Q1 2024 Aptiv PLC Earnings Call
Please standby we are about to begin.
Operator: Stand by, we are about to begin. Good day and welcome to the Aptiv Q1 2024 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jane Wu, Vice President of Investor Relations and Corporate Development. Please go ahead.
Speaker Change: Good day and welcome to the Apt F Q1, 'twenty 'twenty four earnings call.
Speaker Change: Today's conference is being recorded at this time I would like to turn the conference over to Jean <unk>, Vice President of Investor Relations and corporate development. Please go ahead.
Jean: Thank you Jess good.
Jane Wu: Good morning, and thank you for joining Aptiv's first quarter 2024 Earnings Conference Call. The press release and related tables, along with the slide presentation, can be found on the investor relations portion of our website at Aptiv.com. Today's review of our financials excludes amortization, restructuring, and other special items and will address the continuing operations of Aptiv. The reconciliations between GAAP and non-GAAP measures for our first quarter results, as well as our 2024 outlook, are included at the back of the slide presentation and the earnings press release.
Jean: And thank you for joining at this first quarter 'twenty 'twenty four earnings conference call.
Jean: Our press release and related tables, along with the slide presentation can be found on the Investor relations portion of our website at <unk> Dot com.
Jean: Today's review of our financials exclude amortization restructuring and other special items and will address the continuing operations adapted.
Jean: A reconciliation to GAAP and non-GAAP measures for our first quarter results as well as the 'twenty 'twenty four outlook are included at the back of the slide presentation and the earnings press release.
Jane Wu: During today's call, we will be providing certain forward-looking information that reflects Aptiv's current view of future financial performance and may be materially different for reasons that we cite in our Form 10-K and other SEC files. Joining us today will be Kevin Clark, Aptiv Chairman and CEO, and Joe Massaro, Vice Chairman of Business Operations and Chief Financial Officer. Kevin will provide a strategic update on the business, and Joe will cover the financial results in more detail before we open the call to Q&A. With that, I'd like to turn the call over to Kevin Clark.
Jean: During today's call, we will be providing certain forward looking information that reflects <unk> current view of future financial performance and may be materially different for reasons that we cite in our Form 10-K and other SEC filings.
Jean: Turning us today will be Kevin Clark, <unk>, Chairman, and CEO, and Joe Massaro, Vice Chairman of business operations, and Chief Financial Officer.
Jean: Kevin will provide a strategic update on the business and Joe will cover the financial results in more detail before we open the call to Q&A with that I'd like to turn the call over to Kevin Clark. Thank you Jane and thanks, everyone for joining us. This morning, let's begin on slide three.
Kevin P. Clark: Thank you, Jane, and thanks to everyone for joining us this morning. Let's begin with slide three. Operationally, we had a strong start to the year, demonstrating our ability to execute despite some headwinds. Touching on a few highlights, new business bookings reached almost $13 billion, reflecting the continued demand for our industry-leading product portfolio. First quarter revenue was just under $5 billion, representing adjusted year-over-year growth of 2%, impacted by continued slowing of electric vehicle production in North America, production, and increased labor inflation. Additionally, earnings per share increased 27% to $1.16. Lastly, we repurchased $600 million of stock during the quarter. Hello, apologies; we seem to have had a technical difficulty, so if it's okay, I'll start from the beginning.
Kevin P. Clark: Operationally, we had a strong start to the year, demonstrating our ability to execute despite some headwinds.
Kevin P. Clark: You had a few highlights new business bookings reached almost 13 billion, reflecting the continued demand for our industry leading product portfolio.
Joseph R. Massaro: First quarter revenue was just under four 5 billion, representing adjusted year over year growth was 2% impacted by continued slowing of electric vehicle production in North America and Europe.
Joseph R. Massaro: Production and increase labor.
Joseph R. Massaro: <unk> and earnings per share increased 27% to $1 16.
Joseph R. Massaro: Lastly, we repurchased 600 billion of stock during the quarter.
Joseph R. Massaro: Great.
Speaker Change: Hello oncology seem to have had a technical difficulty so it's okay.
Speaker Change: I'll start from from the beginning.
Kevin P. Clark: So again, thanks Jane, and thanks everyone for joining us this morning. Let's begin with slide three. Operationally, we had a strong start to the year, demonstrating our ability to execute despite some headwinds. Touching on a few highlights, new business bookings reached almost $13 billion, reflecting the continued demand for our industry-leading product portfolio. First quarter revenue was just under $5 billion, representing adjusted year-over-year growth of 2%, impacted by the continued slowing of electric vehicle production in both North America and Europe.
Speaker Change: So again, thanks, Jane and thanks, everyone for joining us. This morning, let's begin on slide three operationally, we had a strong start to the year demonstrating our ability to execute despite some headwinds.
Kevin P. Clark: Keep It Down operating income totaled $720 million and $544 million, respectively, representing more than 20% growth and roughly 200 basis points of margin. Reflecting Benefits from Productivity Initiatives and Cost Action, which offset lower vehicle production and increased labor, earnings per share increased 27% to $1. Lastly, we repurchased $600 million of stock during the quarter, bringing the total amount of shares repurchased to $900 million over the last two quarters
Speaker Change: Now a few highlights new business bookings reached almost 13 billion, reflecting the continued demand for our industry leading product portfolio.
Speaker Change: First quarter revenue was just under $5 billion, representing adjusted year over year growth of 2% impacted by continued slowing of electric vehicle production in both North America and Europe.
Speaker Change: EBITDA and operating income totaled.
Speaker Change: $120 million and $544 million respectively.
Speaker Change: Representing more than 20% growth and roughly 200 basis points of margin expansion.
Speaker Change: Benefits from productivity initiatives and cost actions, which offset lower vehicle production and increased labor inflation and earnings per share increased 27% to $1 16.
Speaker Change: Lastly, we repurchased $600 million of stock during the quarter, bringing the total amount of shares repurchased to $900 million over the last two quarters.
Kevin P. Clark: In summary, the team did an exceptional job delivering solutions to our customers while at the same time increasing operating efficiencies and reducing our cost structure. Turning to slide four, while we were encouraged by our strong first quarter execution, we believe that it's prudent to update our 2024 outlook to reflect the contiguous weakness in electric vehicle production, including significant customer schedule reductions over the past few weeks and the current negative impact of foreign exchange rates. As a result, we're lowering our full year 2024 revenue guidance by $450 million.
Speaker Change: Summary, the team did an exceptional job delivering solutions to our customers while at the same time, increasing operating efficiencies and reducing our cost structure.
Speaker Change: Turning to slide four while we are encouraged by our strong first quarter execution. We believe it is prudent to update our 2024 outlook reflect the continued weakness in electric vehicle production.
Speaker Change: Including significant customer schedule reductions over the past few weeks and the current negative impact of foreign exchange rates as a result, we're lowering our full year 2020 for revenue guidance by $450 million.
Kevin P. Clark: Principally reflecting a reduction in our outlook for high-voltage revenue. While we continue to believe that all regions are on the path to full electrification, some will move faster than others, so we consider it prudent to reduce our near-term revenue expectations. As the industry navigates the current headwinds, we're maintaining our high standard of flawless execution while continuing to reduce our cost structure and strengthen our sustainable business model to support our customers at a record number of new program launches. Almost 2300 in 2024, including over 750 program launches in the first quarter.
Speaker Change: Really reflecting a reduction in our outlook for high voltage revenue growth.
Speaker Change: While we continue to believe that all regions are on the path to full electrification some moving faster than others. So we considered prudent to reduce our near term revenue and revenue expectations.
Speaker Change: As the industry navigates the current headwinds.
We're maintaining our high standard of flawless execution, while continuing to reduce our cost structure and strengthen our sustainable business model.
Speaker Change: We're supporting our customers at a record number of new program launches almost 23 hundreds in 2024 and.
Speaker Change: Including over 750 program launches in the first quarter.
Kevin P. Clark: The pace of which gives us confidence in the acceleration of our second half revenue growth. We've also proactively executed initiatives that have lowered our cost structure. In early 2023, we launched several initiatives to improve engineering efficiency in both our ASUX and SPS segments, and in late 2023, we executed additional cost actions across all overhead and operating costs, targeting more than a 10% reduction in salary pay for payroll. And in response to the recent softness of electric vehicle production schedules, we kicked off incremental cost actions that will generate an additional $50 million of cost savings through the balance of this year.
Speaker Change: Many of which gives us confidence in the acceleration of our second half revenue growth.
Speaker Change: We are also proactively executed initiatives that have lowered our cost structure in early 'twenty three we launched several initiatives to improve engineering efficiency in both our <unk> and Sps segments and in late 2023, we executed additional cost actions across all overhead and operating functions targeting more than a 10% reduction.
Speaker Change: <unk> salary payments payroll.
Speaker Change: And in response to the recent softness in electric vehicle production schedules, we take cost incremental cost actions that will generate an additional $50 million of cost savings through the balance of this year.
Kevin P. Clark: The net result of these puts and takes is a $50 million reduction in our full-year outlook for operating income to $2.5 billion. About the bottom end of our prior guidance range, representing 11.8% operating margin and just under 80% growth in operating income, I'm pleased to announce that we've reached a formal agreement with the Hyundai Motor Group regarding our emotional joint venture. Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: The net result of these puts and takes.
Is a $50 million reduction in our full year outlook for operating income to $2 5 billion.
Speaker Change: Above the bottom end of our prior guidance range, representing 11, 8% operating margin and just under 80% growth in operating income.
Speaker Change: I'm pleased to announce that we've reached a formal agreement with Hyundai Motor group regarding our multiple joint venture, which positions motional for ongoing success, while addressing the needs of both joint venture partners Joel will go into more detail later in the presentation.
Kevin P. Clark: Joe will go into more detail later in the presentation. Lastly, we continue to believe that our stock is undervalued and presents an attractive opportunity to return capital to shareholders. As such, we're doubling our share repurchase target from $750 million to $1.5 billion during 2024. In summary, our conviction regarding the strength of our competitive position and the long-term value of our business is as high as ever, and we remain committed to delivering value to our shareholders. Moving to slide five.
Speaker Change: Lastly, we continue to believe that our stock is undervalued and presents an attractive opportunity to return capital to shareholders as such.
Speaker Change: We're doubling our share repurchase target from $750 million to $1 5 billion during 2024.
Speaker Change: In summary, our conviction regarding the strength of our competitive position and the long term value of our business is as high as ever and we remain committed to delivering value to our shareholders.
Speaker Change: Moving to slide five.
Kevin P. Clark: As mentioned, bookings reached nearly $13 billion in the quarter. Advanced Safety and User Experience bookings total $2.5 billion, driven by active safety bookings of $1.9 billion, including our first full-system Gen 6 ADAS award, including in-cabin sensing and the full suite of WinRiver embedded in-studio developer software with an emerging EV player, bringing the cumulative active safety and user experience segment awards to $33 billion since the first quarter of 2021. Signal and Power Solutions new business bookings reached a record of over $10.3 billion, reflecting electrical distribution system cloaking orders totaling a record $7 billion, including an award from a leading global Japanese OEM for both plug-in hybrids and battery electric vehicles for the North American market, and Connection Systems bookings totaling $2.5 billion, putting an award from a leading electric vehicle OEM for high speed cable assemblies on a global electric vehicle platform, bringing Cum $70 billion since the first quarter of 2021.
Speaker Change: Bookings reached nearly $13 billion in the quarter.
Speaker Change: Advanced safety and user experience bookings totaled $2 5 billion driven.
Speaker Change: Driven by active safety bookings of $1 9 billion, including our first full set to Gen. Six eight apps award, including in cabin sensing and with full suite of wind River embedded in studio developer software with an emerging E player, bringing the cumulative active safety and user experience segment awards to 33 billion.
Speaker Change: The first quarter of 2021.
Speaker Change: Signal and power solutions, new business bookings reached a record of over $10 3 billion.
Speaker Change: Frosting electrical distribution systems bookings totaling a record $7 billion.
Speaker Change: Putting an award from a leading global Japanese OEM for both plug in hybrids and battery electric vehicles for the North American market.
Speaker Change: In connection systems bookings totaling $2 five buildings.
Speaker Change: Adding an award from a leading electric vehicle Oems vehicle OEM for high speed cable assemblies on a global electric vehicle platform.
Speaker Change: Bringing cumulative S and PFS segment bookings to $70 billion since the first quarter of 2021.
Kevin P. Clark: In China, across both segments, we were awarded $3 billion in new business awards with both local and multinational OEMs, including a vehicle architecture award from a leading local Chinese OEM for a low-cost battery electric vehicle, putting us on track to exceed our full year 2023 bookings of just under $6 billion. With our industry-leading portfolio, our global scale, and our ability to execute highly complex programs, we remain confident in achieving our target of 35 billion business awards in 2024.
Speaker Change: In China across both segments, we were awarded $3 billion in New business awards with both local and multinational Oems, including our vehicle architecture Award from a leading local Chinese OEM for a low cost battery electric vehicle.
Speaker Change: Putting us on track to exceed our full year 2023 bookings of just under $6 billion.
Speaker Change: With our industry, leading portfolio, our global scale and our ability to execute highly complex programs. We remain confident in achieving our target of 35 billion of business Awards during 2024.
Kevin P. Clark: Turning to slide 6 to review our advanced safety and user experience segment's first quarter highlights, the segment reported 5% growth driven by 24% growth in active safety, which is on track for 20% full year revenue growth, more than offsetting the challenging comparables for user experience in Wind River in the quarter. Solid revenue growth was coupled with ongoing productivity and, including the continued maturation of our global product organization, driving higher levels of platform usage and software reuse.
