Hello, everyone. Thank you for joining us and welcome to Magna International Third Quarter Fiscal Year 2026 Financial Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Louis Tonelli, Vice President of Investor Relations. Please go ahead.

Thanks, operator. Hello, everyone, and welcome to our conference call covering our Q3 2026 results. Joining me today are Swami Kotagiri and Philip Fracassa. Yesterday, our board of directors met and approved our financial results for the third quarter of 2026 and our updated outlook. We issued a press release this morning outlining both of these. You'll find today's press release, conference call webcast, the slide presentation that go along with the call, and our updated quarterly financial review all in the investor relations section of our website at magna.com. Before we get started, just as a reminder, the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. Such statements involve certain risks, assumptions, and uncertainties which may cause the company's actual or future results and performance to be materially different from those expressed or implied in these statements. Please refer to today's press release for a complete description of our safe harbor disclaimer. Please also refer to the reminders slide included in our presentation that relates to our commentary today. With that, I'll pass it over to Swami.

Thank you, Louis. Good morning, everyone, and thank you for joining us today. We appreciate your time and interest. Let's get started. I am pleased with our performance this quarter. We delivered another strong quarter with continued margin expansion reflecting discipline execution and progress across a number of areas. In the quarter, sales were down 4% reflecting lower light vehicle production and our previously announced dispositions. However, weighted organic growth over market was positive. Adjusted EBIT was up 11% while adjusted EBIT margin expanded 90 basis points to 6.8%. And adjusted EPS rose 38% to $1.83. These results reflect continued progress in our operational excellence initiatives and success in resolving commercial items, including some pulled forward from Q4. Most notably, we continue to see improvement in the underlying operating performance of the business. Our strong free cash flow is further evidence of the continued improvement in our operating performance and the cash generating capability of the business. During the quarter, we generated $950 million in operating cash flow and $584 million in free cash flows. And we ended the quarter with leverage and many more. In the last two years, we have seen a growth of $1.4 billion in cash on hand, which provides continued financial flexibility. Supported by our strong year-to-date performance, we updated our full-year 2026 outlook. We lowered our sales expectations to reflect reduced vehicle production in China, an unfavorable program mix, and narrowed our range for adjusted EBIT margin. However, we maintain the midpoint of our outlook range for adjusted EPS. In addition, we raised our outlook range for free cash flow, again, reflecting our year-to-date momentum and confidence in our cash flow trajectory. Together, these updates demonstrate our ability to absorb lower production and still deliver improved profitability and cash generation. We remain steadfast in executing our proven capital allocation framework. We continue to invest in our business to support further profitable organic growth while returning significant capital to shareholders. During the quarter, we returned $658 million to shareholders including $529 million through share repurchases. We completed our existing buyback authorization in October, repurchasing the remaining 1.3 million shares and our board approved a new NCIB for 25.8 million shares. And lastly, we closed on the sales of our rooftop and North American lighting businesses in Q3. and expect to complete the remaining divestitures in the fourth quarter. I would like to take a moment to highlight our complete vehicle segment, which is ramping up business globally and demonstrating the value of our flexible vehicle manufacturing model. In Mesa, Arizona, we are launching and ramping up two new vehicle programs for Waymo in our existing upfitting facility. In Graz, Austria, We assembled six vehicles in total for Xiaopeng and GSE. We are launching the G9L, our fourth model in Graz, supporting Xiaopeng's European localization strategy. We also produced two GSE models, including the Aeon UT, launched earlier this year. And in China, our joint venture is ramping up production of all-new Alpha T7, the fifth ARPFOX model produced by the joint venture. These programs demonstrate our ability to support new and established customers across regions through flexible, state-of-the-art manufacturing. They are also generating discussions with additional customers and creating opportunities to bring more Magna Systems content to new vehicle programs. We also continue to win new business across our core product areas. We were awarded a transfer case, rear drive module, and front drive unit for a North American-based global OEM. This new program, which launches in 2028, adds to our leading market position in four-wheel drive. We were also awarded Thank you very much. Our commitment to innovation continues to be recognized by the industry. Three of our technologies are finalists for Automotive News PACE Awards and two are finalists for PACE Pilot Awards. Winners will be announced in November. These finalists span a number of our capabilities, demonstrating our strong position across our portfolio. With that, I'll turn the call over to Phil.

