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AP

Adient plc (ADNT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 FY25 delivered a solid operating beat: Revenue $3.611B vs S&P consensus $3.440B and adjusted diluted EPS $0.69 vs $0.33; adjusted EBITDA margin rose 40 bps YoY to 6.5% as operational efficiencies offset volume/FX headwinds . Values retrieved from S&P Global.*
  • GAAP results were heavily impacted by a non‑cash EMEA goodwill impairment of $333M, driving GAAP diluted loss per share of $(3.99) despite stronger underlying performance .
  • Management reaffirmed FY25 revenue and adjusted EBITDA outlook, while raising expected interest expense to ~$190M (from ~$185M) and lowering FY25 free cash flow guidance to $150–$170M due to timing of tariff recoveries and accelerated European restructuring cash costs .
  • Tariffs were a manageable headwind (~$9M in Q2) with ~75% of gross exposure already addressed via resourcing and customer recoveries; management is targeting 100% offsets/resolution over time .
  • Near‑term stock catalysts: visible EPS/revenue beat vs consensus, reaffirmed EBITDA outlook, and tangible tariff mitigation progress; goodwill impairment may temper reaction but underscores EMEA restructuring urgency .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted EPS and revenue beats vs consensus with margin expansion: Adj. EPS $0.69 vs $0.33; revenue $3.611B vs $3.440B; adj. EBITDA margin 6.5% (+40 bps YoY) as business performance and lower launch costs offset headwinds . Values retrieved from S&P Global.*
    • Americas outperformance and margin improvement driven by efficiencies and favorable program mix; adjusted EBITDA up YoY with 5.5% segment margin .
    • CEO emphasized resilience and proactive tariff mitigation: “We are targeting 100% cost offsets or recoveries with all customers…we have already resolved 75% of our gross position” .

  • What Went Wrong

    • Non‑cash EMEA goodwill impairment of $333M triggered by weaker European demand and share price decline, resulting in GAAP diluted loss per share of $(3.99) for the quarter .
    • Tariffs created ~$9M net headwind in Q2 and uncertainty for H2 volumes; gross monthly exposure ~ $12M at quarter‑end, with remaining 25% path still under negotiation/resourcing .
    • Free cash flow was negative in Q2 on seasonal working capital/timing, and FY25 FCF guidance was reduced to $150–$170M to reflect timing of recoveries and restructuring cash costs .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.750 $3.495 $3.611
Adjusted EBITDA ($USD Millions)$227 $196 $233
Adjusted EBITDA Margin %6.1% 5.6% 6.5%
Adjusted EBIT ($USD Millions)$147 $122 $161
Adjusted EBIT Margin %3.9% 3.5% 4.5%
Adjusted Diluted EPS ($USD)$0.54 $0.27 $0.69
GAAP Diluted EPS ($USD)n/a$0.00 $(3.99)
SegmentQ2 2024 Net Sales ($USD MM)Q2 2024 Adj. EBITDA ($USD MM)Q2 2024 Adj. EBITDA Margin %Q2 2025 Net Sales ($USD MM)Q2 2025 Adj. EBITDA ($USD MM)Q2 2025 Adj. EBITDA Margin %
Americas$1,660 $80 4.8% $1,699 $94 5.5%
EMEA$1,370 $57 4.2% $1,231 $50 4.1%
Asia$742 $112 15.1% $707 $110 15.6%
Corporate/Elims$(22) $(22) N/A$(26) $(21) N/A
Consolidated$3,750 $227 6.1% $3,611 $233 6.5%
KPIQ1 2025Q2 2025
Operating Cash Flow ($USD MM)$109 $(45)
Free Cash Flow ($USD MM)$45 $(90)
Cash & Cash Equivalents ($USD MM)$860 $754
Net Debt ($USD MM)$1,542 $1,642
Net Leverage (x)1.79 1.90
Cash Restructuring ($USD MM, QTD)$35 $33
Tariff Headwind ($USD MM, QTD)n/a~$9
Estimates vs Actuals (Q2 2025)S&P ConsensusActual
Revenue ($USD Millions)3,440*3,611
Primary/Normalized EPS ($USD)0.33*0.69
EBITDA ($USD Millions)195*233 (Adjusted EBITDA)

Note: S&P “EBITDA” may differ from the company’s “Adjusted EBITDA” definition; Adient reported Adjusted EBITDA of $233M. Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025~$13.9B Reaffirmed (maintained) Maintained
Adjusted EBITDA ($USD Millions)FY 2025Near low end of ~$850M Reaffirmed (maintained) Maintained
Interest Expense ($USD Millions)FY 2025~$185M ~$190M Raised
Free Cash Flow ($USD Millions)FY 2025~$180M $150–$170M Lowered