Speaker Change: Turning to slide six to review, our advanced safety and user experience segment first quarter highlights.
The segment reported 5% growth driven by 24% growth in active safety.
Speaker Change: Which is on track for 20% full year revenue growth more than offsetting the challenging comparables for user experience and wind river in the quarter.
Speaker Change: Solid revenue growth was coupled with ongoing productivity improvements.
Speaker Change: The continued maturation of our global product organization, driving higher levels of platform usage and software reuse.
Kevin P. Clark: The consolidation of engineering centers and the continued rotation of engineering resources to our tech center in Bangalore, India, which is driving our percentage located in the best cost countries to over 75%. The ongoing adoption of WinRiver Studio, which is resulting in a roughly 40% improvement in workflow performance in the software building and scanning process.
Speaker Change: The consolidation of engineering centers and the continued rotation of engineering resources towards to our Tech Center in Bangalore, India, which is driving our percentage located in best cost countries to over 75%.
Speaker Change: The ongoing adoption of wherever studio, which is resulting in a roughly 40% improvement in workflow performance and the software building and scanning processes.
Kevin P. Clark: And lastly, the continued progress we've made in validating local Chinese semiconductor suppliers to meet the increasing demand from local Chinese OEMs for localized sources of supply to provide our global EMs with increased supply chain flexibility and resilience, at significantly lower cost. In terms of commercial highlights in the quarter, in addition to the Gen 6 ADAS award I mentioned earlier, we were awarded a radar program by Global Japanese OEM for applications across multiple vehicle platforms in the North American, European, and Asia-Pacific markets. And Wind River Studio Developer was selected by a major local Chinese OEM to help increase efficiency and reduce costs associated with the development, deployment, operation, and servicing of intelligent edge systems. Moving to slide seven.
Speaker Change: Lastly, the continued progress we've made validating local Chinese semiconductor suppliers to meet the increasing demand from local Chinese Oems for localized sources of supply.
Speaker Change: Provider global Oems with increased supply chain flexibility and resiliency at significantly lower costs.
Speaker Change: In terms of commercial highlights from the quarter. In addition to the <unk> Award I mentioned earlier, we were awarded a radar program by global Japanese OEM for applications across multiple vehicle platforms in the North American European and Asia Pacific markets and.
Speaker Change: In winter of our studio developer was selected by a major local Chinese OEM shall increase efficiency and reduce costs associated with the development deployment operation in servicing of the collagen and systems.
Speaker Change: Okay.
Speaker Change: Moving to slide seven.
Kevin P. Clark: As I mentioned earlier, an emerging electric vehicle OEM has selected the Aptiv Gen6 ADAS platform to enable turnkey ADAS across a wide range of platforms and models, with start of production in 2026. This is our first fully productized Gen 6 ADAS platform award, building on Aptiv's proven hands-free highway, full system solutions, which are already in production. This open, modular, and scalable 8S platform will enable advanced, hands-free urban and highway vehicle automation, driver safety, and more, and region-specific features, including fully-integrated sensors tightly coupled with Aptiv's edge-to-cloud compute framework.
Speaker Change: As I mentioned earlier and emerging electric vehicle OEM has selected the captive Jensen for Adas platform to enable turnkey aaas across a wide range of platforms and models with the startup of production in 2026.
Speaker Change: This is our first full system product ties Gen. Six Adas platform Award building adapt as proven hands free highway full system solutions, which are already in production.
Speaker Change: It's open modular and scalable way gas platform will enable advanced hands free urban and highway vehicle automation driver safety and region specific features including fully integrated sensors tightly coupled with apt as edge to cloud compute framework.
Kevin P. Clark: A containerized feature stack enabled by Aptiv's AIML Enhanced Solution, including radar machine learning and ML-based vehicle behavior, and WinRiver's extensive offerings, such as WinRiver Edge with VxWorks, and WinRAR Studio, to develop, deploy, and operate the software over the life of the program.
Speaker Change: Our containerized feature stack enabled by half this AI ml enhanced solutions.
Speaker Change: Joining radar machine learning and <unk>.
Speaker Change: Base vehicle behavior.
Speaker Change: And whenever his extensive offerings such as whenever edge with VX works and winter or a studio to develop deploy and operate the software over the life of the program.
Kevin P. Clark: This award is a testament to our ability to deliver a full system, productized solution to our customers while validating the value of our Gen6 ADAS platform, which includes flexibility across key layers of the stack to meet our customers' needs, availability of hardware and software components from entry-level compliance up to level 3 and industry-leading performance at a very competitive cost. Turning to signal power solutions, see first quarter highlights on slide 8.
Speaker Change: This award is a testament to our ability to deliver a full system product type solution to our customers while validating the value of our Gen. Six Adas platform, which includes flexibility across key layers of the SaaS to meet our customers' needs.
Speaker Change: Scalability of hardware and software components from entry level compliance up to level III and industry, leading performance at a very competitive cost.
Speaker Change: Turning to signal and power solutions first quarter highlights on slide eight.
Kevin P. Clark: We continue to benefit from our industry-leading portfolio, global scale, and experience designing and developing optimized vehicle architectures across the entire range of powertrain platforms, from the internal combustion engine to the battery electric vehicle. First quarter revenues increased 1% driven by strong growth in China, partially offset by a decline in high voltage revenues, the result of the softening production schedules for electric vehicle platforms in both North America and Europe that I mentioned earlier. New business bookings during the quarter totaled over $10 billion, and they continue to gain traction with top local OEMs in China.
Speaker Change: We continue to benefit from our industry, leading portfolio global scale and experience designing and developing optimized vehicle architecture solution across the entire range of powertrain platforms from the internal combustion engine to battery electric vehicles.
Speaker Change: First quarter revenues increased 1% driven by strong growth in China, partially offset by decline in high voltage revenues. The result of the soft and production schedules for electric vehicle platforms in both North America, and Europe that I mentioned earlier.
Speaker Change: New business bookings during the quarter totaled over $10 billion.
Speaker Change: We continue to gain traction with top local Oems in China.
Kevin P. Clark: During the quarter, electrical architecture bookings with China local AMs reached more than $1 billion, including major awards across each of the five top local EMs, and received our first High Voltage Integrated Power Electronics Award for converters from a global EV manufacturer for its next-gen vehicle platform.
Speaker Change: During the quarter electrical architecture bookings bookings with China Oems reached more than $1 billion, including major awards across each of the five top local Oems.
Speaker Change: Our first high voltage integrated power Electronics award for a DC to DC converters from a global global EV manufacturer for its next Gen vehicle platforms.
Kevin P. Clark: As discussed previously, our single and power solution segment continues to be impacted by increased labor inflation. To mitigate the impact, the operating team has initiated several actions, including further consolidation of our manufacturing footprint while rotating more of our footprint to Central America and North Africa, and Modifying Vehicle Architecture Designs to Enable the Increased Automation of Select Manufacturing Processes, with a target to increase automation to 30% of standard labor hours by 2026 and over 50% by 2030.
Speaker Change: As discussed previously our signal and power solutions segment continues to be impacted by increased labor inflation.
Speaker Change: To mitigate the impact the operating team has initiated several actions, including the further consolidation of our manufacturing footprint, while rotating more of our footprint to Central America and North Africa.
Speaker Change: And modify and vehicle architecture designed to enable the increased automation of select manufacturing processes with a target to increase automation and 30% of standard labor hours by 2026.
Speaker Change: Over 50% by 2030.
Speaker Change: Okay.
Kevin P. Clark: Moving to slide nine, and our OEM partners adapt to the shifting pace of consumer electric vehicle demand and emission requirements. Aptiv is positioned to deliver high-performance, cost-effective solutions that span the powertrain spectrum and adjust our capacity to align with the needs of our customers.
Speaker Change: Moving to slide nine.
Speaker Change: And our OEM partners adapt to the shifting pace of consumer electric vehicle demand and emission requirements.
Speaker Change: After this position to deliver high performance cost effective solutions that span the powertrain spectrum.
Speaker Change: Adapt our capacity to align with the needs of our customers.
Kevin P. Clark: Starting on the left of the slide, as we've discussed previously, we're benefiting from significant and increasing addressable content per vehicle, from approximately 800 in electrical architecture content for an internal combustion engine platform to approximately 2300 for a full battery electric vehicle. In many cases, this incremental content represents an opportunity to apply existing capabilities to a much larger addressable market. Although global penetration rates for hybrids and daily electric vehicles may fluctuate in the near term, we firmly believe that the long-term macro tailwind remains attractive as the industry continues down the path to full electrification.
Speaker Change: Starting on the left of the slide as we've discussed previously we're benefiting from significant and increasing addressable content per vehicle from approximately 800 in electrical architecture content for an internal combustion engine platform.
Speaker Change: Approximately 2300 for a full battery electric vehicle.
Speaker Change: In many cases this incremental content represents an opportunity to apply existing capabilities to much larger addressable market.
Speaker Change: Although global penetration rates for hybrids and battery electric electric vehicles may fluctuate in the near term.
Speaker Change: We firmly believe that the long term macro tailwind remains attractive as the industry continues down the path to full electrification.
Kevin P. Clark: That said, we've taken a more conservative approach to the pace of electrification, and while we will continue to be more conservative than the broader market sentiment, our outlook still represents a significant market opportunity with meaningful future upside. Finally, on the right side of the slide.
Speaker Change: That said, we've taken a more conservative approach to the pace of electrification and while we will continue to be more conservative than the broader market sentiment our outlook still represents a significant market opportunity with meaningful future upside.
Speaker Change: Finally on the right side of the slide the strength of our current portfolio across regions powertrains and platforms significantly insulates, our business from any single industry headwind.
Kevin P. Clark: The strength of our current portfolio across regions, powertrains, and platforms significantly insulates the business from any single industry headwind. To illustrate this point, we're to assume that growth of all electrified vehicle platforms on which we have content was reduced to zero in 2024, including low voltage solutions on battery electric vehicles, with no substitution from ICE vehicle platforms. Our overall growth rate would decline by one... As a result, we believe that we're uniquely positioned to deliver innovative solutions to our customers and value our shareholders across all Powertrain platforms. Moving to slide 10.
Speaker Change: To illustrate this point, if we were to assume that growth of all electrified vehicle platforms on which we have content was reduced to zero in 2024.
Speaker Change: Including low voltage solutions on battery electric vehicles with no substitution from ice vehicle platforms. Our overall growth rate would decline by one to two points.
Speaker Change: As a result, we believe that we're uniquely positioned to deliver innovative solutions to our customers and value to our shareholders across all powertrain platforms.
Speaker Change: Moving to slide 10.
Kevin P. Clark: Before I turn the call over to Joe to walk through the financials, I wanted to touch on two recent customer events. In late February, the Wind River and Aptiv programs exhibited at Mobile World Congress in Barcelona, giving us the opportunity to collaborate with a wide range of telco customers and partners. This team showcased our ability to support operations at scale for 5G VRAN and O-RAN deployments, while highlighting solutions being leveraged by our customers to improve performance and reliability, reduce costs, and unlock new business models.
Speaker Change: Before I turn the call over to Joe to walk through the financials I wanted to touch on two recent customer events.
Joseph R. Massaro: In late February the wind River and <unk> exhibited at mobile World Congress in Barcelona, giving us the opportunity to collaborate with a wide range of telco customers and partners.
Joseph R. Massaro: The team showcase our ability to support operations at scale for <unk>, and Orient deployments, while highlighting solutions being leveraged by our customers to improve performance and reliability reduce costs and unlock new business models.
Kevin P. Clark: Among the many areas of interest to our telco customers was our unique ability to support the convergence of telco infrastructure with a software-defined vehicle, enabling the deployment and update of new services much faster and much more efficiently. Last week, we took the opportunity to further strengthen our strategic partnerships in China during the 2024 Beijing Auto Show. Led by our local China management team, we engage with a wide range of customers to discuss key technology, consumer expectations, performance, and cost requirements that are unique to the Chinese market.
Joseph R. Massaro: Among the many years of interest to our telco customers with our unique ability to support the convergence of telco infrastructure with the software defined vehicle.
Joseph R. Massaro: Enabling the deployment and update of our new services much faster and much more efficiently.
Joseph R. Massaro: Last week, we took the opportunity to further strengthen our strategic partnerships in China during the 2020 for Beijing Auto show.
Joseph R. Massaro: Led by our local China management team, we engage with a wide range of customers to discuss key technology trends consumer expectations and performance and cost requirements that are unique to the China market.
Kevin P. Clark: Local OEMs are demanding full system solutions spanning both hardware and software, while consumer interest is accelerating for higher levels of ADAS and enhanced user experience. Aptiv is perfectly positioned in this market to deliver solutions with increased flexibility, higher performance, and faster speed to market, all at a much lower cost. While we have active engagement with customers across all regions and end markets, it's important to note that they are all essentially asking for the same thing. The right hardware, the right software, and the right engineering toolchain are needed to support software-defined functionality for mission-critical applications.
Joseph R. Massaro: Local Oems are demanding full system solutions spanning both hardware and software.
Joseph R. Massaro: While consumer interest in accelerating for higher levels of Adas and enhanced user experience.
Joseph R. Massaro: After this perfectly positioned in this market.
Joseph R. Massaro: To deliver solutions with increased flexibility higher performance and faster speed to market all at a much lower cost.
Joseph R. Massaro: While we have active engagements with customers across all regions and end markets. It's important to note that for essentially asking for the same thing.
Joseph R. Massaro: The right hardware, the right software and the right engineering tool chain to support software defined functionality for mission critical applications.
