom.
Right.
We believe we can differentiate ourselves because of our innovation and technology where others can't. 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. You know, 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. This new evolution of E-Systems growth has been really somewhat surprising, but refreshing because how we can deliver with speed of 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 $120 million of wins with the Chinese OEMs in wire last year, another $100 million to start this year. His leadership, his relationships with the customers there has been extremely important. Now, we're still underrepresented in the market on Chinese 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. We were extremely successful last year, both in Seating and E-Systems. You know, I think we had almost $800 million of new business awards with the Chinese OEMs in Seating and over $100 million in E-Systems. 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, you know, 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.
The 50% target for the Chinese domestic share within your Chinese business. Where are you now? You said 40-
44% last year. We'll 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 2027.
Those are big moves. That's great.
Yeah.
I wanted to talk about IDEA by Lear. 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?
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 it's the automation. Hence IDEA by Lear. It's really gained incredible traction within our company. We've been at this for 10 years. I mean, we've been really working on how you look at the manufacturing plans, how you combine engineering product advancements for automation and digital change and efficiencies in the manufacturing plants. We've also, at the same time, organically grown our in-house capabilities. We have over 700 people dedicated to IDEA by Lear. The digital changes and the automation, the robotics in our manufacturing plants.
We have over 600, I'll call it, use cases right now that we're implementing around the world that we've been very successful. Last year's target was very important to us to really identify and talk to investors and analysts on the success that we're having. 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 key companies that help us really advance and accelerate our capabilities. On the product side, we acquired Kongsberg and I.G. Bauerhin. 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.
We acquired several leading technology companies. ASI, which is really focused on the key ingredients for on-line 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, 'cause it's very complementary. We have InTouch, that's all end-of-line capabilities for automation through visual systems, camera systems, lasers, other capabilities that were in-house in InTouch. 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.
We just recently announced StoneShield, which is one of the most labor-intensive parts of wire harnesses is the taping. Now we're up and running and have seen very, very good success with that right now. With 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. I wanna 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, you know, even better than what we anticipated. Just to give you a couple examples on how we have been successful. You know, one is, you know, 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%-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 was amazing, what we did with our software capabilities and how we got at that extremely quick. Anything even if we have to reverse it and get credits on how we're gonna move forward with those inside capabilities is gonna help us. It's helping in non-production purchasing, production purchasing.
There's a lot of different examples that we've been successful at. In addition to it, we built this innovation center. Again, I think the important thing is, you know, 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, and it's important that investors understand where we're at. 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. You know, in our modular concepts, our thermal comfort, we've won 35. I gotta get this right 'cause every time I'm out, we're talking about new contracts. Purchase orders of the modular ComfortFlex, ComfortMax, FlexAir. Those are real.
I t 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 POs. We're moving fast. We just had a really good review. If anyone's in Michigan, I'm gonna 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 different facilities, and she walked out and she said, "There isn't a seating company that is doing what you're doing.
I need to get my CEO back here." We were hitting on all the, I think, the key ingredients that they're talking about they want their suppliers to think about, you know, with technology, innovation, quick to market, manufacturing capabilities on a plant floor around automation, digitalization, modular concepts. You know, that's where you really get the savings. That's where you really see the benefits. This 200-500 basis point competitive advantage that we have is real, and we're being very selective on how we pick and choose different programs. You know, we're looking at the longevity or traditional production rates of what the program look like, and that's where we're placing our bets. Right now it's going extremely well.
We have more work to do, and we're still continuing to look at different opportunities. If there is an acquisition out there, they're gonna 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.
Yeah. Just to add a couple of points to Ray's explanation on IDEA by Lear. You know, there are questions about how that impacts the capital intensity of the business. You know, we continue to run this business with 2.5%-3% of revenue on CapEx each year. I think this year's guidance, we're at 2.8% or $660 million. 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, you know, 1-2 years. In these systems, it's a little bit longer, given the lower labor rates, but 2-3 years. 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, two-thirds of our savings were through automation, but a third 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. Now we continue to generate new savings off of that investment that we started a little bit more than 2 years ago.
