Q2 2024 Aptiv PLC Earnings Call
Speaker Change: Please stand by. We're about to begin.
Unknown Executive: Good day and welcome to the Aptiv Q2 2024. Vice President of Investor Relations, The reconciliations between GAAP and non-GAAP measures for our second quarter results, as well as our 2024 outlook, are included at the back of the slide presentation and the earnings press release.
Unknown Executive: Looking at the second quarter, we delivered record earnings and EPS, reflecting solid execution across the company, as well as lower supply chain disruption costs, completion of the restructuring of the Motional Joint Venture, and a lower share count. These headwinds were partially offset by strong ADAS revenue growth in North America and Europe, as well as double-digit revenue growth with the Chinese local OEM, and included an electrical architecture award with a leading Chinese local OEM on an export vehicle platform.
Unknown Executive: As well as a program extension with a global European-based commercial vehicle OEM, bringing year-to-date bookings to almost $14 billion. Now, turning to our advanced safety and user experience segment on slide five. This includes 90 million in aerospace and defense bookings where the need for certified mixed criticality software is driving demand for solutions such as VXWorks and Wind River Helix. And lastly, our first Grid Energy Storage Award, and although relatively small, we believe that this is just the start.
Unknown Executive: And these macro themes have been the tailwind for the safe, green, and connected trends that have shaped the automotive industry over the last decade and in cases where customers have delayed or are considering delaying their original next-gen technology adoption plan. And given the strength of our financial performance, we can execute this repurchase program while continuing to invest in our portfolio of advanced technology. Completion of the Motional JV Transaction, Moving to the right, our regional revenue performance in North America and Europe reflects the previously mentioned customer and product line dynamics. Active safety was up 15% in the quarter with continued strength across North America and Europe.
Speaker Change: Good day and welcome to the Aptiv Q2 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.
Unknown Executive: In addition to vehicle production reductions across regions, particularly from select customers we noted, we believe the ASR continues our longstanding practice of balanced capital allocation, and our strong financial position allows us to continue to invest in the business while accelerating capital return to shareholders. We believe our revised financial outlook is prudent, reflecting the lower OEM production schedules plus an overlay of incremental management conservatism that Joe mentioned. And we're confident that our strong operating performance will translate into increased operating margins as reflected in our updated outlook. Press star 1 on your telephone keypad. Yeah, um, thanks, Joe.
Jane Wu: Thank you, Jeff.
Speaker Change: Good morning, and thank you for joining Aptiv's second 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.
Speaker Change: Today's review of our financials exclude amortization, restructuring, and other special items, and will address the continuing operations of Aptiv.
Speaker Change: The reconciliations between GAAP and non-GAAP measures for our second quarter results, as well as our 2024 outlook, are included at the back of the slide presentation and the earnings press release.
Speaker Change: 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 filings.
Speaker Change: Joining us today will be Kevin Clark, Aptiv Chairman and CEO , and Joe Massaro, Vice Chair and Chief Financial Officer.
Speaker Change: 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'll like to turn the call over to Kevin Clark. Thanks Jane and thanks everyone for joining us this morning. Let's begin on slide three.
Joe Massaro: By looking at the second quarter, we delivered record earnings in EPS, reflecting solid execution across the company, as well as lower supply chain disruption costs, completion of the restructuring of the motion joint venture, and lower share count.
Joe Massaro: The strong earnings, 180 basis points of operating margin expansion, and 26% EPS growth was in spite of significant revenue headwinds from select customers, which Joe will provide more detail on later.
Joe Massaro: These headwinds were partially offset by strong ADAS revenue growth in North American Europe as well as double-digit revenue growth with the Chinese local OEMs.
Joe Massaro: Our cash flow performance continued to be strong, positioning us to repurchase over $400 million of stock during the quarter.
Speaker Change: Building on that momentum, this morning we announced a new $5 billion share repurchase authorization, which includes an accelerated share repurchase plan, reflecting our view that our stock is undervalued and does not reflect our significant market opportunities.
Speaker Change: Joe and I will provide more detail on the announcement later in the presentation. And lastly, we released our annual sustainability report, which provides an update on Aptiv's commitment to not only achieving our sustainability goals, but assisting our customers in achieving their goals as well.