Kevin P. Clark: And as a result, our unique edge-to-cloud portfolio is apt to capitalize not only on the automotive industry's transition to software-defined vehicles, but also on the digital transformation and convergence of multiple industries, as intelligence increasingly moves to the edge. By leveraging these proven solutions across industries, Aptiv is positioned for sustained, long-term, profitable growth. With that, I'll now turn the call over to Joe.
Joseph R. Massaro: And as a result, our unique edge to cloud portfolio positions app to capitalize not only on the automotive industry's transition to software defined vehicles.
Joseph R. Massaro: But also on the digital transformation and convergence of multiple industries as intelligence increasingly moves to the edge.
Joseph R. Massaro: By leveraging <unk> proven solutions across industries, App and is positioned for sustained long term profitable growth.
Joseph R. Massaro: With that I'll now turn the call over to Jeff.
Joseph R. Massaro: Thanks, Kevin, and good morning, everyone. Starting with the first quarter on slide 11, Aptiv delivered strong financial results in the quarter, reflecting robust execution across both segments. Continued progress on our Cost Savings and Margin Improvement Act, resulting in an operating margin improvement of 200 basis points over the prior year. Revenues were $4.9 billion, up 2%, or 3% above underlying global vehicle production, which was down 1% in the quarter. However, growth was negatively impacted by the continued slowing of battery electric vehicle platforms in the quarter, particularly in North America and Europe, where we saw our high voltage revenue down 2% and 6%, respectively.
Jeff: Thanks, Kevin and good morning, everyone, starting with the first quarter on slide 11.
Jeff: Assets delivered strong financial results in the quarter, reflecting robust execution across both segments and continued progress on our cost savings and margin improvement actions.
Jeff: <unk> operating margin improvement of 200 basis points over the prior year.
Jeff: Revenues were $4 9 billion up 2% or 3% above underlying global vehicle production, which was down 1% in the quarter.
Jeff: Growth was negatively impacted by the continued slowing of battery electric vehicle platforms in the quarter, particularly in North America, and Europe, where we saw our high voltage revenue down, 2% and 6% respectively.
Joseph R. Massaro: Revenues on ICE platforms and high voltage solutions on hybrids were up 2% and 26%, respectively. As I will discuss shortly, given the continued weakness in electric vehicle production, including significant customer schedule reductions over the past few weeks, we are revising downward our 2024 outlook for the year. Adjusted EBITDA and operating income were $720,000,000 and $544,000,000, respectively. Operating income margin expanded 200 basis points versus the prior year, in part driven by cost reduction and recovery programs put in place in 2023, as well as continued achievement of our operating performance initiatives, including the continued rotation of our engineering footprint to the best cost location. The year-over-year effects and commodity impact were negligible.
Jeff: Revenues on ice platforms and high voltage solutions on hybrids were up 2% and 26% respectively.
Jeff: As I will discuss shortly given the continued weakness in electric vehicle production, including significant customer schedule reductions over the past few weeks, we are revising downward our 2020 for outlook for the year.
Jeff: Adjusted EBITDA and operating income were $720 million and $544 million respectively.
Jeff: Operating income margin expanded 200 basis points versus the prior year.
Jeff: In part driven by cost reduction and recovery programs put in place in 2023.
Jeff: As well as continued achievement of our operating performance initiatives, including the continued rotation of our engineering footprint to best cost locations.
Jeff: Year over year, FX and commodity impact were negligible.
Joseph R. Massaro: Earnings per share in the quarter were $1.16, an increase of 27% from the prior year, including year-over-year earnings growth of 24%, partially offset by higher tax expense, and sharer purchases completed in 2023 and the first quarter of 2024 added approximately $0.03 to EPS in the quarter. Operating cash flow was strong, totaling $244 million, capital expenditures were $265 million, and share purchases totaled $600 million. Looking at first quarter revenues on slide 12, as noted, revenue of $4.9 billion was up 2%. Revenue growth was driven by strong active safety growth as well as growth in commercial vehicle and engineering components, although partially offset by lower high voltage.
Jeff: Earnings per share in the quarter were $1 16, an increase of 27% from the prior year, including year over year earnings growth of 24%, partially offset by higher tax expense and share repurchases completed in 2023 in the first quarter 2024 added approximately <unk> <unk> to EPS in the quarter.
Jeff: Operating cash flow was strong totaling $244 million.
Jeff: Capital expenditures were $265 million and share repurchases totaled $600 million.
Jeff: Okay.
Jeff: Looking at first quarter revenues on slide 12.
Jeff: As noted revenue were $4 9 billion was up 2%.
Jeff: Revenue growth was driven by strong active safety growth as well as growth in commercial vehicle and engineered components.
Jeff: Partially offset by lower high voltage revenue.
Joseph R. Massaro: That price and commodities were positive for the top line, partially offset by foreign exchange. Moving to the right, revenues outgrew vehicle production in all regions. North American revenues are up 2% or 1% above market driven by increases in active safety and engineered components, partially offset by lower high voltage. In Europe, revenues are down 1% year-over-year or two points above vehicle production, with lower EV production in the region, partially offset by double-digit growth in active savings. And in China, revenues grew 5 points over the market, driven by growth with several key local OEMs. Moving to the ASUX segment on the next slide.
Jeff: That price and commodities were a positive to the top line, partially offset by foreign exchange.
Jeff: Moving to the right revenues outgrow vehicle production in all regions.
Jeff: With American revenues were up 2% or 1% above market driven by increases in active safety and engineered components.
Jeff: Partially offset by lower high voltage.
Jeff: In Europe revenues were down 1% year over year or two points above vehicle production with lower TV production in the region, partially offset by double digit growth in active safety.
Jeff: And in China revenues grew five points over market driven by growth with several key local Oems.
Jeff: Moving some aaas UX segment on the next slide.
Joseph R. Massaro: Revenue growth was 5% or 6% above global vehicle production. Active Safety was up 24% in the quarter, benefiting from new program launches as well as continued strong demand across all regions. User experience was down 8% in the quarter, primarily driven by the roll-off of a legacy program in North America and lower multinational JV volumes in China, as discussed during our year-end earnings call. On the River revenue decreased 16% in the quarter due to a strong year-over-year comparison.
Jeff: Revenue growth was 5% or 6% of our global vehicle production.
Jeff: Active safety was up 24% in the quarter benefiting from new program launches as well as continued strong demand across all regions.
Jeff: User experience was down 8% in the quarter, primarily driven by the roll off of a legacy program in North America, and lower multinational JV volumes in China as discussed during our year end earnings call.
Jeff: When risks with river revenue decreased 16% in the quarter due to a strong year over year comparison.
Joseph R. Massaro: As we have discussed, Wind River revenues are lumpy on a quarterly basis. For the full year, we expect mid-teens revenue growth at Wind River. Segment-adjusted operating income in the quarter was $155 million, up significantly over the prior year, driven by cost reductions taken in the second half of 2023, as well as ongoing performance initiatives, including continued rotation of our footprint. Operating income margin in the quarter was 10.8%. Turning on the signal of power on slide 14.
Jeff: As we have discussed wind River wind River revenues are lumpy on a quarterly basis.
Jeff: For the full year, we expect mid teens revenue growth at Wood River.
Jeff: Segment adjusted operating income in the quarter was $155 million up significantly over prior year driven by cost reductions taken in the second half of 2023 as well as ongoing performance initiatives, including continued rotation of our footprint.
Jeff: Operating income margin in the quarter was 10, 8%.
Jeff: Turning to signal and power on slide 14.
Joseph R. Massaro: Revenue in the first quarter was approximately $3.5 billion, an increase of 1% or 2% above vehicle production, driven by growth in engineered components of 3%. Declines in high-voltage revenue on BEVs were partially offset by growth in hybrids, which make up approximately 25% of our high-voltage product line revenue. And China revenues are up 11% as we saw SPS growth of approximately 30% with local OEMs, while we saw growth of 2% with foreign OEMs.
Jeff: Revenue in the fourth and the first quarter was approximately $3 $5 billion, an increase of 1% or 2% above vehicle production.
Jeff: Driven by growth in engineered components of 3%.
Jeff: Clients in high voltage revenue on Fabs were partially offset by growth in hybrids, which make up approximately 25% of our high voltage product line revenues.
In China revenues were up 11% as we saw Sps growth of approximately 30% with local Oems.
Jeff: While we saw growth of 2% with foreign Oems.
Joseph R. Massaro: Segment-adjusted operating income was $389 million, or 11.2%, up 40 basis points over the prior year. As our cost savings and operating performance initiatives significantly reduced the impact of higher labor costs. Additionally, price and commodities were positive, and on a year-over-year basis, the OI impact of foreign exchange was minimal.
Segment, adjusted operating income was $389 million or 11, 2% up 40 basis points over prior year.
Jeff: As our cost savings and operating performance initiatives significantly reduce the impact of higher labor costs.
Jeff: That price and commodities were a positive and on a year over year basis, the Oi impact of foreign exchange was minimal.
Joseph R. Massaro: Moving to slide 15 and our updated macro outlook. As Kevin mentioned, over the past several weeks, we have seen both legacy OEMs as well as global EV OEMs lower production schedules, primarily in North America and Europe. These reductions are being partially offset by select increases in ICE platforms, particularly in North America. As a result, we estimate global vehicle production to be down 1% for the year from a prior forecast of flat.
Jeff: Moving to slide 15, and our updated macro outlook.
Jeff: As Kevin mentioned over the past several years over the past several weeks, we have seen bulk legacy Oems as well as global EV Oems.
Jeff: Our production schedules, primarily in North America and Europe.
Jeff: These reductions are being partially offset by select increases in ice platforms, particularly in North America.
Jeff: As a result, we estimate global vehicle production to be down 1% for the year from our prior forecast of flat.
Joseph R. Massaro: Our outlook for revenue growth is now 5% for the year versus our prior outlook of 7% reflecting growth over the market of 6%. As for our key FX and commodity rates for the remainder of the year, we are now assuming copper at $4.35, the Mexican peso at 17 pesos to the dollar, and the Chinese RMB at 7.15.
Jeff: Our outlook for revenue growth is about 5% for the year versus our prior outlook of 7% reflecting growth over market of 6%.
Jeff: As for our key FX and commodity rates for the remainder of the year. We are now assuming copper at $4 35.
Jeff: Mexican peso at 17 pesos to the dollar and the Chinese RMB at 715.
Jeff: Yeah.
Joseph R. Massaro: Slide 16 has our updated full-year outlook. As discussed, our Q1 Operating Results were substantially in line with our expectations, including the benefit of our cost savings and performance actions. However, as we look at the balance of the year, we do see several likely and persistent headwinds that have caused us to revise and de-risk our full-year outlook. The revised outlook includes revenues of $21.15 billion, down from the prior midpoint of $21.6 billion, representing adjusted revenue growth of 5%. The lower revenues result from the previously mentioned customer schedule reductions, as well as an additional reduction to our H2 revenue growth based on current market conditions.
Jeff: Slide 16 has our updated full year outlook.
Jeff: As discussed our Q1 operating results were substantially in line with our expectations, including the benefit of our cost savings and performance actions.
Joseph R. Massaro: As a result, first half revenue growth has been lowered to 2% from our prior outlook of 4%, and second half growth is now 8%, down from over 9%. Operating income of $2.5 billion or 11.8% of revenues is down $50 million from the prior midpoint. We are increasing our EPS estimate to $6.05 a share at the midpoint as the negative impact of the reduction in earnings is more than offset by the benefit of our share repurchase activity as well as the benefit of the previously mentioned motional transaction, which I'll cover in more detail in a moment. We have also increased our outlook for operating cash flow, primarily reflecting improved working capital. We are now targeting share repurchases of $1.5 billion in 2024, up from our prior guidance of $750 million.
Jeff: However, as we look at the balance of the year, we do see several likely and persistent headwinds that have caused us to revise and derisk our full year outlook.
Jeff: The revised outlook includes revenues of $21.15 billion down from the prior midpoint of 21 6 billion, representing adjusted revenue growth of 5%.
Jeff: The lower revenues result from the previously mentioned customer schedule reductions as well as an additional reduction to our H two revenue growth based on current market conditions.
Jeff: As a result first half revenue growth has been lowered to 2% from our prior outlook of 4% in second half growth is now 8% down from over 9%.
Jeff: Operating income of $2 $5 billion or 11, 8% of revenues.
Jeff: $50 million from the prior midpoint.
Jeff: We are increasing our EPS estimate to $6 five a share at the midpoint as the negative impact of the reduction in earnings is more than offset by the benefit of our share repurchase activity as well as the benefit of previously mentioned most of the previously mentioned emotional transaction.
Jeff: Which I'll cover in more detail in a moment.
We have increased our outlook for operating cash flow, primarily reflecting improved working capital.
Jeff: And we are now targeting share repurchases of $1 $5 billion in 2024.
Jeff: From our prior guidance of $750 million.
Jeff: Yes.
Joseph R. Massaro: Moving to the next slide, we lay out the more significant changes to our outlook. With respect to revenue, global vehicle production decreasing from a previous outlook of flat to now down 1%.
Jeff: Moving to the next slide we lay out the more significant changes to our outlook.
Jeff: With respect to revenue.
Jeff: Global vehicle production decreasing from our previous outlook of flat to now down 1%.
Joseph R. Massaro: Production of our full year high voltage revenue growth from 20% to 5%. The Decrease in High Voltages Partially Offset by Increases in Ice Production Schedules, Primarily in North America, as well as Increases in Net Price and Commodities, Reflecting Higher Copper Prices that Offset the Foreign Exchange Impact on Revenue. The decrease in operating income is driven by the flow-through on lower revenues, as well as the negative impact of foreign exchange, primarily the peso and RMB.