Thanks, Swami, and good morning, everyone. I'm going to begin on slide 15 with a summary of our strong third quarter results. Sales were $10.1 billion in the quarter, down approximately 4% from last year. Adjusted EBIT margin improved 90 basis points to 6.8%. Adjusted earnings increased 38%, to $1.83 per share. And free cash flow was strong at $584 million. Each of these metrics exceeded our expectations and continued the momentum we saw in the first six months of the year. Now I'll take you through some of the details. Let's start with sales on slide 16. As I mentioned, third quarter sales were down about 4% overall compared to last year. Excluding divestitures and foreign currency translation, sales declined 2.1% organically. By comparison, global light vehicle production declined about 3% in the quarter. On a magna-weighted basis, we estimate light vehicle production was down 2.6%. This translates to positive growth over market for magna of about 0.5% on a consolidated basis, and 1%, excluding complete vehicles. Looking at the sales walk, volumes, launches and other reduced sales by $150 million. The decrease mainly reflects lower light vehicle production, the end of production on certain programs, including the Ford Escape, and normal course customer price concessions. These factors were offset partially by new program launches. including the Jeep Cherokee and the Mercedes-Benz GLV and GLC. Complete vehicle sales declined 74 million organically, despite higher unit volumes. The higher volumes were driven by new programs, the Xiaopeng and GAC and Graz, where sales are recognized on a value-added basis. Logins with other customers, where sales are generally recognized on a full-cost basis, declined year over year. including end of production for the BMW Z4 and Toyota Supra. This mixed shift resulted in net lower assembly sales dollars but at higher margins. Engineering revenue was also lower in line with our expectations. The rooftop systems and completed lighting domesticures reduced sales by $165 million in the quarter. And lastly, Foreign currency translation reduced sales by 14 million, reflecting a net stronger U.S. dollar. Now let's move to EBIT on slide 17. Third quarter adjusted EBIT was 683 million, an increase of 70 million, or 11%, versus last year. Adjusted EBIT margin was 6.8%, an improvement of 90 basis points. Operational, volumes, and other contributed about 120 basis points to margin in the quarter. The improvement mainly reflects net favorable commercial items and the impact of operational excellence initiatives, net of normal course customer price concessions. We also benefited from prior restructuring actions, as well as the divestitures, which were running at margins below net and a half. These factors were offset partially by lower earnings on reduced organic sales volumes, unfavorable net foreign exchange impacts, and higher profit sharing and incentive compensation. In addition, lower net tariff costs contributed approximately 30 basis points to margins. Costs were slightly lower and were getting recoveries faster than we did last year. While the tariff situation continues to evolve, We currently expect that our full-year net tariff headwind will be similar to what we experienced last year. Higher commodity costs reduce margins by about 50 basis points. As we have noted in prior quarters, we continue to experience inflation across several key commodities. While this was a headwind in the quarter, we do expect to substantially mitigate or recover these increased costs over time. and lower equity income reduced margins by around 10 basis points. This mainly reflects the impact of lower sales, unfavorable product mix, and higher income tax expense as certain affiliates accounted for under the equity method. Looking below the EBIT line on slide 18, interest expense was $30 million lower than last year. The improvement was driven by some discrete interest expense last year that did not recur. as well as reduced seasonal short-term borrowments supported by our strong cash flow. Our third quarter adjusted tax rate was 22.4%, an improvement of 410 basis points versus last year and better than our expectations. For the full year, we now expect an adjusted tax rate of approximately 22%. And third quarter adjusted EPS increased 38% to $1.83. reflecting the higher net income and a 6% reduction in diluted shares outstanding from share repurchases completed over the past 12 months. Next, let's take a brief look at our business segment performance, which is summarized on slide 19. We were impacted by lower global light vehicle production across the business. In power and vision, reported sales also reflect the rooftop and completed lighting divestitures. Excluding divestitures and foreign currency translation, P&V sales increased approximately 2% organically in the quarter. In seeding, sales were negatively impacted by a major changeover at Ford's Louisville plant, as well as retooling at BMW's Spartanburg plant for upcoming planned program launches. And in complete vehicles, sales declined 8% as expected despite higher unit volumes, as lower sales on full-cost programs and lower engineering revenue were only partially offset by new value-added programs and higher margins with Chinese OEMs in crowds. According to EBIC, Audi exteriors and structures, power and vision, and complete vehicles all posted notable year-over-year improvements and adjusted EBIT dollars in margins, reflecting strong operational execution. P&V also benefited on the margin line from the divestitures, and complete vehicles benefited from favorable mix. And in seeding, margins were down as expected, mainly reflecting the decline in sales for the program changeovers I mentioned earlier. Now let's look at cash flow on slide 20. In the third quarter, we generated $950 million in cash from operations, an increase of $38 million from last year, driven by higher earnings and improved working capital. Investment activities in the quarter included $307 million in CapEx and $75 million for investments, other assets, and intangibles, offset partially by proceeds from normal course asset disposals. Netting everything out, We generated free cash flow of $584 million in the quarter, which was slightly above last year and ahead of our expectations. We continued to return cash to shareholders in the third quarter with $129 million in dividends, along with $529 million through share repurchases. During the quarter, we repurchased 7.9 million shares under our current NCIB buyback authorization. which left us with just over 1 million shares remaining at the end of September. As of today, we will have repurchased all remaining shares. That's a total of over 25 million shares over the past 12 months. And as Swami mentioned, yesterday our board approved a new NCID buyback authorization which is expected to take effect in November. Turning to slide 21. Our balance sheet and capital structure remains strong. At the end of September, we had close to $5 billion in total liquidity, including $1.4 billion of cash on hand. This is despite the significant return of capital during the first nine months of the year. Looking at leverage, our net debt to adjusted EBITDA was under one times, and our rating agency leverage was 1.4 times at quarter end. These are both within our targeted ranges, which provides significant financial flexibility and puts Magnet in a great position to continue investing in the business and returning capital to shareholders. Next, let me cover the macro assumptions underpinning our current outlook on slide 22. Compared to our July outlook, we've reduced our China production estimate by 800,000 units. We also updated our foreign currency assumptions to reflect recent exchange rates. Our full-year outlook now assumes a slightly stronger Canadian dollar, euro, and Chinese yuan relative to the U.S. dollar. Moving to slide 23, we are revising our full-year sales outlook, primarily to reflect our assumption for lower vehicle production in China, an unfavorable program mix compared to our previous outlook. Despite the lower sales outlook, we continue to expect strong year-over-year margin expansion. We are narrowing our outlook for adjusted EBIT margin to a range of between 6.3% and 6.5%. Our midpoint of 6.4% represents an improvement of 80 basis points from last year on slightly lower sales at the midpoint. We are also narrowing our adjusted EPS outlook to a range of between $6.85 and $7.15 per share. The midpoint, which is unchanged at $7 per share, represents an increase of 22% versus last year. And finally, we are raising our free cash flow outlook to between $1.85 and $1.9 billion, an increase of $75 million at the midpoint, mainly reflecting lower planned capital spending. The updated outlook represents free cash conversion of approximately 100% of adjusted net income. With respect to other key assumptions, we expect CapEx to be approximately $1.5 billion compared to our previous range of $1.5 to $1.6 billion. We're planning for slightly lower interest expense, and we expect a lower adjusted tax rate of approximately 22% compared to 23% previously. reflecting a more favorable mix of earnings. And finally, our assumptions for equity income at the midpoint and diluted shares remain unchanged. That's it for the financial review. And now I'll turn it back to Swami to wrap things up. Swami.