Joe Massaro: Moving to slide four. During the second quarter, we booked $4.3 billion in new business awards, bringing the year-to-date total to over $17 billion, putting us on track to achieve our full-year target of $35 billion.
Speaker Change: Advanced Safety and User Experience bookings in the quarter totaled $900 million, driven by continued strong momentum in ADAS, as well as awards across Wind River's product portfolio in the A&E, telco, industrial, and automotive markets, bringing year-to-date bookings to nearly $3.5 billion.
Speaker Change: Signal and Power Solutions new business bookings totaled $3.4 billion in the quarter.
Speaker Change: and included an electrical architecture award with a leading Chinese local OEM on an export vehicle platform, as well as a program extension with a global European-based commercial vehicle OEM, bringing year-to-date bookings to almost $14 billion.
Speaker Change: New business bookings in China across both segments continue to track to the changing customer landscape and market share gains made by the local OEMs.
Speaker Change: Year-to-date bookings with the Chinese local AMs totals over 1.8 billion, an increase of 27% over last year.
Speaker Change: Turning to our advanced safety and user experience segment on slide 5.
Speaker Change: The segment achieved record revenues and earnings during the quarter, reflecting the strength of our product portfolio as well as the efficiency of our operations.
Speaker Change: We continue to broaden our customer mix by leveraging our industry-leading ADAS portfolio.
Speaker Change: We booked a new ADAS program with a Chinese local OEM that utilizes a local SOC solution, which customers in the China market are increasingly requiring.
Speaker Change: As well as a radar award with the Global Japanese OEM, representing the fifth radar program we've been awarded by a Japanese customer over the last 12 months, bringing total radar bookings with this customer segment to almost $1.1 billion.
Speaker Change: Revenue increased 2% to over $1.5 billion in the quarter, as active safety revenues increased mid-teens, partially offset by user experience revenues, which were impacted by significantly lower multinational OEM production in China.
Speaker Change: Operating income totaled a record $170 million, representing margins of 10.9%.
Speaker Change: As discussed during our last earnings call, supply chains have stabilized, which has led to a significant reduction in disruption costs.
Speaker Change: And as I mentioned, our China Semiconductor Sourcing Initiative continues to gain traction with Chinese local OEMs, and more global OEMs are requesting that we present them with similar options for both current and future programs.
Speaker Change: providing incremental savings opportunities for our customers while also reducing our material costs and improving our profitability.
Speaker Change: Engineering expense also declined during the quarter, almost 20 million versus the same period last year. Bringing the ratio of engineering to sales down 20 basis points, a trend that we're confident will continue.
Speaker Change: This has been the result of several efficiency initiatives, including the adoption of WinRiver Studio for software development on new OEM programs, the rotation of software engineering activities toward tech centers in best-cost countries,
Speaker Change: and a reduction in advanced development activities to reflect changing market conditions.
Speaker Change: Moving to the next slide for an update on Wind River. As we've discussed in our recent Wind River and software teach-ins,
Speaker Change: The digital transformation that reshaped the consumer ecosystem is now driving change across other end markets.
Speaker Change: The strength of Wind River Solutions to support that transformation is evident in our recent commercial awards across multiple end markets, totaling nearly $200 million year-to-date.
Speaker Change: This includes 90 million of aerospace and defense bookings where the need for certified mixed criticality software is driving demand for solutions such as VXWorks and Wind River Helix.
Speaker Change: In Telco, the adoption of VRAN and O-RAN favors our open, cloud-native solutions, resulting in 50 million in bookings here today.
Speaker Change: And in industrial and automotive, the growth in connected, software-defined devices, which are increasingly deploying AI at the edge, continues to present opportunities for Wind River's full portfolio, as reflected in over 55 million in bookings year-to-date.
Speaker Change: To support the development, deployment, and operation of these Intelligent Edge solutions, we're gaining commercial traction with WinRiver Studio Developer.
Speaker Change: During the quarter, we announced that three of the world's leading software engineering service providers are adopting Studio Developer, and as I mentioned, Aptiv's own adoption has meaningfully improved our software quality and increased the efficiency of our software development process.
Speaker Change: Lastly, Wind River just announced it is the prime sponsor of the Elixir project, an open source, Debian-based, enterprise-grade Linux solution for the intelligent edge.
Speaker Change: AWS, Intel, Capgemini, Supermicro, and SAIC have joined Wind River as project supporters, and we will share more regarding the commercial opportunities associated with this in coming months.