Jeff: The reduction of our full year high voltage revenue growth from 20% to 5%.
Jeff: The decrease in high voltage is partially offset by increases in ice production schedules, primarily in North America as well as increases in net price and commodities, reflecting higher copper prices that offset the foreign exchange impact on revenues.
Jeff: The decrease in operating income is driven by the flow through on lower revenues as well as the negative impact of foreign exchange, primarily the peso in RMB.
Joseph R. Massaro: As it relates to the Mexican peso, although many forecasts expect the peso to weaken over the course of the year, the peso has remained stronger than our initial expectations. Accordingly, we have updated our guidance to reflect an exchange rate of 17 pesos to the dollar. This is more in line with the current spot level and also represents the level at which we have hedged approximately 90% of our 2024 pesos. And finally
Jeff: As it relates to the Mexican peso, although many forecasts expect the peso to weaken over the course of the year. The peso has remained stronger than our initial expectations.
Jeff: Accordingly, we have updated our guidance to reflect an exchange rate of 17 pesos to the dollar.
Jeff: This is more in line with the current spot levels and also represents a level at which we have hedged approximately 90% of our 2024 peso exposure.
Jeff: And finally, despite the macro headwinds we fully expect the benefits of the cost savings and performance actions, we delivered in the first quarter to continue.
Joseph R. Massaro: Despite the macro headwinds, we fully expect the benefits of the cost savings and performance actions we delivered in the first quarter to continue, partially mitigating the volume and foreign exchange impact. Turning to the next slide, we thought it would be helpful to walk our expected first half versus second half revenues in 2024. Second half revenue is expected to increase approximately $800 million.
Jeff: Partially mitigating the volume and foreign exchange impact.
Jeff: Turning to the next slide we thought it would be helpful to walk our expected first half versus second half revenues in 2024.
Jeff: Second half revenue is expected to increase approximately $800 million increases in both segments are driven by new program launches with key customers in all regions.
Joseph R. Massaro: Increases in both segments are driven by new program launches with key customers in all regions. ASUX half over half revenue is expected to increase approximately 200 million dollars, with over half of the increase coming from the launch of one of our largest active safety programs across additional platforms in North America and Europe for a global OEM. Additional platforms are internal combustion vehicles and represent several of the OEM's best-selling platforms.
Jeff: <unk> half over half revenue is expected to increase approximately $200 million.
Jeff: With over half of the increase coming from the launch of one of our largest active safety programs across additional platforms in North America, and Europe for our global Oems.
Jeff: These additional platforms are internal combustion vehicles and represented several of the Oems best selling platforms.
Joseph R. Massaro: Approximately 40% of the launch volume is with local Chinese OEMs, including several launches that have already begun. The increase in signal and power of $500 million includes a launch totaling over $100 million on a large North American internal combustion SUV platform, an additional $100 million across two OEMs for new internal combustion truck launches in North America and Chinese market launches, and volume growth for both local and foreign OEMs of over $100 million.
Jeff: Approximately 40% of the launch volume is with local Chinese Oems, including several launches that have already commenced.
Jeff: The increase in signal and power of $500 million includes a launch totaling over $100 million on a large north American internal combustion SUV platforms.
Jeff: An additional $100 million across two Oems for new internal combustion truck launches in North America, and Chinese market launches and volume growth for both local and foreign Oems of over $100 million.
Joseph R. Massaro: The increase in sales will deliver higher margins in the second half with volume flow through of approximately 30%, partially offset by an incremental FX headwind of approximately $35 million due primarily to the peso. Moving to the next slide.
Jeff: The increase in sales will deliver margins higher in the second half with volume flow through of approximately 30%.
Jeff: Partially offset by incremental FX headwind of approximately $35 million due primarily to the peso.
Joseph R. Massaro: As Kevin noted, we are excited to announce that we've reached a definitive agreement with Hyundai that provides for the future success of Motional while meeting the needs of a joint venture partner. As part of the agreement, Hyundai will provide Bosch with additional funding of $475 million. Hyundai will acquire 11% of Motional's common equity held by Aptiv for $448 million, and Aptiv will convert approximately 21% of our common equity interest to a preferred stockholding.
Jeff: We look to the next slide as Kevin noted we are excited to announce that we've reached a definitive agreement with Honda and provides for the future success of emotional while meeting the needs of the joint venture partners.
Jeff: As part of the agreement <unk> will provide emotional and additional funding of $475 million.
Jeff: <unk> will acquire a 11% of <unk> crop common equity held by after from $448 million.
Jeff: And active will convert approximately 21% of our common equity interest to our preferred stock holdings.
Joseph R. Massaro: Hyundai's funding emotional will occur in the second quarter, and we expect the acquisition of Aptiv shares, which is subject to customary regulatory review, to close by the third quarter. The preferred stock conversion will coincide with the sale of our common equity to Hyundai. Our updated guidance includes approximately 30 cents of additional EPS reflecting the benefit of the lower emotional common equity holdings beginning in the fourth quarter of this year. On a full year pro forma basis, the lower dilution promotion will develop an incremental EPS of approximately 90 cents per share beginning in 2025.
Jeff: A nice funding emotional will occur in the second quarter and we expect the acquisition of active shares which is subject to customary regulatory review to close by the third quarter.
Jeff: The preferred stock conversion will coincide with the sale of our common equity is a Honda.
Jeff: Our updated guidance includes approximately 30 cents of additional EPS, reflecting the benefit of the lower motional common equity holdings beginning in the fourth quarter of this year.
Jeff: On a full year pro forma basis, the lower dilution promotional will result in incremental EPS of approximately <unk> 90 per share beginning in 2025.
Jeff: Okay.
Joseph R. Massaro: Before handing the call back to Kevin, I'd like to walk through our updated earnings per share expectations in more detail. Building off the strong performance in the first quarter, the year-over-year EPS growth of 24% is driven by higher earnings of $1.32, as well as the benefit of share repurchases in 2024 and the improvement resulting from the transaction with Hyundai to reduce Aptiv's common equity holdings.
Speaker Change: Before handing the call back to Kevin I'd like to walk through our updated earnings per share expectations in more detail.
Speaker Change: Building off the strong performance in the first quarter the year over year EPS growth of 24% was driven by higher earnings of $1 32, as well as the benefit of share repurchases in 2024.
Kevin P. Clark: And the improvement, resulting from the transaction with Hyundai to reduce Athens common equity holdings emotional.
Joseph R. Massaro: More than offsetting the increase in Aptiv's tax rate, which was included in our original guidance. In summary, despite the lower vehicle production levels and slowdown in high-volt, we are confident that the measures taken to improve first quarter operating income and cash flow are sustainable for the balance of the year. The earnings and cash flow growth, combined with the proceeds from the emotional transaction, provide us with the opportunity to continue our long track record of balanced capital deployment.
Kevin P. Clark: More than offsetting the increase in average tax rate, which was included in our original guidance.
Kevin P. Clark: In summary, despite the lower vehicle production levels and slowdown in high voltage. We are confident that the measures taken to improve first quarter operating income and cash flow are sustainable for the balance of the year.
Kevin P. Clark: The earnings and cash flow growth combined with the proceeds from the emotional transaction provide us the opportunity to continue our long track record of balanced capital deployment.
Joseph R. Massaro: Including the return of capital to our shareholders. And combined with the 2023 share purchases, our outlook for 2024 results in almost $2 billion of capital return to shareholders in the past two years, increasing total capital return to over $9 billion since our IPO. And with that, I'll turn the call back to Kevin for his closing remarks. Thanks, Joe.
Kevin P. Clark: Including the return of capital to our shareholders.
Kevin P. Clark: When combined with a 2023 share repurchases our outlook for 2024 results in almost $2 billion of capital returned to shareholders in the past two years.
Kevin P. Clark: Increasing total capital returned to over $9 billion since our IPO.
Kevin P. Clark: With that I'll turn the call back to Kevin for his closing remarks, thanks, Joe I'll wrap up on slide 21 before opening the lineup for questions overall, our strategy remains unchanged, while the industry navigates the near term headwinds. We will continue to provide flexible high performance cost effective solutions to our customers that enable the transition to the elect.
Kevin P. Clark: I'll wrap up on slide 21 before opening the line up for questions. Overall, our strategy remains unchanged while the industry navigates the near-term headwinds, and we will continue to provide flexible, high-performance, cost-effective solutions to our customers that enable the transition to the electrified, software-defined vehicle. We remain focused on execution and operational excellence, which enables us to delight our customers while optimizing our cost structure to expand margins and deliver value to our shareholders. We executed well in the first quarter.
Kevin P. Clark: <unk> software defined vehicle.
Kevin P. Clark: We remain focused on flawless execution, and operational excellence, which enables us to delight, our customers, while optimizing our cost structure to expand margins and deliver value to our shareholders.
Kevin P. Clark: We executed well in the first quarter and our laser focus on continuing to execute.
Operator: In our laser focus, I continue to do, which will position us well for the remainder of the year. Operator, let's now open the line for questions. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Kevin P. Clark: Which will position us well for the remainder of the year.
Operator: We ask that you please limit yourself to one question and one follow-up. You may rejoin the queue for more. Again, that is star number one to ask. I'm going to pause for just a moment to allow everyone an opportunity to ask a few questions. And we will take our first question from John Murphy. Your line is open.
Speaker Change: Operator, let's now open the line for questions.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: Being a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our commitment.
Speaker Change: Ask that you please limit yourself to one question and one follow up you may rejoin the queue for additional questions.
Speaker Change: Again that is star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal.
Speaker Change: And we will take our first question from John Murphy with Bank of America. Your line is open. Please go ahead ma'am.
John Joseph Murphy: Good morning, guys. I just want to ask you a question first on the customer side and then second on automation. Just on the customer side, Kevin, the wins with these Japanese OEMs on the radar, you know, and sort of the high voltage on the hybrid side, sounds like a real positive. Just curious if you can comment about where you stand with the Japanese, because, as I understand it, they're very small in the book of business right now, but are they growing?
John Joseph Murphy: Good morning, guys just wanted to ask first on the customer side and then second on automation just first when the customers say, Kevin you. The the the wins with these Japanese Oems on the radar.
Speaker Change: In the interim.
Speaker Change: High voltage on the hybrid side sounds like <unk>.
John Joseph Murphy: A real positive just curious if you can comment about where you stand with the Japanese because as I understand they're very small in the book of business right now, but how are they growing and then also just on the Chinese Oems you mentioned that they were looking for locally sourced semi.
John Joseph Murphy: And then also, just on the Chinese OEMs, you mentioned that they were looking for locally sourced semiconductors, which I guess makes kind of sense. But it just kind of makes people nervous that they might be looking for more locally supplied, you know, everything.
John Joseph Murphy: Semiconductors, which I guess makes kind of sense.
John Joseph Murphy: But just kind of I think makes people nervous that they might be looking for more locally supplied EU everything in.
Kevin P. Clark: And I'm just curious how they view you, Aptiv, as a supplier, as being sort of a local or maybe a US company, kind of aspiring to Japanese. Hey John, we got your second half of the question. The first half you broke up a little bit with respect to, I think it was a mix of electrification bookings or revenue. I know that the first part of the question is the potential with the Japanese, right?
Speaker Change: And I'm just curious how they view you active as a as a supplier as being sort of a local or maybe the U S.
Speaker Change: Kind of aspire to Japanese and Chinese potentials.
Speaker Change: John I guess, we'd at your second half of the question. The first half you broke up a little bit with respect to I think it was mix of electric electrification bookings or revenues.
Speaker Change: On the first part of your question is the potential with the Japanese right I mean, it sounds like Youre, making more headway there than you have in the past on the radar in and in the high power high voltage just.
Kevin P. Clark: I mean, it sounds like you're making more headway there than you have in the past on the radar and then the high voltage, just on the hybrid side. So it sounds like a real opportunity there, which is beginning to grow. Thank you. Let me start with the second part of the question, or the second question, and I'll come back to the first. As it relates to... The Chinese OEMs, especially the Chinese local OEMs, the reality is that they are looking for local sources.
Speaker Change: On the hybrid side, so it sounds like a real opportunity there, but it's beginning to grow.
Speaker Change: Okay. Thank you listen let me start with the second part of the question or the second question and I'll come back to the first as it relates to the.
Speaker Change: The Chinese Oems.
Speaker Change: Presently the Chinese local Williams. The reality is they are looking for local sources.
Speaker Change: And it's one of their objectives to localize.
Speaker Change: The supply chain as you know we've had this conversation we've been in China for close to 30 years and has operated in China to serve the China market. So I think as best as possible. They view us as a as a local supplier given the fact that we are fully localized capability for that for that particular market our customers have come.
Kevin P. Clark: And it's one of their objectives to localize the supply chain. As you know, we've had this conversation. We've been in China for close to 30 years and have operated in China to serve the Chinese market.
Kevin P. Clark: So I think, as best as possible, they view us as a local supplier, given the fact that we have fully localized capability for that particular market. Our customers have come to us asking us to make sure that we focus on developing the Tier 2, Tier 3 supply chain and provide them with solutions. As you can imagine, given some of the geopolitics, they are especially focused on the semiconductor space.
Speaker Change: To us asking us to make sure that we focus on developing the call. It tier two tier three supply chain to provide them with with solutions as you can imagine given some of the geopolitics they are especially focused on the semiconductor space.
Kevin P. Clark: So that is an area where, just again, given the strength of our supply chain and our historical presence in the market, we had some capabilities over the last two years, especially after the semiconductor crisis in 2021 and 2022. We doubled down on enhancing our capabilities in that particular market. I think I mentioned previously that we're partnering with over a dozen semiconductor manufacturers in China to deliver their solutions to the automotive market in China, and that's from SOC down to the peripheral sort of semiconductor chips.
