And we have started to make really good progress in that market. So if you think about the top customers there, it’s Honda, it’s Hero, Royal Enfield, etc, TVS. We have current business with all of the key players, but we also have business with the ones that are more higher end. We talked about Harley Davidson previously, and also we have business that we are working on with BMW Motorrad. So our footprint in that market is growing and that market has needs for different price points and different levels of content, all driven by two things: more digital displays. The sizes vary from 4.2 inches to about 7 inches; and the content coming largely through the smartphone connectivity. And so we are extremely well positioned, as you can imagine, in that segment with our footprint, the products that we are already offering to the passenger vehicle side of the transportation market.
And today I would say our revenues are fairly small, probably no more than between 1% to 2%. But we think we can more than double that by 2026. And the product introduction time in that market is much shorter, in many cases about 12 months. So that’s something that has got us excited because the trend is now really picking up momentum. We are in a very good position to take advantage of it, and it can help derisk a little bit of our 2026 target.
James Picariello: That’s very helpful. Just a very quick follow-on. Is it a similar list of competitors for the displays in two-wheelers —
Sachin Lawande: Actually not. In fact, the competitors are much more, I would say, regional players that I would not put them in the same category as the passenger vehicle competitors.
James Picariello: Thanks.
Operator: Your next question is from the line of Itay Michaeli with Citi Research.
Itay Michaeli: Great. Thanks. Good morning, everyone. Just a couple follow ups for me. First, maybe on the bookings, Sachin, hoping maybe you can share what you might be targeting for the full year for bookings. And second, I know it’s only a couple of months since you updated it, but any just updated thoughts on the 2026 revenue target? Any kind of puts and takes have changed in the last couple of months, either good or bad, in the bridge to 2026?
Sachin Lawande: Yes. Thanks, Itay, I’ll just put our new business win performance in Q1 in context. So if you think about what we were able to achieve in 2023, over $7 billion of wins, that was largely because the digital cockpit awards started to come back to the levels that we had seen prior to the dip that we experienced due to COVID and semiconductor constraints. And then added on top of that, we had our electrification wins. Now, if you look at Q1, there were $1.4 billion in wins, mostly from digital cockpit. We did not have any electrification wins in Q1, just the nature of the awards timing. So that’s a great start, I would say, to the year. The pipeline of opportunities also looks very robust, virtually for all of the product lines and including electrification where we have opportunities for both BMS as well as power electronics.
And it really reflects the strength of our product portfolio and the fit to the trends that they have. And at the same time, it helps us smooth out some of the inherent lumpiness in any of one of the product categories. So we believe for the full year, we should be in a position to exceed $6 billion in sales, hopefully similar to last year. And when it comes to 2026, I just want to make a couple of points. We will provide more details at some point here later in the year, but if you think about the foundations of our 2026 outlook, they were built on an expectation of a sales growth CAGR of 8% on 2023 levels. Now, if you think about what we have accomplished in the prior years, both 2022 and 2023, our sales growth was higher than that. And on top of that, we have won high levels of business, both in 2022 and 2023, and it seems like we’re going to see that continue in 2024.
So that should put us in a good position to accomplish this 8% CAGR sales growth that we would need to achieve our 2026 targets.
Itay Michaeli: That’s very helpful. Thanks, Sachin. Maybe just as a follow up, maybe for Jerome. You had really good margin performance in the quarter despite some of the customer vehicle launch delays that you outlined. So with revenue expected to improve for the rest of the year, how should we think about the puts and takes of the sequential incremental margin?
Jerome Rouquet: Yes, so we had pretty decent margins. In fact, in Q1, it was a solid start of the year. And to your point, we were at 11% overall margin, with sales being slightly lower than what we had exiting 2023. So I would say, it was a fairly clean quarter, a minimal amount of one-timers, pretty good on operational execution, including launches. And I would say that our cost controls remains pretty strong. And another thing as well I’d like to highlight is the fact that we were able to negotiate a lot of our annual pricing as well as recoveries already in Q1. So that derisks a little bit the rest of the year. So as we look at the second quarter, I’ve highlighted that we would have a level of sales that would be slightly over $1 billion.