Speaker Change: Turning to our signal and power solution segment on slide 7.
Speaker Change: Revenues in this segment declined 3% during the quarter, principally the result of the reduction in production schedules by select customers.
Speaker Change: Significantly impacting our electrical distribution systems business which had revenues decline high single digits.
Speaker Change: Engineering components grew low single digits in the quarter, with solid revenue growth for traditional interconnect and specialty products in the automotive market, and strong growth in the A&D and space markets.
Speaker Change: which is partially offset by a slowdown in orders from automotive tier ones.
Speaker Change: As I mentioned previously, Signal & Power Solutions booked approximately $3.4 billion in customer rewards.
Speaker Change: We continue to diversify future revenues with ConQuest awards, including multiple engineer component awards for high-speed cable assemblies, high and low voltage interconnects, and power distribution units with a Korean OEM.
Speaker Change: A high-voltage charging award with a Japanese OEM in North America, our fourth award to date that meets the North American charging standard.
Speaker Change: And lastly, our first Grid Energy Storage Award, and although relatively small, we believe that this is just the start, and that the energy storage systems represent an attractive end market for a signal and power business.
Speaker Change: Operating income totaled $436 million, representing margins of 12.4%, reflecting strong operating performance, resulting from lower supply chain disruption costs, as well as manufacturing and engineering performance.
Speaker Change: We're aligning our manufacturing capacity in this segment across all regions to the lower OEM vehicle production schedules and continue to work closely with our OEM customers to address the labor situation in Mexico.
Speaker Change: Looking at signal and power in more detail, we wanted to provide an update on our engineered component product line on slide 8.
Speaker Change: Aptiv is a market leader in providing highly engineered, ruggedized, and mission-critical interconnect, cable management, and fasting solutions for automotive and industrial end markets.
Speaker Change: These solutions have a low cost relative to the overall bill of materials, but a high cost of failure, and are integral to the safe and efficient distribution of power and data.
Speaker Change: Breaking it down further, Aptiv's connection systems business, which will have over $4 billion in revenue this year, is the number two global provider of automotive and commercial vehicle interconnect solutions.
Speaker Change: Harman Titan is the number one provider of cable management and fastening solutions globally and is now almost a $2 billion business.
Speaker Change: Half of their revenue is automotive, and the other half of the business serves non-automotive end markets.
Speaker Change: Lastly, Winchester Interconnect provides highly specialized advanced interconnects and cable assemblies for A&E, commercial space, and other industrial end markets.
Speaker Change: Both HellermannTyton and Winchester provide access to growing markets benefiting from the same industry megatrends and customer needs as automotive.
Speaker Change: And they're key to both our growth and diversification strategies, reducing our exposure to light vehicle production while strengthening through cycle resiliency.
Speaker Change: Moving to slide 9.
Speaker Change: The global trends that include the transition to electric power, edge to cloud connectivity, and the path to higher levels of software and automation continue, with some regions evolving faster than others.
Speaker Change: And these macro themes have been the tailwind from the safe, green, and connected trends that have shaped the automotive industry over the last decade.
Speaker Change: And we strongly believe Aptiv remains well positioned to benefit from these trends.
Speaker Change: While the pace of EV adoption may be slower than recently anticipated, the demand for electrified vehicles that generate lower CO2 emissions continues to grow.
Speaker Change: Consumer demand for advanced safety solutions that meet global regulatory and rating agency standards remains strong and demand for edge-to-cloud connectivity that enables more intelligent solutions continues to grow.
Speaker Change: Despite some near-term challenges, our customers remain committed to making vehicles more safe, more green, and more connected, and require our expertise and assistance to develop optimized solutions that balance the trade-offs between performance and cost.
Speaker Change: And in cases where customers have or are considering delaying their original next-gen technology adoption plans.
Speaker Change: We're being presented with several incremental near-term, near and mid-term opportunities to enhance existing solutions so OEMs can remain competitive in the market by addressing consumer demand for new features and applications that are more efficient, cost-effective, and compliant with regulations.
Speaker Change: Moving to slide 10. As the world continues to become more electrified and software defined, we're uniquely positioned to enable this transition for our customers.
Speaker Change: and are confident in our ability to meaningfully grow earnings and cash flow and deliver significant value to our shareholders, and strongly believe that Aptiv shares are an attractive investment opportunity.