Speaker Change: So that is an area just again, given the strength of our supply chain and our historical presence in the market. We had some capabilities over the last two years.
Speaker Change: Especially post the semiconductor crisis.
Speaker Change: Crisis in 2021, and 2022, we doubled down on enhancing our capabilities in that particular market.
Speaker Change: I've mentioned previously where we're partnering with over a dozen semiconductor.
Speaker Change: Manufacturers in China to deliver their solutions.
Speaker Change: To to the automotive market in China, and Thats from <unk> down to.
Speaker Change: The peripheral sort of semiconductor chips. So that's an area of focus Alternatively, we have a number of non Chinese Oems, who are very focused on cost reduction and.
Kevin P. Clark: So that's an area of focus. Alternatively, we have a number of non-Chinese OEMs who are very focused on cost reduction and material savings. We're presenting these opportunities to several of them; they are interested in the options and will report out when we actually have a commercial range.
Speaker Change: Material savings for presenting these opportunities to several of them are interested.
Speaker Change: Are interested in the options and we'll report out when we actually have commercial interest.
Kevin P. Clark: That relates to the recent Japanese awards, especially on the ADF side, as well as on the plug-in hybrid and BEV side. Over the last couple of years, we've been increasingly focused on Japanese OEMs, especially Japanese manufacturers, and the Japanese market. So I think it's the net result of the progress we've made and, quite frankly, the momentum we've built with several of the players like Honda, like Nissan, and now we're starting to make progress with the largest Japanese OEM.
Speaker Change: As it relates to the.
Speaker Change: The Japanese recent Japanese awards, especially on the ETF side as well as as well as.
Speaker Change: On the plug in hybrid and Ambev side listen over the last couple of years, we've been increasingly focused on Japanese Oems, especially Japanese Oems.
Speaker Change: And.
Speaker Change: And the Japanese market. So I think it's the net result of the progress we've made and quite frankly, the momentum we've built with several of the players like <unk>.
Speaker Change: <unk> behind us like Nissan and now we're starting to make progress with the largest Japanese OEM for themselves.
Kevin P. Clark: And just one quick follow-up on the automation comment. I mean, you said 30% by 2026 and 50% by 2030. I mean, what's the baseline that we're starting from now? And what would that mean as far as labor is a percent of total sales? I'm just trying to understand if this is a cost savings program, a cost mitigation program, or just, you know, what you're going to have to do going forward. It's all of the above.
Speaker Change: And just one quick follow up on the automation comment to me. He said, 30% by 2026, 50% by 2030, I mean, what's the baseline that we're starting from now in.
Speaker Change: What would that mean as far as labor as a percent of total sales I'm just trying to understand if this is a cost savings program cost mitigation program or just you know what youre going to have to do going forward.
Kevin P. Clark: So it solves the problem related to the availability of labor. It also solves the problem as it relates to the cost of labor. And quite frankly, it solves the problem of complexity of overall vehicle architecture in the past to more of a software-defined vehicle with smart vehicle architecture. Those savings are the percent of labor hours. So I don't have offhand the average number of labor hours on an average wire harness, but it's a 30% reduction in those labor hours, so it'd be a significant cost savings, as you can imagine, and a baseline for automation right now that we should think about.
Speaker Change: It's real it's it's it's all the above so it solves the problem related to availability of labor. It solves a problem as it relates to cost of labor and <unk>.
Speaker Change: Frankly, it solves the problem of complexity of of of overall vehicle architecture in the past more of a soft software defined vehicle smart vehicle architecture. Those savings are as a percent of labor hours. So I don't have off hand.
Speaker Change: The average number of labor hours on a on an average wire harness, but it's a 30% reduction in there.
Speaker Change: Those labor hours, so it would be a significant cost savings as you can imagine.
Speaker Change: And baseline on automation right now that we should think about.
Kevin P. Clark: Baseline right now, we're running at roughly 15%. Very helpful. Thank you guys. The next question comes from Itay Michelli with Citi. Your line is open. Great, thanks. Good morning, everybody.
Speaker Change: Hub baseline right now we're running at roughly 15%.
Speaker Change: Okay very helpful. Thank you guys.
Speaker Change: Okay.
Speaker Change: Our next question comes from each time as Shelley with Citi. Your line is open. Please go ahead.
Itay Michaeli: Just two questions on my end. First, on the Gen6 award, can you maybe share kind of what the CPV on that award is, maybe what the rest of the pipeline looks like? Could this award now catalyze additional wins?
Shelley: Great. Thanks, Good morning, everybody just two questions on my end first.
Shelley: The Gen. Six award can you maybe share kind of what the CTV.
Shelley: And that award is maybe what the rest of the pipeline looks like.
Speaker Change: This award now catalyze additional wins.
Shelley: Maybe just it looks like you're sticking with the long term six to eight point G. O M. A framework, maybe you can talk a little bit about that is there maybe now biased more towards the low end of the range or could that potentially you could accelerate next year.
Speaker Change: I'll answer the first question, maybe Joe can answer the second.
Joseph R. Massaro: As it relates to the <unk> Award I don't want to give specifics because from level as you can imagine from a from a pricing standpoint, it's always sensitive.
Joseph R. Massaro: Commercially and competitively we've talked in the past about.
Joseph R. Massaro: About L two plus sort of L. Three.
Joseph R. Massaro: <unk> per vehicle.
Joseph R. Massaro: This particular program. In addition to our <unk> platform has our in cabin sensing solution as well as the full suite of.
Joseph R. Massaro: Wind River, both embedded and studio solutions. So as you think about that you sit you should think about it.
Joseph R. Massaro: Being roughly in that traditional range that we've talked about.
Joseph R. Massaro: Given what we're doing from an AI ml standpoint, with our radar solution given our overall approach to sensor fusion I guess, we've talked in the past our overall gen. Six eight <unk> platform and deliver anywhere between 15% to 30% savings to our customers depending upon the configuration of the plan.
Joseph R. Massaro: That's one.
Joseph R. Massaro: So it's a very competitive solution.
Joseph R. Massaro: And then anytime it's Joe on growth over market.
Joseph R. Massaro: So in the prepared remarks, I think we're closer to the six 6% of that range based on how we see 2024 today.
Joseph R. Massaro: Obviously too early to rack up 2025.
Joseph R. Massaro: Particularly with just some of the dynamics, we've seen in customer schedules over the past really over the past months.
Joseph R. Massaro: But I would think it's within that 6% to 8% range I certainly wouldnt go up above that at this point.
Joseph R. Massaro: Terrific.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joe Spak with UBS. Your line is open. Please go ahead.
Kevin P. Clark: And second, maybe just, it looks like you're sticking with the long term six to eight point GOM framework. Maybe talk a little bit about that. Is there maybe now a bias more towards the lower end of the range? Or could GOM potentially even accelerate? I'll answer the first question; maybe Joe can answer the second.
Joseph Robert Spak: Thanks, Good morning, everyone.
Joseph R. Massaro: As it relates to the Gen 6 ADAS award, I don't want to give specifics because, from a commercially and competitively point of view, we've talked in the past about... About L2 plus, sort of L3 content per vehicle. This particular program, in addition to our ADAS platform, has our in-cabin sensing solution, as well as the full suite of WinRiver, both embedded and studio solutions.
Joseph R. Massaro: So as you think about that, you should think about it being roughly in that traditional range that we've talked about, given what we're doing from an AIML standpoint with our radar solution. Given our overall approach to sensor fusion, as we've talked about in the past, our overall Gen 6 ADAS platform can deliver anywhere between, you know, 15 to 30% savings to our customers depending upon the configuration of the platform. So, it's a very competitive... Always show on growth over market. Yeah, it's just one of the prepared remarks.
Joseph Robert Spak: Joe maybe to start.
Joseph Robert Spak: Just <unk> margins in the quarter.
Joseph Robert Spak: Really strong I think a large surprise versus street expectations.
Joseph Robert Spak: Anything going on there specifically in the quarter, we should think about and how should we think about the margins in that business over the balance of the year.
Kevin P. Clark: I think we're close to the six and 6% of that range based on how we see 2024 today. Obviously, too early to rack up 2025, particularly with just some of the dynamics we've seen in customer schedules over the past, really over the past month. But I would think it's within that 6% to 8% range. I certainly wouldn't go up above that at this point. Terrific, all that, very helpful, thank you. Your line is open, please. Thanks. Good morning, everyone. Joe, maybe to start.
Joseph Robert Spak: Yes, Joe I would say nothing nothing stands out in the quarter.
Joseph R. Massaro: ASU New York's margins in a quarter. I think a large surprise versus street expectations. Anything going on there specifically in the quarter? about and how should we think about the margins in that business over the balance, Yeah, Joe, I would say, you know, nothing stands out in the quarter, you know, from a sort of a one off perspective, certainly nothing material I would, I would say we've, you know, been working very hard on those margins for a long period of time, as you know, with both the supplier side of things, and then taking costs out of the business, we have some, You know, cost actions that we put in place last year, this engineering rotation has been going on for a period of time.
Joseph Robert Spak: From a sort of a one off perspective, certainly nothing material I would I would say we've been working very hard on those margins for a long period of time as you know with <unk>.
Joseph Robert Spak: Both the supplier side of things and then taking costs out of the business, we add some cost.
Joseph Robert Spak: Cost actions that we put in place last year of its engineering rotation has been that's been going on for a period of time.
Joseph R. Massaro: So you'll, you know, I think you're talking about sort of seeing the high 10, call it 10 and a half to 11% margin in that business. You know, being maintained, certainly for the full year. It's, it's going to be, you know, a little lumpy, Q3 is obviously a little lower for us at times. But, you know, I think that's where we're starting to see this business and should come out of, you know, should come out of the year, call it in the mid 10. Thank you.
Joseph Robert Spak: So youll I think youre talking about sort of seeing the the high 10 call. It 10, 5% to 11% margin in that business.
Joseph Robert Spak: Being maintained certainly for the full year, it's going to be it's a little lumpy in Q3 is obviously, a little lower for us at times, but.
Joseph Robert Spak: I think thats, where our that's where we're starting to see this business and should come out of it.
Joseph Robert Spak: It should come out of the year call. It in the in the mid teens.
Speaker Change: Okay. Thank you.
Kevin P. Clark: And Kevin, I just want to go back to the China conversation and a couple things here. Because obviously, there's a lot of volatility; there are a lot of new players, emerging players like Xiaomi and Huawei. So maybe you could sort of give us a sense of how you think your positioning is with some of and even the new emerging players, and we all saw the news about it. W. and Zhao Peng on electrical architecture.
Speaker Change: And then Kevin I, just want to go back to the China conversation and a couple of things here.
Kevin P. Clark: Because obviously theres a theres a lot of volatility there is a lot of new players you see emerging players like Xiaomi and Huawei. So maybe you could sort of give us a sense of how you think you are positioning us with some of even the new emerging players.
Kevin P. Clark: And then we saw all saw the news about <unk>.
Kevin P. Clark: VW and Zhao upon on electrical architecture.
Kevin P. Clark: What does that mean for your prospects going forward in China back to John's question about.
Kevin P. Clark: You know, what does that mean for your prospects going forward in China? Back to John's question about competitiveness, I guess, of vehicles in China but also, you know, a desire for Chinese.
Kevin P. Clark: Yeah.
Kevin P. Clark: One competitiveness I guess of vehicles and in China, but also a desire for Chinese supply chain.
Kevin P. Clark: Yes.
Kevin P. Clark: Yeah, listen, I, you know... As I said, we've been in the China market for a long period of time, and, you know, clearly, the market has rotated from dominance by the multinational joint ventures to a much stronger localized Chinese, always local Chinese, always. Over the past three or four years, we've talked about the rotation of our bookings and the mix of our bookings. Significantly rotating from the multinationals to the locals.
Speaker Change: Yeah listen I E.
Speaker Change: As you know.
Kevin P. Clark: As I said, we've been in the China market for a long period of time in and.
Kevin P. Clark: Clearly the market has rotated from.
Kevin P. Clark: Dominant by the multinational joint ventures to a much stronger localized Chinese.
Kevin P. Clark: Always such a local Chinese Oems.
Kevin P. Clark: Over the past three or four years, we've talked about the rotation of our bookings and the mix of our bookings.
Kevin P. Clark: Significantly rotating from multinationals to the locals I think over the last.
Kevin P. Clark: I think over the last couple of years or so, our bookings, and the dollar value of our bookings, have roughly matched the mixed shades between the Chinese locals and the multinationals. We're still a little bit behind that from a revenue standpoint, but it's well over 50% that is now with the local Chinese OEMs. A significant portion of our bookings last year and this year will be with the Chinese locals, so that's an area where we think we'll continue to close that gap over the next 12 to 24 months from a revenue standpoint. There are several of those, the leading Chinese local OEMs, who are very focused on export.
Kevin P. Clark: Last couple of years or so.
Kevin P. Clark: Bookings dollar value of our bookings is roughly matched the mix change between the Chinese locals Gen. A multinational jbs, we're still a little bit behind that from a revenue standpoint.
Kevin P. Clark: But it's well over 50% of that now is with the local Chinese Oems.
Kevin P. Clark: A significant portion of our bookings last year and this year will be with the Chinese locals. So that's an area, where we think we will continue to close that gap.
Kevin P. Clark: Over the next 12 to 24 months from a revenue standpoint.
Kevin P. Clark: There are several of those the leading Chinese local Oems, who are very focused on export to Europe, and possibly to North America as well as the manufacturing in Europe and North America.