The way we’re thinking about it in terms of margin progression is still going with the high-double-digit incrementals that we’ve been using in the past few quarters or years, with maybe the exception of engineering, that will continue to increase a little bit in Q4 from a gross engineering standpoint. And then we’ll see later in the year improvement on the recovery side. So generally, that’s how Q2 should shape up. And then for the second half of the year, we’ll have, obviously, revenues, which will be in excess of $2 billion. And then we are thinking about incrementals as well in the same way, with a slight benefit coming from engineering because of the recoveries. So that’s how we think the year will develop. But again, a very good base in Q1 with 11% EBITDA margin.
Itay Michaeli: Appreciate all that detail. Thanks so much.
Jerome Rouquet: Thank you.
Operator: Your next question is from the line of Shreyas Patil with Wolfe Research.
Shreyas Patil: Hi, thanks so much for taking the question. Maybe just one just to confirm. So as you think about this quarter, I think, Jerome, in the past you’ve talked about a normalized margin is somewhere around 11%. That’s kind of what you achieved in the fourth quarter. For the full year, I think the guide is for somewhere around 11.7%. So as we think about the levers of upside there, growth is obviously one factor, but just curious how you think about cost performance relative to increases in engineering or SG&A.
Jerome Rouquet: Yes. So to your point, 11.8% for the full year in terms of the guidance at the midpoint, so we’re running pretty much on track. In terms of the drivers that are going to help us getting to the 11.8%, obviously, volume and scale has been very important for us. But at the same time, and we saw that already in Q1 versus prior year where we’ve gained 70 basis points of margin, execution, productivity, efficiencies are drivers that have been helping us tremendously over the years, and it did in Q1. So that’s another driver that you’ll see as we go through the year. In terms of engineering, we’re still planning to be in the mid-5% range in terms of engineering as a percentage of sales and SG&A in the mid-4%. So it’s very consistent with what we’ve been talking about two months ago. And that implies that engineering will go up slightly as we go throughout the year. But given the sales level, percentages will go down and it’s a little bit the same for SG&A.
Shreyas Patil: Okay. All right, thanks. And then maybe, just maybe, looking beyond this year, I guess trying to think about the incremental margins that you’ve been expecting for the next few years, I think if you exclude the price recoveries, you’re talking about high teens incrementals. And I’m just wondering in the context of the products that you’re supplying, the amount of technology that’s going into things like SmartCore, and obviously your own software that you’re incorporating, do you see opportunities for that to be better? Because I guess when we just look at regular suppliers, we typically see incremental margins of somewhere around 20% to 30%. And given the amount of value add that you’re providing, one would assume there’s opportunity for that to be better. Thanks.
Sachin Lawande: Yes. So Shreyas, let me take that. This is Sachin. We do see opportunities in the mid-term to drive more of a software and services driven business opportunity in addition to our products, or I should say alongside our products, and that would have an incremental or accretive margin opportunity associated with that business. That’s what Jerome alluded to earlier as being part of our focus as we broaden our business. We were largely focused on a platform approach as a margin driver. In the past couple of years, we’ve seen the benefits of that in our current performance. And now as we drive more of a platform strategy, now we can go forward with an IP-led services strategy for software with the same customers that we are providing the hardware to. As these systems need over-the-air updates, incremental feature updates, these things start to come into play, and we are building ourselves up for that opportunity as we go forward from here.
Operator: Your next question is from the line of Mark Delaney with Goldman Sachs.
Mark Delaney: Yes, good morning. Thanks for taking my questions. You mentioned BMS was off to a strong start in 1Q, but I’m hoping to better understand how Visteon is thinking about the year. Last quarter, I think Visteon said it was using a more conservative view on EV volumes in its guidance for 2024 than customer forecasts, and I’m hoping to understand if that’s still the case.
Sachin Lawande: Yes. No, the short answer is, yes, definitely, we are maintaining our guidance for the full year. I’m really happy that the first quarter has come strong and looks like the Q2 momentum is also pretty robust. And as we discussed previously, the pipeline of how the BMS is shipped to the customer and then eventually launched into the vehicle, that is a little bit longer than, say, our other products. So we are pretty comfortable with that strong performance for the next couple of quarters, and then we will have to see how it develops beyond that. So for now, I think it is still appropriate to take a slightly conservative perspective that we have in our original guidance for the year, and then we’ll update it if things look different.
Mark Delaney: That’s helpful context. Thanks. My second question was trying to understand some of the share gain opportunities. I think 1 opportunity for Visteon has been to gain share at customers in Japan. You spoke to some wins in 1Q with Japanese auto OEMs, but could you put that into some broader context about how well Visteon is doing with its goal to gain traction in the region? Thanks.