Speaker Change: Accordingly, our board has approved a $5 billion share repurchase authorization.
Speaker Change: including a three billion dollar accelerated share repurchase program.
Speaker Change: The total authorization represents over 25% of our current market cap and is incremental to the almost $9 billion we've returned to shareholders since our IPO in 2011.
Speaker Change: We're very excited about Aptiv's long-term growth prospect and believe that repurchasing our stock is a great investment.
Speaker Change: And given the strength of our financial performance, we can execute this repurchase program while continuing to invest in our portfolio of advanced technologies.
Speaker Change: With that, I'll now turn the call over to Joe.
Joe Massaro: Thanks, Kevin, and good morning, everyone, starting with the second quarter on slide 11.
Joe Massaro: Aptiv delivered strong operating performance in the quarter, reflecting execution of our performance initiatives, as well as our continued focus on costs, resulting in operating margin improvement of 180 basis points over the prior year.
Joe Massaro: Revenue was 5.1 billion dollars down 2% or 1% below underlying global vehicle production, which was down 1% in the quarter.
Joe Massaro: Revenue growth was primarily impacted by lower production volumes at select customers.
Joe Massaro: including a European OEM with a large truck and SUV presence in North America, a global EV-only OEM, and two multinational OEMs in China that are experiencing significantly lower production volumes.
Joe Massaro: These customers represented the majority of the revenue shortfall in the second quarter and as I will discuss shortly we are lowering our full-year revenue outlook.
Joe Massaro: Despite the top line pressure, adjusted EBTA and operating income were both quarterly records at $788 million and $606 million respectively.
Joe Massaro: EVDA margins expanded 220 basis points over prior year as our performance and cost actions helped reduce the decremental impact of lower revenues.
Joe Massaro: FX and Commodities were a $17 million headwind in the quarter.
Joe Massaro: Earnings per share in the quarter was $1.58, an increase of 26% from the prior year, including the benefit of higher earnings.
Joe Massaro: Completion of the Motional JV transaction.
Joe Massaro: A $0.12 benefit in the quarter, as well as the benefit of a lower share count partially offset by higher taxes.
Joe Massaro: Operating cash flow was strong, totaling $643 million. Capital expenditures were $226 million, and share of purchases totaled $434 million.
Joe Massaro: Moving to slide 12.
Joe Massaro: Revenue of 5.1 billion dollars was down 2%.
Joe Massaro: As mentioned, revenue was negatively impacted by vehicle production headwinds in select customers.
Joe Massaro: Primarily impacting our electrical distribution and user experience product lines, including customer schedule reductions on both electrified and internal combustion vehicles.
Joe Massaro: This is partially offset by growth in our active safety and engineered components product lines.
Joe Massaro: Net price and commodities were positive to the top line, offsetting the negative impact of foreign exchange.
Joe Massaro: Moving to the right, our regional revenue performance in North America and Europe reflects the previously mentioned customer and product line dynamics.
Joe Massaro: In China, we grew 16% in the quarter with local OEMs, effectively offsetting the negative impact from lower production at the multinational OEMs.
Joe Massaro: As Kevin discussed, we continue to expand our business with the local Chinese OEMs as we see strong double-digit growth in both new business bookings and revenues with this customer segment.
Kevin Clark: Moving to slide 13.
Kevin Clark: Our ASUS segment achieved record quarterly revenue and earnings as strong growth and active safety more than offset the impact of lower user experience revenues.
Joe Massaro: Active Safety was up 15% in the quarter, with continued strength across North America and Europe .
Joe Massaro: User experience, which is impacted by the slowdown of multinational OEMs in China, was down 10% in the quarter.
Joe Massaro: Segment-adjusted income in the quarter is $170 million or 10.9%.
Joe Massaro: Driven by strong flow-through and active safety volumes, as well as the ongoing initiatives to improve manufacturing and engineering efficiency.
Joe Massaro: Turning to signal and power on slide 14.
Joe Massaro: Revenue in the second quarter was just over 3.5 billion dollars, a decrease of 3% or 2% below vehicle production.
Joe Massaro: Reflecting growth in the engineered components product line, excluding high voltage of 3%.
Joe Massaro: Offset by declines in the electrical distribution product line, primarily driven by the lower volumes of select customers.