Kevin P. Clark: Europe and possibly to North America as well as manufacturing in Europe and North America. I would say we are working now with virtually all those who are considering that, who are looking for, you know, supply solutions that meet the requirements of the European and US markets, which tend to be a little bit different from what's in the Chinese market. So we feel like we're well positioned for both, you know, growth in China, as well as being very well positioned as they decide to either export or move production outside of China.
Kevin P. Clark: I would say we are working now with virtually all of those who are entertaining that who.
Kevin P. Clark: Who are looking for.
Kevin P. Clark: Supply solution.
Kevin P. Clark: <unk>.
Kevin P. Clark: Meet the requirements of the European.
Kevin P. Clark: In the U S markets, which tend to be a little bit different from.
Kevin P. Clark: Whats in the China market. So we feel like we're well positioned for both growth in China, as well as well as very well positioned as they decide to either export or move production outside of China.
Kevin P. Clark: Okay.
Kevin P. Clark: Maybe just one quick follow-up, I know you mentioned that the mix of business within China is sort of moving, and it doesn't sound like it's now over 50-50. But what what about, if we just think about your overall bookings, like what percent of that? in China, Damascus.
Speaker Change: Just one quick follow up I know you mentioned that.
Speaker Change: The mix of business within China has started moving and it sounds like it's now over 50 50, but.
Speaker Change: What about like if we just think about your overall bookings like what percent of that is in.
Speaker Change: In China.
Speaker Change: Domestic China data center in China, where we're running.
Kevin P. Clark: In China, we're running close to 70% local bookings versus the multinational JVs. Last year, we were up over 60%. So it's certainly moving in that direction. And it should take you now within a year to two years. Sorry, like of the 34, 35 billion or whatever, like how much China is a local, take 70% of $6 billion. Thank you very much.
Speaker Change: The exact are probably close to 70% local bookings versus the multinational JV last year, we were up over well over 60%. So it's been certainly moving in that direction.
Speaker Change: And it should take trying to I guess a year to two years.
Speaker Change: Sorry like of the 34 to 35 billion or whatever like how much of that is China as a local Chinese players.
Speaker Change: 70% of $6 billion.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Christopher Patrick McNally: We will go next to Chris Mcnally with Evercore. Your line is open. Please go ahead.
Christopher Patrick McNally: Go next to Chris McNally with Evercore. Your line is open. Thanks so much, team. Two questions. One pretty simple.
Christopher Patrick McNally: <unk>.
Joseph R. Massaro: Just, Joe, you mentioned the new margin for AS at 10.5%. Does that sort of imply that we should think SPS is probably on the lower end of something more like 12 to 13%? That's probably where you have more of the pace of exposure. Uh, yeah, one sec, Chris.
Christopher Patrick McNally: Thanks, So much two questions one pretty simple just Joe you mentioned new margin for.
Christopher Patrick McNally: Uh huh.
Christopher Patrick McNally: And a half percent does that sort of implies we should think SBS is probably on the lower end of something more like 12%, 13%, that's probably where you have more of a peso exposure.
Christopher Patrick McNally: I wish my Crystal nature, I guess is the right number.
Joseph R. Massaro: Let me make sure I'm getting the right number. SPS 11.2% in Q1. Yeah, I would say you're in the college 12 to 12 and a half for coming out of school. And then the same, the growth over market split, ASUX, probably a high single digit, and SPS because of the high voltage now at 5%. Is that closer to 3% or 3% to 4%? What's the split on growth over market? Yeah, I'd say low to mid-single digits on SPS. Perfect.
Christopher Patrick McNally: Sps.
Christopher Patrick McNally: 11, 2% in Q1, yes, I would say here in the call. It 12 to 12 five for coming out of a coming out of the year.
Christopher Patrick McNally: And then the same the growth over market split Asus's, probably a high single digit and Sps because of the high voltage now at 5% is that closer to three or 3% to 4%. What's the split on gorilla I'd say low to mid single low to mid single digits on SBS Yep.
Kevin P. Clark: And then the second question is, you know, is a bigger question. You know, when I think about capital allocation, One and a half billion for the buyback this year, you know, use words like, you know, opportunistic, obviously your stocks at a very low multiple. But when I look at the free cash flow generation over the next couple of years, you know, anywhere from a billion this year to 2 billion in the next couple of years, could this sort of level of buyback or sort of this new priority be something that stays for a multi-year basis?
Speaker Change: Perfect and then the second question is it a bigger question when I think about capital allocation, obviously, one 5 billion for the buyback this year use words like.
Speaker Change: Opportunistic obviously your stocks at a very low multiple but when I look at the free cash flow generation over the next couple of years, you know anywhere from a billion two this year to $2 billion in the next couple of years could this sort of level of buyback or sort of new priority be something that stays for a multi year basis than you traditionally.
Kevin P. Clark: You know, traditionally, you've been a lot more acquisitive, both on the large equity. I'm just curious if this could be something that's more sustainable of a higher level buyback for a multi-year basis, or at least until the stock re-raises.
Speaker Change: And a lot more.
Speaker Change: Acquisitive, both bolt ons that the large acquisition, but I'm just curious if this could be something that's more sustainable of a higher level of buyback for a multi year basis or at least until the stock re rates.
Shreyas Patel: Yeah, Chris, I think I would continue to buy that stock at fairly healthy levels. The reality is, we view our stock as undervalued, obviously, of what we're trying to do is to build out our capabilities again around the software stack as we've talked about, and quite frankly, diversify our revenue, our revenues further in the industrial markets as well. So, you know, we would like to assume that there's a fair amount of acquisition activity that will occur during 2024-2025 and beyond. Welcome next to Shreyas Patel with Wolf Research. Your line is open.
Speaker Change: Yeah, Chris I think I didn't get at current levels, It's fair to assume we would.
Speaker Change: We continue to buy back stock and fairly fairly healthy levels, but the reality is we view our stock is undervalued, obviously, we'd like to see.
Speaker Change: Stock price appreciation and important an important part.
Speaker Change: What we're trying to do is to build out our capabilities in and around the software stack as we've talked about and quite frankly diversify our revenue our revenues further in the industrial markets as well so.
Speaker Change: We would like to assume that Theres, a theres a fair amount of acquisition activity that happens.
Speaker Change: During 2020 for 2025 and beyond.
Speaker Change: Alright, thanks, so much.
Speaker Change: Yeah.
Speaker Change: We'll move next history as <unk> with Wolfe Research. Your line is open. Please go ahead.
Kevin P. Clark: Hey, thanks a lot for taking my question. Maybe just thinking about where the underlying growth rate is for the business today. So you're pointing to six points of growth over the market for this year. I know there are a lot of puts and takes in the last quarter.
Wolfe Research: Hey, Thanks, a lot for taking my question.
Wolfe Research: Maybe just thinking about where the underlying growth rate is for the business today, So youre pointing to six points of growth over market for this year I know there are a lot of puts and takes but.
Speaker Change: I think in the bridge that you had provided.
Shreyas Patel: It implied about maybe two points of tailwinds from price recoveries, for example, that were tied to semiconductor inflation last year. But there are also mixed headwinds in China, which sounds like you're mitigating with new launches. So just trying to get a sense of where the underlying is. Yeah, I'm not sure I understand the pricing comment or the recovery comment. But listen, I think our long-term view, the framework is six to 8% in a flat market, right? So that growth over the market is generally consistent with the adjusted growth rate.
Speaker Change: Last quarter it implied about maybe two points of tailwind from price recoveries. For example that were tied to semi conductor inflation last year.
Speaker Change: But there are also mixed headwinds in China, where it sounds like you are mitigating with new launches. So just trying to get a sense of where the underlying rate of growth is today as you see it.
Speaker Change: Got it.
Speaker Change: Not sure I get the pricing comment or the recovery comment, but listen I think our our long term view.
Speaker Change: The framework is 6% to 8% in a flat market right. So that growth over market is generally consistent with the adjusted growth rate.
Joseph R. Massaro: Obviously, to move a bit with vehicle production, we're obviously working through, You know, working through the high voltage headwind at the moment, we've seen those schedules come down. But you know, as I talked about in my prepared remarks, we're seeing good hybrid growth, and we're seeing the internal combustion volumes come back up. So, you know, and Kevin talked about, you know, from a portfolio perspective, sort of fully capable of servicing all powertrains. There's really no capability or product line that we lack for that. Okay. I guess then, so when you think about the incremental performance savings that you're expecting this year, are those tied to the automation initiative you're talking about? Or is that, Footprint Actions, and like an SPS?
Speaker Change: Obviously, they'll move a bit with vehicle production, we're obviously working through.
Speaker Change: Now working through the.
Speaker Change: Through the high voltage headwind at the moment, we've seen those schedules come down, but you know as I talked about in my prepared remarks, we're seeing good hybrid growth, we're seeing the internal combustion volumes come back up.
Speaker Change: So.
Speaker Change: Kevin talked about from a portfolio perspective.
Speaker Change: Sort of fully capable of.
Speaker Change: Servicing all powertrains, there is theres really no capability or product lines that we lack from that perspective.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: I guess, then if I'm thinking about the incremental performance savings that you're expecting this year are those tied to the automation initiatives, you're talking about or is that more.
Speaker Change: The footprint actions.
Shreyas Patel: Yeah, automation is longer term. Automation will be a longer term thing, as Kevin talked about. We've, You know, the end of last year, second half of last year, really started to focus on, and again, right, the business has changed a bit, so it shouldn't surprise folks. We've looked at the cost structure. We've had a set up, you know, salary and overhead reduction, took out some overhead. We always
Speaker Change: Automation is longer automation will be longer term as Kevin talked about.
Speaker Change: At the end of last year second half of last year. It really started to focus on and again right. The businesses. The business has changed a bit so it shouldn't surprise folks we've we've looked at the cost structure.
Speaker Change: We've had a SaaS salaried overhead reduction and took out some overhead we've always do that.
Joseph R. Massaro: You know, we've been pretty diligent over the past, you know, 10 years at least of managing that cost structure, and really, what you're seeing now are the benefits of that, as well as, you know, what we talked about on investor day. I mean, I appreciate the high-voltage revenues.
Speaker Change: We've been pretty vigilant over the past.
Speaker Change: And 10 years at least of of managing that cost structure, and and really what you're seeing now is the benefits of that as well as what we talked about at Investor Day, I mean I I.
Speaker Change: I appreciate the high voltage revenues.
Joseph R. Massaro: A lot of other things we talked about yesterday are on track, right? We talked about that engineering rotation. We talked about getting engineering down as a percent of sales. We talked about, as you recall, that performance bucket with, you know, a few hundred million dollars of performance initiatives every year between 23, 24, and 25. And we are, you know, we are ticking the boxes on those, and that's where you're seeing that margin improvement. Okay, and then maybe just a quick last one is just on FX.
Speaker Change: Come off but a lot of other things we talked about at Investor day are on track right. We talked about that engineering rotation, we talked about getting engineering down as a percent of sales we talked about as you'll recall that performance bucket with few hundred million dollars of performance initiatives every year between 'twenty three 'twenty four 'twenty five and we are we are taking the boxes on.
Speaker Change: And that's we're just seeing that margin improvement.
Shreyas Patel: You didn't see much of an impact in the quarter, but it looks like the headwind's gonna be for the rest of the year. I mean, last year when we saw the peso strengthen, it had kind of the opposite effect where it was largely impacting you in Q1. So maybe just trying to think about, you know, how much of that effect is pace over. Brennan B.
Speaker Change: Okay, and then maybe just a quick last one is just on an FX you didn't you didn't see much of an impact in the quarter.
Speaker Change: But it looks like the headwinds going to be for the rest of the year I mean last year when we saw the peso.
Speaker Change: Strengthening it was kind of the opposite effect.
Speaker Change: It was largely impacted you in Q1 so.
Speaker Change: Maybe just trying to think about how much of that FX impact is peso versus Brendan B, just trying to get a sense of that.
Joseph R. Massaro: Just trying to get a sense of the, You know, R&B's in there, the pesos, the more significant. Listen, I think you've got to distinguish between... The actual year-over-year and the guide, the peso, unfortunately, in Q1 is pretty consistent with where it was in Q1 of last year, between the 16 and low 17s. That's why there's not a significant... Impact on a year-over-year basis comparing actuals to prior year actuals, the guide we had at 1825, as I said in my prepared remarks.
Speaker Change: Rfps in there the peso is the more significant listen I think you've got to distinguish between.
Speaker Change: The actual year over year.
Speaker Change: And the guide right the actuals the peso. Unfortunately in Q1 is pretty consistent with where it was in Q1 of last year between the 16 in low <unk>. So that's why there's not a significant impact.
Speaker Change: The impact on a year over year basis, comparing actuals to prior year actuals. The guide we had at $18 25.
Joseph R. Massaro: We you know we expect that pace of the strengthen over time. It is obviously not happening, and I think you know our view is what we do with most macro headwinds once it's clear they're not evading, is we put it into the guide, and we take out cost to offset it. And that's effectively what we've done.
Speaker Change: As I said in my prepared remarks.
Speaker Change: We expect that peso to strengthen over time, it is obviously not happening and I make.
Speaker Change: Our view as we do with most macro headwinds.
Speaker Change: What's it's clear they're not abating as we put it into the guide and we take out cost to offset it and that's effectively what we've done. We also as I said have a benefit of a hedge we put in place where.
Joseph R. Massaro: We also, as I said, have the benefit of a hedge we put in place where, you know what? 90% of our peso exposure is protected below 17, which is why we pegged it to the 17 rate. Okay, thanks. So, next to Mark Delaney with Goldman Sachs, your line is open, please.