Thank you, Phil. Before we take your questions, let me summarize. We delivered a strong third quarter with meaningful growth and adjusted EBIT margin and Edgester EPS. Just as importantly, we generated strong free cash flow, reinforcing the quality and sustainability of our earnings. These results reflect the continued progress we are making through disciplined execution and operational excellence across the company. Looking ahead, our updated 2026 outlook reflects our confidence in Magna's ongoing operating performance. We remain focused on sustaining our momentum in margin expansion, earnings growth, and free cash flow, while continuing to execute a disciplined capital allocation strategy. We completed our previous share repurchase program, and the board has approved a new authorization. This positions us to continue returning Significant capital to shareholders while investing in the business. Overall, we believe Magna is well positioned to deliver continued margin expansion, EPS growth, and attractive shareholder returns. We hope to see many of you in November at our investor event in New York City, where we will go into detail on our strategy, key initiatives, and long-term financial outlook. Thanks for your attention. Now, operator, let's open it up for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please limit yourself to one question and one follow up. We ask that when asking a question, you pick up your handset. And if you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of James Piccariello from BNP Paribas. Please go ahead.

James, you're on the line. You may need to unmute.

Let's move to the next question, operator. Please, thank you.

Thank you. James, we will return momentarily. Your next question comes from the line of Dan Levy from Barclays. Please go ahead.

Hi, good morning. Thank you for taking the questions. First, just wondering if you could unpack Maybe some of the items within the quarter, you said there was timing of commercial recoveries. Maybe you could just outline a bit more the magnitude of those and maybe just give us a little more sense if those were for commodities, if those were for vehicle programs, and then what's one time versus maybe the right sort of on a run rate basis going forward, the right way to think of it.

Yeah, good morning, Dan. Maybe I'll start off with the high level and jump in with some of the details. The commercial and tariff recoveries benefited Q3, and some favorable commercial items moved forward from Q4. But I would say that's not the full explanation of the full improvement. We delivered meaningful productivity and efficiency If I had to summarize it, I would say timing helped the quarter, but the underlying operating performance is what held the improvement and will serve as a trajectory going forward.