Joe Massaro: and High Voltage Revenues were down 19% in the quarter.
Joe Massaro: Segment Adjusted Operating Income was $436 million or 12.4% driven by operating performance initiatives and cost reduction actions.
Joe Massaro: That price and commodities were a positive, offsetting the negative impact of foreign exchange.
Joe Massaro: Moving to slide 15 in our updated macro outlook.
Joe Massaro: Based on changes in customer schedules, we now assume global vehicle production will be down 3% in 2024, from our prior outlook of down 1%.
Joe Massaro: Expected production volume is down across all regions.
Joe Massaro: With North America now expected to be down one percent
Joe Massaro: Europe down 5% and China flat on a year-over-year basis, driven by lower production at multinational OEMs in China.
Joe Massaro: In addition to vehicle production reductions across regions,
Joe Massaro: We are also seeing reductions across powertrains, including both BEV and internal combustion platforms.
Joe Massaro: For FX and commodity rates, our outlook assumes copper at $4.25, Mexican peso at $17.40, and the Chinese RMB at $7.15.
Joe Massaro: Slide 16 has our full year outlook.
Joe Massaro: As we look out at the balance of the year, we do expect continued pressure on vehicle production.
Joe Massaro: particularly from the select customers we noted.
Joe Massaro: However, we remain confident that the actions we have taken to improve performance and reduce costs will continue to drive strong operating performance.
Joe Massaro: Our outlook includes revenues in the range of $20.1 billion to $20.4 billion, down from the prior midpoint of $21.2 billion.
Joe Massaro: Representing adjusted revenue growth of 1%.
Speaker Change: I would note that we've incorporated both customer schedule reductions as well as an additional judgmental reduction in revenues.
Joe Massaro: and our updated outlook.
Joe Massaro: We assume global vehicle production is down 3% resulting in growth over market of 4%.
Joe Massaro: At the segment level, ASUX growth over market remains strong at 10%.
Joe Massaro: with SPS at 1%.
Joe Massaro: Operating income of 2.4 billion dollars, which is an increase in operating margin to 12%.
Joe Massaro: Reflecting continued strong operating performance that partially upsets the decremental impact of the lower revenues.
Joe Massaro: We are also increasing our EPS estimate to $6.30 at the midpoint, an increase of $.25 from prior guide, resulting from the early completion of the motional JV transaction, as well as lower share count, which offsets the impact from lower earnings.
Joe Massaro: Operating cash is expected to be 2.15 billion dollars, up 13% from the prior year.
Joe Massaro: The outlook also reflects the impact of the $3 billion accelerated share repurchase plan, which we'll cover in more detail on the next slide.
Joe Massaro: As Kevin stated, we are announcing a $5 billion share repurchase authorization.
Kevin Clark: which will include an Accelerated Share Purchase Plan, or ASR, totaling $3 billion, that will commence tomorrow.
Kevin Clark: Our confidence in the long-term megatrends, combined with our operating performance and the strength of our balance sheet,
Joe Massaro: Afford us the opportunity to acquire a significant amount of Aptiv's common stock.
Joe Massaro: The ASR will be funded through a combination of available liquidity and debt.
Joe Massaro: We believe the ASR continues our longstanding practice of balanced capital allocation.
Joe Massaro: And our strong financial position allows us to continue to invest in the business while accelerating capital return to shareholders.
Joe Massaro: The remaining authorization will be available for future purposes once the ASR is completed.
Joe Massaro: Moving to my final slide on 18.
Joe Massaro: Our consistent focus on improving and maintaining Aptiv's strong financial position.
Joe Massaro: has provided us the ability to accelerate the return of capital shareholders while maintaining our financial policy and balanced track record of capital deployment.
Joe Massaro: Performance improvement initiatives across the business and the elimination of the significant disruption costs experienced over the last few years have returned margins to pre-COVID levels.
Joe Massaro: And the completion of the motional transaction provides additional funds for capital deployment within Aptiv.
Joe Massaro: Our capital allocation plans, including the acceleration of capital return to shareholders, fits within our financial policy as we maintain the ability to invest in the business and de-lever over the coming year.
Joe Massaro: With that, I'll turn the call back to Kevin for his closing remarks. Thank you, Joe. I'll make some final remarks on slide 20 before opening the lineup for questions.