I think that we have a lot of momentum in this area, and this is really a key factor for us in driving that sustainable 40 and 80 basis points of net performance in Seating and E-Systems respectively over not just this year, but next year and into the future.
Yeah. I think it's important Jason mentioned, though, when we can actually manufacture our own capital. This has been an area I think has lacked a lot of attention, is that, you know, 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. Customers come in and say, "Listen, can you share this with your..." No, we're not sharing it with anyone.
We're gonna keep it in-house, and even the companies that we acquired, you know, canceled the contracts with any one of our competitors, so we could keep all that technology and innovation in-house. To give you an example, I've used this before, is when we launched the plant in Detroit for the Jeep Wagoneer, we manufactured almost 80% of the CapEx at a significant savings of 20%-30%. It was specifically built for our consumption and our needs around, you know, manufacturing and around automation and around the digital enhancements. 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 wanna 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, the 20%-30% savings, I think we're scratching the surface. Now we have like what we call a VA/VE 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 it on the capital side. I think we're gonna continue to see a reduction in our capital spend. I think Jason's absolutely right.
I wanna be very clear on that we're looking at paybacks, and we're seeing paybacks that when you're seeing less than two years and with a great IRR or a great return, that's what we're pushing. We reprioritize 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. I think there's more. I'm excited, like I said, about this year. I think, you know, it's a matter of connecting the dots. You know, when you have 260 different manufacturing plants, you have a great idea.
It's how quickly you can do it, 'cause you still have the plants running. You still have to deploy the capital. You still have to engineer the product in some cases. It's prioritizing that and getting it 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 pivot to the EV slowdown that we've seen, you know, 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 this. What are some of the biggest challenges you have or opportunities in this kind of EV shift?
It's really just, you know, 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-
Right
Programs that we're awarded with General Motors and with Stellantis on the Ram REV. That program's been canceled, and the volumes obviously in the full size electric trucks are meaningfully lower than what was anticipated. It did lead to, you know, 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. 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.
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. You know, 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. I think the biggest challenge over the last 18 months was really around the product planning process at our customers. You know, 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 last year, and we're seeing that momentum continue into this year, a return to a more normal sourcing cadence.
Yeah.
It 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've built on the Seating side, and to take share in both Seating and E-Systems through conquest opportunities. We're seeing a lot of great growth opportunities. I think we've finally bottomed out the EV volumes.
To a degree,
There's really not any risk left. I mean, the volumes are very negligible in the U.S., in this year's outlook. We bottomed out, we're at the trough, and now we're building back up.
Makes a lot of sense.
I wanted to dig a little more into margin. I think some of this plays off of, you know, the IDEA by Lear that you were talking about earlier. 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, you know, are a little bit better than expected?
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. 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. Then you have our normal cost reduction toolbox of commercial negotiations, plant efficiencies, you know, purchasing negotiations with our suppliers. 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 these systems that's offset a portion of that, but the net result is a modest improvement in operating margins this year, in both segments. 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.
If our customers can produce what they want to this year, if the Middle East conflict or other factors don't disrupt that, now that's sort of what's embedded in the high end of the guidance range. You know, 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. As we sit here today, the way the first quarter has started and our customer production schedule's out into the second and third quarter now, you know, that's all trending in the right direction.
You know, sort of see revenue in the kinda 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, you know, 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. The core business itself and the way our customers are performing would suggest, you know, revenues are gonna be pretty strong. You heard Ray talk about what we're doing on net performance. We expect to meet or exceed the targets that we established there. If revenues do come in above, the midpoint of the guidance range, we typically convert at 15%-20% on that.
Now, some of that may be backlog revenue. Ray talked about one of the Chinese OEM awards that we received in wire that actually launches this year. You know, that's typically gonna roll on at 10%-12% as opposed to, you know, your variable margin on existing programming, sort of 15%-20%. Of course, a lot of it depends on which programs are increasing and decreasing. 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, you know, normally variable costs out, that could impact it.
