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Autoliv, Inc. Q1 2026 10-Q Summary

Business Context and Reporting Period

This filing covers the quarterly period ended March 31, 2026. Autoliv, Inc. is a global supplier of automotive safety systems, including airbags, seatbelts, and steering wheels. The company operates as a single reportable segment. As of April 9, 2026, there were 74,863,338 shares of common stock outstanding.

Key Financial Metrics

Margins: Gross margin was 19.1% (up 0.6pp); Operating margin was 8.6% (down 1.3pp). Adjusted operating margin (Non-GAAP) was 8.9%.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 6.8% year-over-year, driven by a 6.0% currency effect and 0.8% organic growth. Organic growth outperformed global Light Vehicle Production (LVP) declines, particularly in China (+4.9% organic) and Asia excluding China (+11.1% organic).
• Profitability: Operating income decreased 6.7% to $237 million. While gross profit rose 10% due to operational efficiency and favorable FX, this was offset by a 26% increase in R&D expenses (net) and higher SG&A costs.
• Cash Flow: Operating cash flow turned negative ($76 million outflow) compared to a $77 million inflow in Q1 2025. This was primarily due to a $349 million increase in working capital, driven by higher receivables from strong March sales and a reduction in accounts payable.
• Headcount: Total headcount decreased 2.9% to 64,100, with a 4.4% reduction in direct manufacturing personnel.

Guidance, Outlook, and Risks

Full Year 2026 Guidance:

• Organic Sales: Around 0% (unchanged).
• Adjusted Operating Margin: 10.5% - 11.0%.
• Operating Cash Flow: Around $1.2 billion.
• Capital Expenditures: Less than 5% of sales.
• Assumptions: LVP decline of ~1%; Foreign currency impact of ~3% positive on sales; Tax rate of ~28%.

Management Commentary: Management noted strong sales in March and operational performance exceeding expectations. However, geopolitical challenges, tariff uncertainties, and raw material inflation remain risks. The company expects to mitigate tariff impacts through customer compensation and cost reductions.

Material Risks and Contingencies:

• Antitrust Litigation: BMW filed a complaint in Germany claiming damages of approximately €95 million related to past anti-competitive behavior. Autoliv estimates a potential loss range of €0 to €95 million; no accrual has been made as the loss is deemed "reasonably possible" but not probable.
• Product Recalls: A Stellantis recall involving side curtain airbags (approx. 428,000 vehicles) has a potential loss range of $0 to $203 million. A Honda seatbelt buckle recall is ongoing with an estimated net exposure of approximately $12 million after insurance.
• ARC Inflator Litigation: Ongoing multi-district litigation regarding ARC airbag inflators; no accrual made as loss is reasonably possible but range cannot be determined.

Investor Verification Checklist

• Verify the sustainability of the 0.8% organic sales growth given the projected 1% global LVP decline for the full year.
• Monitor the resolution of the BMW antitrust lawsuit and the Stellantis recall costs, as these represent significant contingent liabilities with wide loss ranges.
• Assess the impact of working capital fluctuations on cash flow, specifically the reversal of the high accounts payable balance from Q4 2025.
• Track the execution of cost reduction initiatives required to maintain the 10.5-11% adjusted operating margin target amidst tariff and raw material inflation.
• Confirm the timeline and financial impact of the new motorcycle airbag and wearable safety product launches.