The only thing I would add there, Dan, is you're right. The operational volume and other bucket, if you will, added 120 basis points over all the margins. The two biggest positives and operational excellence. Swami talked about the operational excellence. As we've said many times, we're still in the early innings there and expect that momentum to continue. You know, on commercial, I would say it was, in that particular bucket, it was probably a combination of volume-related commercial and some commodity-related commercial, although commodities was a net headwind in the quarter. We actually show that in the different buckets. It was mainly commercial-related or volume-related commercial. Some pull ahead from Q4. The only thing I would say is we still expect margins in Q4 despite the pull ahead into Q3, still expect margins in Q4 to step up from Q3 despite lower volume, despite commodity costs, despite actually commercial probably flipping negative on us in Q4. So we do believe the margin performance when you peel it all back is sustainable. And as we've said before, we think the midpoint of the Full Year Guide. When you look at 6.4% at the midpoint, we do believe that is a structural jumping off point as we head into 2027. Thank you.

And just to clarify, you know, within that, the commodity cost that you said was a net headwind, is the view I assume over time is that you should get full recoveries to make it, you know, EBIT dollar neutral? and so it's just a matter of the timing. Is that correct?

Yeah, that is correct. You know, we signaled it probably last quarter was modest impact in Q2. It stepped up in Q3 to the 50 basis points that you see. We're expecting probably a comparable headwind, you know, maybe even a little bit higher in Q4 and it is a timing issue. You know, it really is a cross. Think of DRAM and related electronic components. You can think of and some aluminum that we buy from Tier 2s and the like that's embedded in components, if you will. And that is where it does take some time to get recoveries from customers. I would tell you we've gotten some. The 50 bps you see is sort of the net headwind for the quarter. Conversations, I would say, are constructive. But what we don't recover this year, the plan would be to substantially mitigate or recover

Thank you. As a follow up, one of the automakers mentioned on their call that for one of their They want to bring, you know, castings in-house. And we've heard this from others as well, this idea to do sort of, you know, daily castings. So, you know, BES, obviously, you know, you've got some big customer relationships there and it's pretty chunky content. Maybe you could just talk about the trend by some of the automakers to bring some of the casting in-house and, you know, whether that's at all a risk to you?

The simple answer, Dan, no. The reason I say that is as we continue to have conversations with various customers, actually in all regions of the world, North America, Europe, and China, if anything, we are continuing to see more interest in our capability and bringing forward Some inventive or innovative ideas on doing castings on a pretty large scale, right? In the 6,000, 7,000 ton type machines. And some of the technologies we are bringing, which we got PACE awards last time in terms of the alloy development, in terms of joining technologies and so on. And we're able to show some solutions there where Two or three castings, which bring together significant consolidation of parts, but at the same time take into account repairability and maintenance and so on and so forth. So all in all, a lot of interest. We are not seeing any negative influence. We are actually pretty enthusiastic about that process and product.

Great. Thank you. I look forward to seeing each of the of us today.

Thanks, Dan.

Your next question comes from the line of James Piccariello from BNP Paribas. Please go ahead. Hi.

Good morning, everybody. Can you hear me?

Yeah, morning, James.

All right, second time's a charm. Sorry about that. So I know we're going to get in all the detail we want in just two weeks at the investor day, but as we think about free cash flow and consider the strength in Magna's free cash flow and buybacks commitment, can you confirm the amount of EV recoveries in the outlook, in the free cash flow outlook for this year, and just high-level How are you thinking about the puts and takes for the trajectory into next year?

Thanks. Yeah, sure, James. We talked in the first quarter that we had a large EV recovery from a North American OEM, and we had talked at that time that it was north of $450 million. We got probably a little bit more in Q3, so as we're sitting here today, I'd probably round the number to about Thank you for joining us. So feel really good about the free cash flow, not only in 2026, I'll talk about go forward in a moment, but balance sheet's in great shape. So we ended the quarter with great liquidity. The balance sheet's in really good shape. We renewed the NCIB, so we feel really good about the cash generation of the business and the ability to continue returning significant capital to shareholders moving forward. And as you step forward to 2027, obviously those Thank you for joining us today.

The growth over market was a clear positive again this quarter, with the four-year guide implying another strong showing for the fourth. Can you speak to any key factors driving this improvement, either from a product or favorable customer mix perspective, or is the growth mainly driven by new business backlog contributions? Just any color on the power and vision growth inflection would be helpful. Thanks.