The level of vertical integration we have in both Seating and E-Systems can impact that variable margin. All things, you know, equal on average, it's gonna be in that 15%-20% range.
Just one quick one on capital deployment. I think current liquidity is enough to operate the business. Leverage is at target levels. You're on track to deliver $550 million-$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.
Yeah, 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. First, I'll just start out with 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, you know, the four or five acquisitions we've done on the manufacturing, integration, and automation side. We'd love to do more of those sort of $10 million-$20 million transactions. They're not significant in terms of cost, but they are significant in terms of the impact on the business.
Beyond that, we don't see any significant acquisition opportunities that would provide a better return than buying back our own stock. The remaining excess cash that we're generating in the business is going to be returned through dividends, which is, you know, a consistent dividend of just over $3 a share today, and then the balance is through share repurchases. Over the last three years, you know, we've returned more than $1.5 billion to shareholders through dividends and share repurchases. You know, we took out 5%-6% of our shares both in 2024 and again in 2025. We're on target to do that again this year. I think we're creating real value through our share repurchase program.
You know, when we talk to some of our largest investors, this is something that they're very focused on. 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. You know, one is revenue per share. You know, 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, you know, 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.
It's a meaningful contributor to the value that shareholders can expect to see from Lear in the coming years too.
Maybe we'll open it up to the audience for a moment. Question towards the back.
Thank you. Good to see you guys.
Yeah, good seeing you.
Congratulations on the execution the last couple of years.
Thanks.
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, you know, your pass-through, some of the delays in that, you know, in terms of lags. Just as a reminder of if this does persist for 4-8 weeks and not 4 weeks.
Yeah.
That type of dynamic. 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?
Yeah.
Maybe just kinda how you're kinda preparing for that in terms of the flexibility of your business model. Thank you.
I agree with that, characterization. We've worked diligently over the last 7, 8, 10 years now, to put pass-through mechanisms and indexing agreements in place. For the vast majority of the commodities that we buy, they're on either a direct pass-through where the customer's responsible for the purchase or there's a one-quarter lag. In some cases there may be a two-quarter lag. For the most part, things like foam chemicals, it's generally a one-quarter lag. If the spike in oil leads to higher chemical prices, you could see a modest impact in one 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, you know, pretty much consistently over the last five or six years, whether it's COVID, the chip shortage, you know.
EV decr-
Yeah
What's. If it's, say, good and bad, the bad is obviously what's going on in the Middle 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, you know, the EV decline, we've done a nice job of going in and really re-reviewing contracts and purchase orders. There might be a lag in some respects on how we look at a recovery, if commodity is the increase. I think the question that you have on demand. we can all. We're all reading the same stuff and trying to understand what's gonna happen there.
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. I do feel better on how we'll protect ourselves. Like I said, we're seeing minimal impacts from supply disruptions, those type of things. 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's a great tool that we're using right now to get ahead of some of this stuff. Then the contracts that we've kind of reestablished 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 gonna happen with what demand looks like around the world? 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 that right now, looking at different potential issues and then trying to divert or reevaluate how we're positioning ourselves. It's good right now.
Just a quick follow-up on that. What you do control is the pace of the stock buyback. When you think about this uncertainty now, how do you think about that dynamic of
We just talked about this.
Yeah
the other day, so.
I think you may have walked in just after we.
I came in late. Apologies.
We're on track to buy $65 million-$75 million back in the first quarter. We're well ahead of the pace that we ran at last year, where we started off a little slower and then ramped up. if we see a dislocation in value, we will take advantage of that. We typically don't generate cash in the first quarter, just kind of the normal cyclicality of the working capital side of the business. 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. If we do more earlier, then so.
That's would be the right thing to do to take advantage of this.
Got it. Thank you.
Yeah.
...
Well, perfect. I think that is all the time we have. I wanna thank Ray and Jason for an excellent conversation. Thank you all for attending. Thank you again.
Thank you.
It's exciting stuff.
Thank you.
Yeah. Thank you.