Kevin Clark: We executed well in the second quarter, despite the revenue headwinds, with record earnings and strong cash flow. And we're well positioned to continue our solid operating performance through the remainder of the year.
Speaker Change: We believe our revised financial outlook is prudent, reflecting the lower OEM production schedules plus an overlay of incremental management conservatism that Joe mentioned.
Joe Massaro: And we're confident that our strong operating performance will translate into increased operating margins as reflected in our updated outlook.
Joe Massaro: As the automotive industry navigates the near-term headwinds, we remain confident that the trends towards greater levels of electrification, connectivity, and digitization will continue.
Joe Massaro: And Aptiv's portfolio is well-positioned to help our customers both transition to and benefit from a more electrified, connected, and software-defined world, which we're confident will result in strong earnings and cash flow growth that will translate into significant value creation for our shareholders.
Joe Massaro: Our conviction around the medium to long-term trend and our strong operating performance has positioned us to take advantage of the market dislocation in our stock price and allows us to increase our capital return to shareholders.
Joe Massaro: Our management team remains focused on flawless execution and creating shareholder value and we will continue to drive the business forward.
Joe Massaro: Focused on developing our portfolio of advanced technologies.
Joe Massaro: Strong Operating Execution, Returning Cash to Shareholders, and Maximizing the Value of our Portfolio of Businesses.
Speaker Change: Operator, let's now open the line up for questions.
Operator: Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. Again, press star 1 to ask a question. We will now move first to Joseph Spak with UBS. Your line is open. Please go ahead.
Joe Speck: Thanks. Good morning, everyone.
Kevin Clark: Kevin just just to start on on the buyback, you know, clearly a strong signal from from you and the management team
Joe Speck: I know you as a leadership team have been very focused on shareholder value, so can you just talk a little bit more about
Speaker Change: How you came to this decision to sort of lever up versus maybe some other options. And then on the debt, you know, you've historically also been pretty conservative.
Speaker Change: Is this just confidence in the next few years cash flow to sort of bring this down or are there other are there other some Potential ways to maybe get some cash out of the business by like looking at some slower growth assets or something like that
Unknown Executive: Well, listen, I think I'd start with our, you know, our general view from a management standpoint is that we remain, we remain conservative. Our outlook for the business is, and quite frankly, has been very strong. Over the last couple years, clearly, as it relates to the transition from COVID to supply, supply chain disruption, and some of the costs and inefficiencies that we had to absorb and had to work through over a period of time. That took a little time, but we've gotten through it.
Speaker Change: Thanks Joe. Well listen, I think I'd start with our general view from a management standpoint is we remain conservative. Our outlook for the business
Speaker Change: is and quite frankly has been very strong.
Speaker Change: Over the last couple years, clearly, as it relates to the transition from COVID to supply chain disruption and some of the costs and inefficiencies that we had to absorb and had to work through over a period of time. That took a little time and we've gotten through it.
Unknown Executive: The reality is we've gotten through that, and it's reflected in our results last quarter from an operating performance standpoint, and this quarter from an operating performance standpoint. Now, setting that aside, we look at the opportunities that are in front of us, whether it's electrification, which has clearly slowed down a bit, whether it's areas in and around active safety or user experience, or our engineering components portfolio, we're very optimistic.
Speaker Change: The reality is we've gotten through that and it's reflected in our results last quarter from an operating performance standpoint, this quarter from an operating performance standpoint.
Speaker Change: And then as we look at, you know, the balance of the year, we have, we have really strong, strong confidence in our ability to continue to execute and deliver margin expansion.
Speaker Change: Now, setting that aside, we look at the opportunities that are in front of us, whether it's electrification, which clearly it slowed a bit.
Speaker Change: Whether it's areas in and around active safety or user experience.
Speaker Change: or our engineer components portfolio, we're very optimistic. We have significant opportunities in front of us in the automotive and non-automotive space.
Speaker Change: Relative to those opportunities, relative to how we're executing and the operating performance that we're delivering,
Speaker Change: You know, our share price is clearly, it's clearly undervalued, and as we look at, you know, trade-offs, various investments, it's the most attractive investment that we have in front of us.
Speaker Change: And given the performance of our business and our view, our outlook for the future, we feel as though we can do this while at the same time continuing to invest in the business.