Additional context: The company successfully refinanced $795M senior unsecured notes due 2026, extending average maturity from 4.0 to 6.1 years, supporting liquidity and balance sheet flexibility .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs/macroPlaybook built since 2017; preparing mitigation; FY25 guide initially predicated on offsets and stable volumes Net headwind ~$9M in Q2; gross monthly exposure ~$12M; ~75% resolved; targeting 100% offsets/recoveries with customers Mitigation progressing; volume risk remains
Americas performanceMargin expansion with favorable program mix despite destocking in Q1 Outperformed industry volumes; margin improvement Y/Y from efficiencies; segment margin 5.5% Improving
EMEA restructuringMultiyear plan; ~$100M FY25 cash restructuring; trough margins; stabilization needed $333M non‑cash goodwill impairment; business performance positive; caution on extrapolating margins; trough in FY25, inflection expected in FY26 Still challenged; actions ongoing
Asia/ChinaDouble‑digit margins; China underperforming; pivot to local OEMs (BYD etc.) Strong execution; near‑term China pressure; growing with local OEMs; component/content wins Mixed near‑term; building local OEM mix
Technology/automationEfficiency and automation to drive margins Expanded China tech center; automation/AI visual inspection, cobots; product innovation (mechanical massage) Execution advancing
Liquidity/Capital AllocationStrong liquidity; buybacks opportunistic, second‑half cash generation Liquidity ~$1.6B; potential offsets of tariff costs; measured approach to repurchases given macro Balanced, disciplined

Management Commentary

  • CEO: “Our positive momentum accelerated in Q2… improved business performance versus a year ago across all regions… adjusted EBITDA margins by 40 basis points… We achieved $233 million of adjusted EBITDA.” .
  • CEO on tariffs: “We are targeting 100% cost offsets or recoveries with all customers… we have already resolved 75% of our gross position and a road map [for] the remaining 25%.” .
  • CFO: “Adjusted EBITDA for the quarter was $233 million, up 3% year‑on‑year… we expanded EBITDA margins 40 basis points year‑over‑year to 6.5%… A $333 million noncash goodwill impairment was recorded in the EMEA reporting unit.” .
  • CEO on USMCA/Annex‑1: “Nearly 95% of Adient’s parts produced in Mexico and Canada and shipped to the U.S. are USMCA compliant… we don’t ship complete seats across the border… components not on Annex‑1 are subject to stacking (AEPA + reciprocal), leading to a 145% China tariff exposure.” .

Q&A Highlights

  • Tariff resolution: Resolved share implies agreed recoveries; roadmap portion mixes resourcing and ongoing negotiations/documentation processes with customers .
  • EMEA performance: Quarter looked better but management cautioned against annualizing; variability expected; trough margins still anticipated in FY25 with inflection in FY26 .
  • Tariff mechanics: Clarified Annex‑1 scope and stacking leading to 145% tariffs on certain China components; USMCA compliance limits Mexico/Canada impacts .
  • Restructuring cash: FY25 cash restructuring could be “north of $100M,” potentially ~$125M if acceleration occurs; only ~1/3 of charges are EBITDA‑accretive given volume roll‑off .
  • FX assumptions: Maintained prior EUR/USD planning assumption (~1.06) despite spot near 1.08; translational upside possible but kept prudent stance .

Estimates Context

  • Results vs Wall Street consensus (S&P Global): Revenue $3.611B vs $3.440B*, EPS $0.69 vs $0.33*; both beats. EBITDA consensus ~195* vs company’s Adjusted EBITDA $233 (definitions differ) . Values retrieved from S&P Global.*
  • Implications: Street models likely raise FY25/26 adjusted margin assumptions (Americas mix/efficiencies, tariff cost offsets) while reflecting higher interest expense and slightly lower FY25 FCF range due to timing .

Key Takeaways for Investors

  • Strong underlying quarter: Adj. EBITDA margin expanded to 6.5% with broad‑based operational improvements; adj. EPS and revenue beat consensus materially . Values retrieved from S&P Global.*
  • EMEA drag is non‑cash this quarter but real: $333M goodwill impairment highlights structural European headwinds; multiyear restructuring remains key to FY26+ margin trajectory .
  • Tariffs manageable: ~$9M Q2 headwind; ~75% of exposure addressed; targeting full offset via resourcing and recoveries; monitor H2 volume impact risk .
  • FY25 guide steady on revenue/EBITDA; model tweaks: lift interest expense to ~$190M and lower FCF to $150–$170M on timing/European actions .
  • Balance sheet/liquidity intact: ~$754M cash, ~1.6x–1.9x net leverage; recent $795M refinancing extends maturities to 2033, reducing near‑term risk .
  • Segment mix supportive: Americas improved margins; Asia remains profitable with local OEM traction; EMEA showing early restructuring benefits but remains lumpy .
  • Near‑term trading setup: Beat + reaffirmed EBITDA + tariff mitigation vs impairment headline; watch tariff policy/volume updates and European restructuring cash timing into H2 .
*Values retrieved from S&P Global.