Good morning, James. I think you have summarized it. Power and vision, as you saw, declined 2% in the sales side of things, including the devastation effects, and the margin improved about 150 basis points and standing at 6.6. The improvement in this case or in this segment definitely was less about commercial recoveries and more about strong operational execution. I would say it's Continued traction from our operational excellence initiatives, and it's truly becoming foundational, and we're starting to see that. It's definitely a trajectory going forward, and I don't think there is any one particular product that stands out. Definitely the launches of some of the programs that we've been working, being in normal cadence and normal run rates definitely helps. and the discipline in engineering and launches is the other part. So all in all, I would sum it up as the different headings under the operational excellence is what's giving us the jump and the profitability.

Yeah, it's great to see that low to mid single digit core growth. Okay, appreciate it. Thanks, James.

Your next question comes from the line of Tammy Chen from BMO Capital Markets. Please go ahead. Hi, good morning. Thanks for the questions.

First, just want to start on the seeding side. Can you remind us again in North America, I think there is the fairly sizable replacement or refresh program. that will come. When do you launch that? And when we think about overall seating margins as we go towards that launch, like is this refresh or renew program meaningful enough to potentially move those segment margins back to pre-pandemic? Is that how we could think about it?

Yeah, good morning, Tammy. I think the couple of things, right, the program changeover and BMW Spartanburg. 3.1 to 3.3 right so if you take the midpoint 3.2 that's in line with what we've been talking about and with the program launches coming in play and the one big program that you mentioned will be fully launched by this time next year it started now and it's phasing right and we feel pretty confident in how the launch is going how the economics are working out and when all of this comes back, I would say I kind of go back to what I always said about seeding good returns business. We are seeing the trajectory we wanted. So this quarter seems a little bit off, but that's because of the changeovers. All in all, it's following the trajectory we had in plan.

Yeah, Cam, the only thing I would add is that we'll feel more the impact of the BMW because that's sort of launching as we speak, but we'll feel it's more than 27, whereas Fort Louis will be sort of mid-next year, so that'll be kind of a mid-year ramp, if you will. But as Swami said, the margins this quarter, while they were down year over year, were actually better than we anticipated coming into the quarter, because obviously that's a lot of volume to lose, albeit it's temporary, if you will, but the team did a great job on Operational Excellence, and some commercial items to kind of protect margins and move it forward. As Swami said, with the new economics and the volumes coming back, we feel really good about the ability of seeding margins to get back where they were.

Okay, good to hear. Got it. And my follow-up question is the bigger picture. I assume you'll talk more about it the ambassador day as well, but curious if you can give any insights right now. Your overall operational excellence journey, if you had to describe what inning do you think we're at? What's still to come? I think one of the areas is your factory of the future just continuing to roll out in more facilities. So if you can give any sort of numbers to help us assess how far along and how much more there is to come from there.

Thanks. Hi. Good morning, Tammy. At the investor day, you know, you'll definitely hear from us about a little bit more detail on how our strategy is evolving. We'll talk about growth over market priorities and definitely more color on the operational excellence initiatives. I won't put a number on it, but I will still say it's early innings. We are enthused about, and you've seen the traction of what, you know, shout out to the Magna team, everybody on the shop floor, they're sticking to it, doing it. So with all gratitude towards them. We still feel pretty good about how we're doing, and then we'll also obviously touch on the medium to long-term financial framework when we come to the investor day.

Okay, thank you.

Thanks, Tammy.

Your next question comes from the line of Alex Perry from Bank of America. Please go ahead.

Hi, thanks for taking our questions here. I guess first, I just wanted to ask a little bit more about the change in the guide for this year, specifically on China. Is there any visibility on China improving? How conservative would you say the outlook is at this point with the volatility and visibility you have in that region? And then maybe just walk us through how China Thank you very much.

Our impact was roughly about 10%. And if you peel the onion back a little bit, you'll see that the three German OEMs, OEM group collectively declined approximately 28% in the quarter. So contextually, you know, Magna, when we started, we had a much bigger share with the Western OEMs. But over the last decade, I would say we've grown at 10 plus percent CAGR in China. and today we are about 65% business or revenue is with the Chinese OEMs in China. So we have evolved pretty well. We continue to grow in the long term pretty good. It's an important market for us. And for my financial metrics, you know, I would say we are satisfied and continue to be good and creative. It's a little bit lumpy is how I would characterize it, but our focus remains on the right customers, platforms, products, and definitely returns.

Really helpful. And then I wanted to ask a little bit about what you're doing with some of the AV players. So maybe help us think about, for instance, textualizing the size of the Waymo business, what you're doing there. Could that become significant over time? And then are you targeting other RoboTaxi and AV players that are trying to integrate a lot of pieces and the various tech stacks?