Speaker Change: And, you know, as it relates to, you know, other opportunities to increase value, you know, that's something that we, as we always do, we'll continue to look at, we'll continue to evaluate, and the extent we need to adjust our portfolio to certain market trends or market dynamics.
Speaker Change: You know, those are things we'll consider.
Speaker Change: Joe, it's Joe. Just to follow up from a D-lever perspective, not assuming any cash from one-off sources, we've built a plan here that will allow us to...
Joe: Be lever over the course of 25 and maintain, you know, the same view on financial policy that we've had before.
Speaker Change: Thank you. And just the second question on China. Obviously, sort of, this has been an area of a lot of focus for investors, not just for Aptiv, but the entire industry and
Speaker Change: You know, you have the growth under market now of 4% for the year, doesn't seem like the dynamics of some of those foreign players are changing anytime soon. I know you showed some decent metrics with some of the domestic players, but
Speaker Change: You know, I think in the past you've said your backlog is moving to 50-50, but you know, if you look, the domestics are already 60, maybe 65% share in some of the more recent months, so...
Unknown Executive: We have significant opportunities in front of us in the automotive and non-automotive space. I know you don't recast your past bookings, but like how much of that should investors think is at risk? Because, you know, clearly some business that has been awarded is just not going to materialize in the volume, and I'm obviously watching closely. Yeah, if I can add Joe, I think important in the Chinese market with the local OEMs.
Speaker Change: I know you don't recast your past bookings but like how much of that should investors think is at risk because you know clearly some it would seem that some business that has been awarded is just not going to materialize in the volumes.
Speaker Change: Yeah, Joe, it's Joe. Let me start. I mean, our revenues are over 50% at this point, local Chinese OEM, and growing quickly.
Speaker Change: We're clearly growing into that market share shift. Bookings are 60-plus percent and have been for the last couple of years on the Chinese locals.
Speaker Change: So it's something I don't have exact sort of bookings headwind number for you But it's clearly something we're watching closely. It's something the team has been on for a while now This isn't something we just started doing in the last couple quarters
Speaker Change: You know, at one point, that business, as you know, was 70% global, 30% local. So, we continue to see good transition. I think the challenge at the moment is just how quickly...
Speaker Change: A couple of these multinationals are actually dropping off more than a concern about how well we're growing with the locals. It's something we're working with those customers on.
Unknown Executive: The period between award and actual launch tends to be 9 to 12 months for your R&D and product development, and then lean back on some of the ICE and other core products and generate more cash. And we might be looking at an even better return of value to shareholders over time. Just curious how this balances out sort of back into the core. It was about 500 million, roughly, give or take back then.
Speaker Change: The period between award and actual launch tends to be 9 to 12 months.
Speaker Change: So, the ability to gain traction and deliver revenue growth, and it's reflected in the growth numbers that Joe talked about with the China Local AMs, it's rapid. I would say the challenge that we have in China right now is really, from a multinational standpoint, is unique to two customers.
Joe: And this past quarter we saw a significant reduction.
Joe: in their volumes, in their schedules. And, you know, part of the judgment that Joe is referring to or Joe referred to from a schedule standpoint is that continues during the balance of this year.
Joe: So, as Joe said, changing our mix has been a priority for the last three years. We have made traction, we'll continue to make traction, and we think we're addressing the challenge there and the market changes.
Speaker Change: Thank you guys.
Speaker Change: We'll move next to John Murphy with Bank of America. Your line is open. Please go ahead.
John Murphy: Good morning, guys.
John Murphy: Kevin, just maybe, and Joe, maybe just kind of in sort of a strategy and philosophical
John Murphy: Follow up to sort of this you know cap reallocation as you think about you know step up in buybacks
Speaker Change: Okay, you're kind of alluding to the shares being very undervalued, which I certainly agree with, and a good ROI, which I also agree with.
Speaker Change: Advanced stuff that you know is taking time to come to fruition that you might be able to sort of structurally slow down
Speaker Change: At the same time, John , our engineering factory, both in the ASUX segment and the SPS segment, is really executing extremely well a number of the efficiency initiatives that we've put in place from an operational standpoint.
Unknown Executive: So that's a 15% CAGR. So that's been a, you know, not a double or triple; I would argue maybe a home run. Are there other acquisitions that could create, you know, even greater expansion in adjacent? Great, thank you. Good morning, everyone.