Speaker Change: About 90% of our our peso exposure is protected below 17, which is why we pay to the 17 right.
Speaker Change: Okay. Thanks.
Speaker Change: Yep.
Speaker Change: We'll go next to Mark Delaney with Goldman Sachs. Your line is open. Please go ahead.
Mark Trevor Delaney: Good morning and thanks very much for taking the question. Interview for High Voltage Revenue for 24 to 5% from 20%. Beyond this year, does Aptiv think a 20% CAGR in high voltage revenue is still achievable, and does the composition... BeVs and BeHavs change it all as you think about the longer term high voltage? Yeah, I'll start with our customers and dialogue with their customers. Our customers are still pushing forward with the introduction of battery electric vehicles, so you can hear from their public statements that they're still standing behind them and certainly pushing in that direction.
Mark Trevor Delaney: Good morning, and thanks very much for taking the questions. You took your view for high voltage revenue for 24% to 5% from 20% beyond this year does that have to take a 20% CAGR in high voltage revenue still achievable and does the composition between Babs MP has changed at all or do you think about the longer term high voltage outlook.
Speaker Change: Yeah, I'll start with our customers and dialogues with our customers our customers are still.
Speaker Change: Pushing forward with.
Speaker Change: The introduction of battery electric vehicles. So you can hear from their public statements that theyre still standing behind them and certainly pushing in that direction.
Kevin P. Clark: In addition to that, they're talking about launching incremental plug-in hybrids or hybrid programs as well to augment their overall product portfolio. So, likely near term, our general view is you'll see a richer mix of plug-in hybrids relative to what we've had historically on a go-forward basis from an overall growth rate of electrification. We'll see.
Speaker Change: In addition to that they are talking about launching incremental plug in hybrid.
Speaker Change: Or hybrid programs as well to augment their overall product portfolio.
Speaker Change: Likely near term our general view is you'll you'll see.
Speaker Change: A richer mix of plug in hybrid relative to what we've had historically.
Speaker Change: On a go forward basis from an overall growth rate of the electrification out we'll see.
Kevin P. Clark: Obviously, it's been a couple of challenging quarters as it relates to our high voltage revenue growth, as Joe and I have mentioned. Over the back end of the quarter and in April, we saw a significant reduction in schedules. They seem to have stabilized, but as we get closer, maybe into the middle of the year, we'll be able to get more visibility as to what we think that growth rate looks like. But I think it's fair to assume you're gonna see more plug-in hybrids in the mix. Relative to battery electricity
Speaker Change: Obviously, it's been a couple of challenging quarters as it relates to our high voltage revenue growth as Joe and I have mentioned.
Speaker Change: Over.
Speaker Change: At the end of the quarter and in April we saw a significant reduction in.
Speaker Change: In schedules they seem to have stabilized.
Speaker Change: But as we get closer maybe into the middle of the year, we'll be able to give more visibility as to what we think that growth rate looks like but I think it's fair to assume you're going to see more plug in hybrid mix.
Speaker Change: Relative to battery electric vehicles.
Speaker Change: I think thanks for that Kevin.
Mark Trevor Delaney: Thanks for that, Kevin. The second question I had was on margins. You had your best 1Q EBIT margin, I think, since 2018. I will discuss a little bit more what led to the margin strength in the first quarter. This is how much some of the footprint actions may have contributed. Typically, 1Q is the seasonal low point for the year, but can you talk about how 1Q may compare to the normal seasonality with even margins and whether it is more of a typical year or something more unusual in 1Q?
Speaker Change: Question is on margins you had your best <unk> EBIT margin I think since 2018, you talk a little bit more on what led to the margin strength in the first quarter and specifically how much of the footprint actions may have contributed.
Speaker Change: Typically won't use the seasonal low point for the year, but can you talk about how <unk> may make may compare to the normal seasonality, but with with EBIT margin is more of a typical year or something more unusual in <unk> from 2024.
Kevin P. Clark: Yeah, maybe I'll start. Listen, I think we should go back to 2018. We went through COVID 2020 and 2021. And then we went to semiconductor challenges. So we had, you know, three years there that were extremely, extremely choppy from an overall operational standpoint, and Martin's standpoint. We feel like the macro environment is largely at least stabilized from an availability of product standpoint. We're able to operate much more efficiently and effectively, as are our customers, as are our suppliers. So it gives us a greater ability to plan.
Speaker Change: Yes, maybe I'll start with and I think we always go back to 2018, we went through Covid 2020, 2021 and then we want to do.
Speaker Change: Through semiconductor challenges so we had.
Speaker Change: Three years, there that were extremely extremely choppy from an overall operational standpoint.
Speaker Change: And margin standpoint, we.
Speaker Change: We feel like the.
Speaker Change: <unk>.
Speaker Change: The macro environment is largely at least stabilize from an availability of Av products to keep the supply chain full so we're able to operate.
Speaker Change: More efficiently and effectively as are our customers as are our suppliers. So it gives us greater ability to plan as Joe mentioned in his prepared comments, we're always focused on reducing costs, but we did spend a year or so really focused on keeping our customers connected.
Joseph R. Massaro: Joe mentioned in his prepared comments that we're always focused on reducing costs, but we did spend a year or so really focused on keeping our customers connected. And you know, since 2023, when things stabilize, we've been really, really, you know, hyper focused on how do we can, how do we significantly reduce our cost structure? That's through operational initiatives within the four walls of our plants, as well as initiatives in our engineering, in our engineering factory, as well as continuing to reduce our overall overhead.
Speaker Change: And since 2023, when things stabilize we've been really really.
Speaker Change: Hyper focused on how do we how do we significantly reduce our cost structure.
Joseph R. Massaro: So like I mentioned, you know, we reduced payroll, salary payroll last year by over 10%. By delaying, by consolidating, by making the organization operate more efficiently, that's something we'll continue to do. Typically, this is a business where you see margin expansion from first half to back half because the back half tends to have more production than the first half. Then the first half does, we'll see how this year plays out.
Speaker Change: That's true.
Speaker Change: Operational initiatives within the four walls of our plants.
Speaker Change: As well as our initiatives in our engineering.
Speaker Change: And our engineering factory as well as continuing to reduce our overall overhead so I think I mentioned.
Speaker Change: We reduced.
Speaker Change: We reduced payroll salary payroll last year over 10%.
Speaker Change: By delayering by consolidating by making your organization operate more efficiently. That's something we'll continue to do typically this is a business where you see margin expansion from first half to back half because back half tends to have more production than the first half.
Speaker Change: In the first half does we'll see how this year plays out.
Kevin P. Clark: There's a little less clarity right now as we sit here based on what we've seen over the last month, but we'd expect. We'd expect to see continued operating improvements, including continued performance improvement really across all aspects of our cost structure. So it's everything. It's really everything. I'll go next to Dan Levy with Barclays.
Speaker Change: Theres, a little less clarity right now as we sit here based on what we've seen over the last months, but we'd expect.
Speaker Change: We would expect to see continued operating improvements, including continued performance improvement really across all aspects of our cost structure.
Speaker Change: So its everything its really everything.
Speaker Change: Thank you.
Speaker Change: Okay.
Dan Meir Levy: Your line is open. Please go ahead, for taking the question. I'm wondering if you could just address a couple of points on access. Any voiceover?
Speaker Change: We will go next to Dan Levy with Barclays. Your line is open. Please go ahead.
Dan Meir Levy: Hi, good morning, Thanks for taking the questions.
Dan Meir Levy: I'm wondering if you could just address a couple of points on.
Dan Meir Levy: Active safety any voiceover on.
Dan Meir Levy: The solid results in.
Dan Meir Levy: In the quarter I think.
Dan Meir Levy: In 2025% or so.
Dan Meir Levy: And then is the expectation still see 20% plus growth.
Kevin P. Clark: [inaudible] 20-25% And then there is the expectation... 20% plus. AIDAS for the year. Are you still seeing launches and content? Yes, yes. So, as Joe mentioned, we're launching across, We're launching both new programs as well as existing programs across a broader set of models within OEMs. There continues to be increasing, you know, significant consumer demand for access safety solutions. It's something that our customers are interested in, so it continues to be an area that we believe will see strong revenue growth. Yeah, Dan, it's Joe. We're forecasting 20% plus a little bit over 20% for the year.
Dan Meir Levy: Aid asks for the year are you still seeing launches.
Dan Meir Levy: Content growth intact.
Dan Meir Levy: Yes, yes, so as Joe mentioned, we're launching across.
Dan Meir Levy: We're launching both new programs as well as well as launching.
Dan Meir Levy: Our existing programs across.
Dan Meir Levy: A broader set of models within Oems.
Dan Meir Levy: There continues to be increasing significant consumer demand for our.
Dan Meir Levy: Active safety solutions, it's something that our customers are clearly looking for it.
Dan Meir Levy: So it continues to be an area that we believe we will see strong revenue growth.
Joseph R. Massaro: So we'll have a, you know, like things, you know, as we go back to just the old way of the business, it's historically run, it won't shoot perfectly straight every quarter. But we go into some very heavy launch activity, as I said in my prepared remarks in the back half of the year, launches run up and then have a bit, but no, that business is strong. And we'll see that continuing. As Kevin mentioned, we had close to $2 billion of bookings in this quarter alone on active safety, so we continue to see very strong traction on active safety.
Dan Meir Levy: Yeah, Dan its Joe will be we're forecasting 20%.
Joe: Plus a little bit over 20% for the year. So we'll have a.
Joe: As we go back to just the old way of the businesses historically around there once you perfectly straight every quarter, but.
Joe: We go into some very heavy launch activity as I said in my prepared remarks in the back half of the year.
Dan Meir Levy: You know launches run up and then have a bit but know that business is strong and would see that continuing as Kevin mentioned, we had close to $2 billion of bookings in this quarter alone on an active safety. So continue to see very strong traction on active safety.
Joseph R. Massaro: Great, thanks. And then as a follow-up, wondering if you could just provide some comments on the price versus inflation, inflation, and you talked about some incremental coming into the cost structure this year. Is that coming in as planned? And then how much revenue did you get in one queue? And what's the price?
Speaker Change: Great. Thanks, and then as a follow.
Speaker Change: Paul I'm wondering if you could just provide some comments on the.
Paul: Price versus inflation dynamics.
Paul: As inflation and you talked to some incremental inflation.
Paul: Into the cost structure this year that coming in as planned and then how much pricing did you get in <unk> and what's the pricing outlook for the year.
Dan Meir Levy: for the Are We Back? sort of tip, One and a half, two percent price. Is there any offset that you're getting?
Paul: Are we back to sort of typically a.
Dan Meir Levy: Wanted to ask 2% price downs and is there any offset that you're getting in your commercial discussions.
Joseph R. Massaro: Yeah, Dan, I would say the dynamics move from direct material inflation to very much labor inflation. So we're obviously in discussions with customers around issues around labor inflation, some of that's recovery, some of that, as Kevin mentioned, is going to be leaving places like Mexico that are becoming too expensive and reducing labor in those places, to Kevin's point on automation. So, you know, I would say we've seen a significant slow down in those direct material costs that needed to be passed through the customers, and it's a...
Speaker Change: Yes, Dan I would say the dynamics moved from direct material inflation to very much labor inflation.
Speaker Change: So we're obviously in discussions with customers around issues around labor inflation some of that recovery some of that as Kevin mentioned is going to be leaving in places like Mexico that are becoming too expensive.
Speaker Change: And.
Speaker Change: <unk> labor in those places to Kevin's point on automation so.
Speaker Change: I would say we've seen significant.
Speaker Change: Slowdown in sort of those direct material costs that needed to be pass through with customers and it's a it's more of an inflation discussion around labor and those you know.
Joseph R. Massaro: It's more of an inflation discussion around labor and those... You know, there are a couple of levers we have to pull on those. And like we've talked about, we've started to take cost actions to deal with it. And I think there'll be a number of things that you see. I think long term. You know, and we've said this for a while, we'll return to that net price was right around 1.7% before all the material inflation. We expect that to continue long term. I'd have that in the outlook.
Speaker Change: There's a couple of levers we have to pull on those and like we talked about we have started to take cost actions to deal with it and I think there'll be a number of things that you see I think long term.
Speaker Change: And we've said this for a while will return to that net price was around right around one 7% before all the material inflation, we would expect that to continue long term would have that in the outlook.
Speaker Change:
Joseph R. Massaro: But I think labor inflation is something we'll deal with both at the customer level, to the extent customers don't want to relocate facilities or get service out of other countries, we will have increases when, and in other cases, we will move the plant. Got it. And then just within the quarter, what was the pricing?
Speaker Change: But I think labor inflation is something we will deal with both at the customer levels to the extent customers don't want to relocate facilities or get serviced out of other countries will will have increases.
Speaker Change: And in other cases, we will move to the plants.
Speaker Change: Okay.
Speaker Change: Got it and then just within the quarter what was the pricing because I said the price of commodities was one bucket.
Joseph R. Massaro: Price, commodities, because you've got copper and inflation in there as well, was about 35 million positive on the revenue line. Welcome to our next question from Adam Jonas. Hi, thanks for squeezing me in. So Kevin and Joe, nobody knows. Active Safety. Nobody.
Speaker Change: Priced commodities, because you've got the copper copper and inflation in there as well.
Speaker Change: Was it was about 35 million positive.
Speaker Change: Great on the revenue line.
Speaker Change: We'll go to our next question from Adam Jonas with Morgan Stanley. Your line is open. Please go ahead.
Adam Michael Jonas: Hi, Thanks for squeezing me in so Kevin and Joe Nobody knows.
Adam Michael Jonas: Electrical vehicle architecture and active.