Yeah, I think generally AV is, first of all, I think from a component systems perspective, we have been pretty clear that our focus really is on calling the driver assist systems, right? and if there is alignment in terms of our product strategy where we can support the AV players in sensors and systems and so on, absolutely yes and we continue to explore that opportunity. Specifically with Waymo, it's our complete vehicle group that has brought value in terms of the upgrading for Waymo and as we talked about, we're adding more models there That model will continue to be explored in other areas or with other customers and other regions. But again, it's got to be something long-term, something that's more partnership and value driven. But we continue to look at it, but we are very disciplined and cautious in how we go about it.

That's really helpful. Best of luck going forward.

Thanks, Alex.

Your next question comes from the line of Tom Narayan from RBC Capital Markets. Please go ahead.

Hey, Swami and Phil. Thanks for taking the questions. The first one is on European capacity. It looks like you took a charge in P&V, 76 million in Q3. I'm just curious what was behind that. You know, we know Jim Farley on the Ford call was saying that Europe has just too much capacity, and then this is coupled with Chinese exports coming into Europe. So curious if you expect to see more capacity cuts in Europe at P&V in Europe or perhaps in other segments. And then I will follow up.

Hi, Tom. Good morning. I think we've been talking about consolidation, restructuring, closures, all of it, you know, over the last 40 years, and we've done that with 41 plus divisions. A significant portion of that was in Europe. My point being, it's been a continuing journey, so we have been flexing from the times when Europe saw and class units. So we work along with it. We still are very careful and continue to watch it. I feel pretty comfortable. Again, this is part of the operational excellence, right? Being able to react quickly enough, be agile and be resilient. So there's a little bit more work, but nothing that, you know, I would call a heavy lift from Magna perspective for Europe.

Okay. And then on the buyback plan, I think it's a 10% of the float through, I think, November next year, your leverage is quite low. I know we'll hear more on the investor day on this, but the implication is potentially that you're maybe leaving some room for M&A and reinvesting in the business, perhaps in some non-automotive areas. Again, I don't want to steal the thunder here, but is that a fair assumption to make that the buyback plan, which is big, but it is maybe potentially leaving some room for other things too?

So I think for us, the capital allocation principles were pretty straightforward. So I think focus really on the organic profitable business. and I think it still holds. We are pretty happy with the portfolio the way we have it today. I don't really see a significant or transformative M&A. Could we see some small tuck-ins that would help our strategy? Yes. So we would be looking at externalities, the dynamics of their and the rest, I think, would be share buybacks and dividends, you know, as we see it, as we have done in 2026.

Yeah, and you know, Tom, I would only add that I would probably look at it a little bit different. So we had 10% available to buyback this year and we've bought back the entire 10%. We have been able to take leverage down. You know, we have been working to bring our leverage down within our range. We're slightly below the top end of our targeted range. We don't feel the need to certainly de-lever From here, and I do think it puts us, if anything, puts us in great position as we look ahead to next year, you know, from a capital return standpoint. And as Swami said, continue to invest in the business and, you know, maybe, you know, maybe a tuck in here or there. But I do feel like the balance sheet capacity that we have, you know, we certainly intend to put it to use, you know, similar to what we did this year.

Got it. Looking forward to the investor day. Thank you. Thanks, John. Thank you.

Your next question comes from the line of Jonathan Goldman from Scotiabank. Please go ahead.

Hey, good morning, everyone. Thanks for taking my questions. Could you just remind us if you've updated any of your expectations for growth over market this year?

Yeah, great question, Jonathan. So, you know, given the updates to the volumes that we made in this current outlook, you know, in the quarter, we were, you know, slightly above 1% growth of our market, roughly 1% excluding complete vehicles. Right now, for the full year, we're probably looking at closer to flattish all-in and up 1% excluding complete vehicles. So, a little bit down from what we would have guided to Last quarter, you know, mainly as a result of the updated volume estimates. And then as we peel the onion back in terms of programs that were on, Swami talked about the dynamic in China. And then as well as we do, we did have a customer in North America and a customer in Europe add some planned downtime in the fourth quarter where we do have quite a bit of content with those customers. So as we kind of pulled it all together, it did bring it down. But if you take a step back As we've said all along, really the downtime and some of the impacts in China, China is going to move around a little bit. The downtime is really temporary, if you will. We still feel really good about our ability to generate positive growth over market. We've talked about low to mid-single digits in the past. It's not going to be that number every quarter or every year, but really nothing's changed in terms of our long-term view on that.

Okay, that's helpful. That's a good dovetail to my next question. Maybe by this point in the year, how would you describe your level of visibility on Q4 production? And do you have any early reads on light vehicle production in the environment in 27, based on some of the commentary you're talking about, you know, downtime and kind of that sun coming back and kind of the macro environment you're seeing in your various regions?

Yeah, I think as we go through the planning process as we're going Thank you very much. Thank you very much. Thank you.

and I guess related to that, if I can squeeze one more in on free cash flow, I think it's going to be the second year in a row you're doing close to $2 billion, maybe $1.875, $1.9 billion. Is there anything that sticks out that's unusual this year, last year, or should this be kind of like the go-forward run rate of free cash flow and free cash flow conversion and maybe upside if you're able to squeeze more out on the operational excellence?

Yeah, no, great question, Jonathan. So if you look at last year and this year, free cash flow, we're quite good in both years. Over 100% conversion on adjusted net income last year, and the midpoint of the guide would imply right around 100% conversion on adjusted net income this year. So really strong performance. We did have some recoveries last year related to some EV investments. We did have some recoveries, as I talked about earlier this year. But moving forward, as we've talked about with earnings growth, strong working capital management, and discipline around CapEx, we do expect a strong free cash flow to continue. It's a little early to talk about 2027, but even with those recoveries not recurring, we do expect to continue to generate strong conversion on net income, strong free cash flow, which should be very supportive of our capital allocation strategy.

Okay, that's good to hear. Thanks for taking my questions. I'll get back to you. Thank you.

Your next question comes from the line of Rajat Gupta from R.P. Morgan. J.P. Morgan, apologies. Please go ahead.

Great. Thanks for taking the questions. I wanted to follow up on the AV and Robotaxi opportunity. We keep hearing a lot from both Western and Chinese OEMs about insourcing a lot of the work, particularly the higher value software there, et cetera. I'm curious, as your conversations have progressed on the opportunity, what has changed versus what has been intact in terms of where you're playing across the ADAS stack? and, you know, all the opportunities there from an M&A side that can help you enhance your stack in the future. I'm just curious, you know, what's the latest there? I have a quick follow-up.

Hi, Rajesh. Good morning. You know, I think the way, again, I've said As you look into the story of the driver assist, depending on who you talk to, let's say that in generic terms, L3 or L3++ scenario, there's a lot of discussions, as you said, and depends on the region and also depends on the type of the vehicle, whether you have sensors that have edge compute and that architecture. Thank you very much. Thank you very much. So I think they're a little bit cautious at this point in time. I would be focused on continuing to expand our strength rather than look at any inorganic activity at this point in time. We feel pretty good where we are. We'll stay disciplined and focused and be deliberate on the customers and programs we take. And we're watching.

That's helpful. And I just wanted to follow up on the commodities headwind. I'm curious, versus the prior outlook, how much higher is the margin headwind from commodities? And within that, what parts are just indexed and easily recoverable versus which is what you might have to offset with more internal initiatives? Thanks.

Yeah, sure, Roger. This is Phil. So I would say it definitely got worse since the last outlook. I don't have the exact number, but it certainly got incrementally worse both in Q3 and Q4 versus the prior outlook. And obviously, we actually are doing a little bit better on operational excellence, which is helping to mitigate that a little bit. But when you take a step back, you look across Thank you for joining us. And then the bigger thing that's really continuing to escalate, probably the biggest driver behind what we saw in the second half has been the DRAM and the related electronic components, whether it's the boards and the like, we're seeing increases there as well. And on most of that, the vast majority of that is where we have to negotiate with our customers for recoveries. And as I said, that's ongoing. We've actually secured some Thank you, Roger.

Your next question comes from the line of Joe Spack from UBS. Please go ahead.

Thank you. Good morning, everyone. Maybe, Phil, if we could just sort of recap. I mean, you sort of made the 6.4% sort of jumping off point. And look, we could all make our own volume assumptions. And Then you talked about operational excellence, which is still in the early innings, but some of that might get eaten away by the inflation headwinds. I guess the question is really on that operational excellence. I think you were targeting 35 to 40 this year, and Swami, you sort of said it's early innings, but isn't Correct me if I'm wrong, but isn't some of the new contracts rolling on versus the old ones rolling off part of that operational excellence? Are we through most of that, or is there still more favorable contracts that still continue on that still support that operational excellence?

Good morning, Joe. I'll make a few points. No, it's not just in the economics. When we talk about operations, on top of that. And I don't think it's the right way to characterize that whatever we do is being eaten away by inflation. I think some of the inflation is the recoveries and the economics that you talked about. On the other hand, what we talk about operational excellence is the self-help activities, right? So the best way, at least the way we are looking at it is From last year to this year, about 1.5% lesser revenue and about 80 basis points better in margin. And as we continue, what I said was 35 to 40 basis points is what we said last time. We're kind of tracking more towards 50 this year from the margin benefit. And if you ask me, like Phil said, If you take the midpoint of 6.4 on a flattish production environment, I would venture to say it's very likely for us to look at another 35 to 40 basis points going into next year on operational excellence. Now, you talked about externalities. That's anybody's guess, right? Production, mix, interest rates. Yeah, that's industry driven. We're really focused on what can we do that's in our control, and that's what I'm talking about.