Adam Michael Jonas: Active safety combined better than you know I mean nobody.
Adam Michael Jonas: So I'd be curious in your opinion, from a user, and from a capability standpoint. Do you see... Advantage of Level 2 Plus, Unknown Executive, Emmanuel Rosner, Gautam Narayan, Dan Levy, Joseph Spak, Rod Lache, Christopher McNally, Benjamin Lyon, Anant Thacker, Aptiv PLC versus the capability and experience of the same system attached to an internal combustion engine?
Adam Michael Jonas: I'd be curious in your opinion.
Adam Michael Jonas: From a user experience and from a capability perspective.
Adam Michael Jonas: Do you see.
Adam Michael Jonas: An advantage of level two plus systems.
Adam Michael Jonas: To a software defined electric vehicle.
Adam Michael Jonas: Versus the capability and experience of the same system.
Adam Michael Jonas: Attached to an internal combustion.
Adam Michael Jonas: Non software defined vehicle system.
Adam Michael Jonas: Thanks.
Kevin P. Clark: [inaudible] Yeah, that, uh, um... That's an interesting question. I'm not sure. And if the consumer experience ultimately would be better, on an electric vehicle with a, you know, vehicle architecture versus architecture around, I think what we would say ultimately is that architecture would be more optimized and ultimately would allow for savings both from an architecture standpoint and from an ADF system, right, and would enable a much more optimized both vehicle architecture, hardware architecture, as well as software architecture. It would provide more flexibility as it relates to upgrades, enhancements, things like that. It would make it easier, and maybe the way I would translate it easier isn't more cost-effective.
Adam Michael Jonas: Yes.
Adam Michael Jonas:
Speaker Change: That's an interesting question.
Adam Michael Jonas: I'm not sure.
Adam Michael Jonas: Yeah, if if the consumer experience ultimately would be better.
Adam Michael Jonas: On an electric vehicle.
Adam Michael Jonas: With.
Adam Michael Jonas: That vehicle architecture versus architecture around an internal combustion engine.
Speaker Change: I think what we would say ultimately is.
Adam Michael Jonas: <unk> architecture would be more optimized.
Adam Michael Jonas: And ultimately would allow for savings both from an architecture standpoint, and from an Adas system standpoint right.
Adam Michael Jonas: And would enable.
Adam Michael Jonas: A much more optimized both vehicle architecture hardware architecture as well as software architecture. So if you would provide more flexibility as it relates to upgrades enhancement things like that it would make it each year.
Adam Michael Jonas: And maybe the way I would translate each year.
Adam Michael Jonas: Is it more cost effective.
Kevin P. Clark: So that's one of the things about our views is that we take a step back. We can't perfectly predict the timing of all aspects of the future, but we still believe there's a significant momentum towards electrification, towards smart vehicle architecture, towards software defined driving, and it all comes down to performance and cost, and there's an element of gravity. Appreciate that, Kevin. Unknown Speaker, And I'm also just as a follow-up, people in the robotics community are describing two years ago as the good old days. There seems to be a revolution in the last couple of years with. Large Language Models and Gen AI
Adam Michael Jonas: So that's one of the kind of our views as we takes to take a step back we can't perfectly predict the timing of all aspects of the future, but we still believe there's a significant momentum toward electrification towards smart vehicle architecture towards the software defined vehicle and it all.
Adam Michael Jonas: It comes down to performance and cost.
Adam Michael Jonas: And there is an element of gravity there.
Speaker Change: I appreciate that Kevin.
Adam Michael Jonas:
Speaker Change: And I'm also just as a follow up.
Adam Michael Jonas: People on the robotics community.
Adam Michael Jonas: Describing two years ago and the good old days.
Adam Michael Jonas: And that seems to be a revolution in the last couple of years with.
Adam Michael Jonas: Large language models and Jen AI.
Adam Michael Jonas: Now rolled into multi-modal models, visual learning models to help. Autonomous Systems and Robotics Learn Faster and Better, without as much of the rules, really kind of attached to the flywheel of AI. I'm sorry if I'm speaking in platitudes here, but I think you know exactly what I'm talking about. I'd be curious if
Adam Michael Jonas: Now rolled into multi modal models with visual learning models to help.
Adam Michael Jonas: Autonomous systems, and robotics learn faster and better.
Adam Michael Jonas: Without as much of the rules based you can really kind of attached to the flywheel of AI.
Speaker Change: I'm, sorry, if I'm speaking in platitudes here, but I think you know exactly what I'm talking about I'd be curious yes.
Kevin P. Clark: Hey, you agree that there have been profound changes in an AI's role on Robots in a Car Form Factor, you, you, you, and how that might be changing. Transcribed by https://otter.ai Yeah, it's a great question and a complex question.
Speaker Change: Hey, you agree that there has been some profound changes in an AI is roll of.
Speaker Change: On robots in a car form factor, which as you know something.
Speaker Change: You.
Speaker Change: Enable and how that might be changing.
Speaker Change: The decisions that you make and how your capital is deployed.
Speaker Change: <unk>.
Speaker Change: Yeah.
Speaker Change: That's a great. That's a great question and a complex question listen I agree that AI ml as change changes change a number of things and you're right it's actually changed.
Kevin P. Clark: Listen, I agree that AI ML has changed a number of things. And you're right, it's actually changing.
Kevin P. Clark: How we approach a number of the products that we develop, like radar solutions, is a great example. So, I think it's a pretty easy argument to make, a pretty easy argument to make today, that the utilization of tools like AIML allows the advancement to move much faster and at a much lower cost. And we're seeing that, and we're benefiting from that, and that's one of the big benefits about this Gensys AS platform that we're... Talked about using AIML allows us to drive down the cost of the perception system, which allows us to actually reduce the compute in this particular platform and reduce and reduce cost.
Speaker Change: How we approach a number of the products that we develop like <unk>.
Speaker Change: <unk> solutions is a great example, any perception solution. So so I think it's pretty easy argument Tonight.
Speaker Change: Pretty easy argument to make today.
Speaker Change: That the utilization of tools like AI ml allows the advancement to move much faster in a much lower cost.
Speaker Change: And we're seeing that and and and we're benefiting from that and Thats one of the big benefits about this genesis the Eos platform.
Speaker Change: We've talked about use of AI ml allows us to drive down our cost of.
Speaker Change: The perception system, which allows us to.
Speaker Change: Actually reduce the computing. This particular, this particular platform and reduce <unk>.
Speaker Change: Reduce costs.
Kevin P. Clark: I think one of the items that, so we're using IML, one of the items that we think is somewhat unique relative to the automotive industry, and I guess one could debate whether it's necessary or not, but the concept of safety and traceability, and the complexity that things like AI ML can introduce to that in terms of lack of traceability makes that calculus a bit more complex. And when we sit down with our customers today and talk about how systems that are integrated operate, they want to know why things fail or how things fail, or how they can determine when things fail.
Speaker Change: I think one of the items that we're using I am one of the items that we think is somewhat unique relative to the automotive industry.
Speaker Change: And I guess, one could debate, whether it's necessary or not but the concept of safety and traceability and.
Speaker Change: And the complexity that that things like AI ml.
Speaker Change: <unk> can introduce too.
Speaker Change: That in terms of lack of.
Speaker Change: Traceability makes that calculus, a bit more complex and as and when we sit down with our customers today and talk about how systems that are integrated operate they wanted to know why things are housing sale or how they can determine things sale.
Kevin P. Clark: Now, we'll see if that changes at some point in time, you know, in the future, but now there needs to be a balance between, you know, an element of the traditional rules-based and, you know, a full AI, general AI ML-based. I appreciate it, Kevin.
Speaker Change: Now, we'll see if that changes at some point in time.
Speaker Change: In the future, but now it needs to be a balance between.
Speaker Change: An element of the traditional rules based and full AI.
Speaker Change: General of AI ml days.
Adam Michael Jonas: Thanks, everybody. I think you're taking a question about trying to be, Hey, I'm on S&P S. You know, you have your three powertrains, you talked about ICE, hybrid, plug-in hybrid. Europe seems to be going more, A lot of hybrid growth. China is more plug-in hybrid, let's say. Maybe the US is more ICE.
Speaker Change: I appreciate it Kevin Thanks, everybody.
Speaker Change: And we will take our final question from Tom Narayan with RBC. Your line is open. Please go ahead.
Gautam Narayan: Hey, Thanks for taking the question so I'll try to be real quick.
Gautam Narayan: And and Pete as.
Gautam Narayan: You know you have your.
Gautam Narayan: Three powertrains, you talked about Ice's hybrid plug in hybrid Europe seems to be growing more latter hybrid growth China's more plug in hybrid, let's say, maybe the U S. Right you just curious.
Kevin P. Clark: Just curious. As these kinds of dynamics change, how does that impact your guys' S&P as a business? Is it easy to pivot? Is there any kind of retooling involved to try to change these different powertrains? Or is it really just a really big deal?
Gautam Narayan: As these kind of dynamics change how does that impact your guy S&P as easy to pivot is there is there kind of retooling involved.
Gautam Narayan: To try to change the different powertrains or is it just really just straightforward.
Gautam Narayan: It's a different product lines. So if its pure bev products, so whether it's a bus bar or it's a a connector for a battery electric vehicle or a harness it tends to have.
Kevin P. Clark: It's a different product line, so if it's pure BEV products, whether it's a bus bar or it's a connector for a battery electric vehicle or a harness, it tends to have a specific set of equipment with a specific tool. But a lot of those are within existing facilities that we have that produce products for both low-voltage as well as high-voltage solutions, so there's some ability When you think plug-in hybrid and hybrid, there's some overlap between that product portfolio that goes on a bed vehicle that would also go on a plug-in hybrid or hybrid.
Gautam Narayan: A specific set of equipment with it with specific tools.
Gautam Narayan: A lot of those are within existing.
Gautam Narayan: Facilities that we have that produce products for both low voltage as well as high voltage solutions. So there is some ability to pivot there when you think plug in hybrid and hybrid there's some overlap between that product portfolio that goes on in that vehicle.
Gautam Narayan: That would also go on a plug in hybrid.
Gautam Narayan: Or or a hybrid vehicle.
Kevin P. Clark: So there's some work that needs to be done, but it depends on the specific situation, and oftentimes, it's not real significant to shift from one to the other. Yeah, it's not something outsized, Tom, that you'd see, like, pop up in CapEx or something. I think it can be managed within the existing... Financial Framework.
Speaker Change: Got it.
Speaker Change: There is some work that needs to be done, but it depends on the specific situation and oftentimes. It's it's not real significant to shift from one to the other yes, it's not something outsized Tom that you would see like pop up in Capex or something I think it can be managed within the existing.
Speaker Change: And the existing business.
Speaker Change: Financial framework.
Speaker Change: Yeah. The other thing that's come up but then there's some pretty big legacy Oems are reported results. This past week, commenting on their efforts to reduce their dealer inventory level. We saw some big just general production cuts in the quarter.
Kevin P. Clark: The other thing that's come up, there are some pretty hot big legacy OEMs or reported results this past quarter, commenting on their efforts to like reduce their dealer inventory levels. We saw some big, just general production cuts in the quarter. They're all saying they're going to do big, But just curious if you're seeing or hearing any just overall high-level downside to overall global production.
Speaker Change: They're all saying, they're going to do big H twos.
Speaker Change: Just curious if you're seeing or hearing any just overall high level of downside to overall global production.
Kevin P. Clark: Which would impact all Yeah, that's, um, we brought our output for video production down a point. The biggest piece of that is, is that related. As Joe and I have talked about, there are some OEMs that we've seen an increase in, and production schedules for products that have internal combustion engines, but net net, we do expect production to be down. Yeah, as I said in my prepared comments, Tom, April was a month of schedules coming down with a few exceptions. There were some nice platforms that popped up, but I would say both legacy, Global OEMs, and Global EB-only OEMs, we saw schedules come down.
Gautam Narayan: Which would impact all powertrains.
Gautam Narayan: Yes, that's we brought we brought her outlook for vehicle production down a point.
Gautam Narayan: The biggest piece of that is that related as Joe and I have yes.
Gautam Narayan: Talked about there are some Oems that we have seen an increase in production schedules for our products that are internal combustion engines, but net net.
Gautam Narayan: We view production would be down yes.
Speaker Change: In my prepared comments, Tom April was a month of schedules coming down with a few exceptions. There are some ice platforms that popped out, but I would say well the legacy.
Speaker Change: Global Oems and global EV, only Oems, we saw schedules come down and.
Kevin P. Clark: And the past four or five weeks, and that's really what we're for. That's what is driving the takedown in the top line. Got it. Thanks a lot. Great, thanks. That will conclude the Q&A session. I'd like to turn the conference back to Kevin Clark for any additional or closed questions. Thank you everyone for taking the time today to listen to our earnings call. I apologize for the technical problem at the start.
Speaker Change: And in the past four or five weeks and that's really what we're for.
Speaker Change: That's what that's what is driving the.
Speaker Change: Take down and be in the top line.
Speaker Change: Got it thanks, a lot guys.
Speaker Change: Great. Thanks.
Speaker Change: That will conclude the Q&A session I would like to turn the conference back to Kevin Clark for any additional or closing comments.
Kevin P. Clark: Okay. Thank you everyone for taking the time today to listen to our earnings call I apologize for the technical problem at the start take care and have a good day.
Kevin P. Clark: Take care and have a good day. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time. ,,,,,,,,,,,, Thank you. This is a production of the Center for Autonomous Vehicle Research and the Center for Autonomous Vehicle Research and Development, in association with the Center for Autonomous Vehicle Research and Development. ,,, Thank you.
Kevin P. Clark: Thank you, ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time.
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