Yeah, absolutely. That's helpful. And then, Phil, maybe just one point on the NCIB. I think last year when you renewed it, there was some commentary about a commitment to sort of fully execute it. Can we assume that again? Is it a little bit play by year as to sort of how much of that authorization you'll attack this year?

Yeah, no, thanks, Joe. What I would say is you're right. Back in February, we did indicate our intention to exhaust the current NCIB, which we've done. We put the new one in place. It'll take effect in a week or two. You know, I'm probably a little bit early to talk specifically about it, but as I said earlier, when we think about the strong free cash flow and our expectation for that to continue and the balance sheet being in great shape, I mean, we are in a great position to continue to buy back a substantial amount of shares. And I would expect that we will have buybacks certainly in the fourth quarter that we'll be talking about later. Next call, if you will, but in terms of being more specific in that, probably a little early and probably I would say more to come.

Okay. If I could squeeze one quick one in, like just, you know, your fourth quarter, you know, at the midpoint of the range, right, we could all sort of calculate that, but It is still like plus or minus like 9% on either side, which with two months left seems a little bit wide. So any color commentary about just sort of how we should expect the year to finish up?

Yeah, I mean, I think you're right. We narrowed the just even margin down to 6.3 to 6.5, which One quarter to go is maybe a little bit wide. But again, I think we feel, I would say, feel very confident in our ability to land in that range. And I would focus, I would probably focus mainly on the midpoint in that range, you know, plus or minus. And yeah, and I think, you know, when you think about the headwinds that got layered into the fourth quarter between volumes, between mix, between commodity costs, etc., I think still really confident in the full year guide. And the midpoint would imply roughly 7.3% margins in Q4, which is a step up from Q3, you know, despite incremental headwinds. And then down only 20 bps from last year. And you remember last year was a bit of a tough comp given the significant recoveries we got last year that we don't expect to recur.

Yeah. Yeah. Okay. Thanks so much for that, Phil.

Your next question comes from the line of Brian Morrison from TD Cohen. Please go ahead.

Thank you. I appreciate all the answers today. I just have a couple housekeeping. Pilar Swamy, can you just remind me what the complete vehicle assembly theoretical capacity is in Europe? I think it was like 150,000 units several years back. And what is the volume capacity in Arizona and Asia? and then second question just quickly for housekeeping. Why the increase in the value of the euro in your updated guide? I realize that most of the year is over, but at $1.11 now, I'm a little bit surprised it went up.

So, good morning, Brian. You're right about the assumption, you know, approximately 150,000 units, right, in our euro facility. and so on. So it's flexible, I would say. So it's just based on a little bit of footprint, but it could be very agile. It's not as asset heavy or capital intensive. So that could flex pretty easily. So it's not constrained by anything.

And then on the currency, Brian, I would say I would just add, you know, we generally tend to snap the line kind of at the end of the quarter. And that's kind of what we did this time around. You know, currency is going to move around. You're right. You know, the dollar-euro is probably sitting at probably 1.12 today, if you will. So a little bit weaker than what we had guided. But, you know, my experience, I think we consistently like to snap the line at the end of the quarter and That's kind of what we did in this case.

And Brian, just to add one other thing. In China, the complete vehicle assembly capacity is roughly about 180,000, just to complete the picture. Thank you.

Your next question comes from the line of Mark Delaney from Goldman Sachs. Please go ahead.

Good morning, everyone. Thank you for taking the questions. I'm looking forward to seeing you soon at the Investor Day. I have another one on complete vehicles. I think EBIT for 2H26, for your current guidance, is relatively flat year on year. Given all the work Magna is doing in EV upfitting, as well as the growing business you're speaking about with the Chinese OEMs, including in Europe, can you help contextualize what that all means for the ability to grow complete vehicles EBIT from here?

Yeah, sure, sure, Mark. So basically what we're seeing in complete vehicles, obviously this year has been impacted by, you know, lower engineering revenue has certainly been the negative, but on the positive side, you know, the launches that we've seen with Chinese OEMs and garage tech have gone very well. Those contracts are on a value-added basis, and that's really the model we're going to work going forward in complete vehicles is more on a value-added basis, so the margins will be higher. Thank you for joining us.