Speaker Change: For your core business that might make sense that you guys are looking at right now I mean because I mean that's a great example of you know of an add-on
Speaker Change: Thank you very much.
Speaker Change: We'll move next to Itay Micheli with Citi. Your line is open. Please go ahead.
Unknown Executive: Just the first question, just, you know, given the volatility and top line this year and, of course, the resilient margin, just curious how we should be thinking kind of more broadly in the medium term around the company's organic growth or growth in the market, as well as just the incremental margin path from here. And then, just secondly, on the bookings, I know it can be very lumpy quarter after quarter, but I was just curious how Q2 compared with internal expectations. I think in the past you may have suggested it was maybe upside to the $35 billion for the full year. Curious if that is still a possibility.
Itay Micheli: We should be thinking kind of more broadly in the medium term around, you know, the company's organic growth or growth of the market.
Speaker Change: You know and again we just and if you looked at this look at the chart in the in the deck right you'll see the Quarters just tend to move around based on size of awards and we've had a couple of large awards and and sort of given Quarters so nothing nothing more than that normal lumpiness there and remain I I think confident in the 35 billion at this point
Unknown Executive: As it relates to revenue, it was in the very early days to be going into next year. You know, as we think about early planning assumptions, we're certainly targeting mid-single digit growth, really assuming no help from the market at this point, so flat vehicle production. But a lot to work through, particularly just given, you know, the mix in platforms, the mix in powertrains, those types of things, and obviously China.
Speaker Change: Hey, if I can augment that, I, I, listen, Joe, Joe, I, I think it's important because Joe articulated this in his prepared comments. Really, when you look at, um, the second quarter, it was four customers.
Speaker Change: So, you know, that dynamic had a big impact on us for Q2. We believe they'll have consistent impacts for the balance of the year, but we'll see how that plays out. When you look at the broader mix of...
Speaker Change: of OEMs. Listen, some are up, some are down, but the net is with those four, and I think it's important to keep that in context.
Speaker Change: Absolutely. That's all very helpful. Thank you.
Speaker Change: We'll move next to Adam Jonas with Morgan Stanley . Your line is open. Please go ahead.
William Takedon: Hi, this is William Tacadon for Adam Jonas. I'm curious, maybe expanding on Itay's question ago, with how fast the trends are shifting in the industry, do you reiterate that long-term growth over market assumption of six to eight percent, I guess even with the new aggressive capital return strategy? Thanks.
Unknown Executive: Listen, we'll look at customer mix and market dynamics. And, evaluate. I think, as Joe said, you know, next year, we're looking at kind of mid single-digit sort of growth in a flat market. We need to do more work on that to determine whether that's the longer term outlook, or it translates to what we're seeing more near. Got it. That makes a lot of sense. I guess the next question is, Do you expect to see your OEM soon?
Speaker Change: You know next year we're looking at kind of mid single digit sort of growth on flat market. We needed to do more work on that to determine whether that's the longer term outlook or it translates to what we're seeing more near term.
Speaker Change: Yeah, I think, you know, we get asked questions about...
Speaker Change: You know delays of technology adoption whether it be the transition to EVs or possible transition to
Speaker Change: to smart vehicle architecture and What you need to keep in mind is OEMs need to be constantly upgrading enhancing vehicles to meet
Speaker Change: We've seen incremental what I'd call bridge programs that relate to legacy ADAS or user experience solutions.
Speaker Change: that are in the billions of dollars, so significant opportunities to enhance and upgrade existing solutions that we feel like we're very well positioned for. Some are with existing customers, some are with new customers.
Speaker Change: We'll move next to Dan Levy with Barclays. Your line is open, please go ahead.
Unknown Executive: The more advanced L2 plus the impact of some of the delays in technology adoption, whether it be the transition to EVs or the possible transition to smart vehicle architecture. And what you need to keep in mind is that OEMs need to constantly upgrade and enhance vehicles to meet, Hello, good morning. Thank you for answering the question about trajectory and how much. But then to Kevin's prepared remarks, you know, if you look at where engineering is a percent of sales, very much in line with those targets as it comes back down to sort of that six to seven percent range. So it's fairly balanced really across those initiatives. That's in the price comment. That's obviously come down, right?
Dan Levy: Hi, good morning. Thank you for answering the questions.
Dan Levy: Yeah, Dan, it's Joe. I mean, it's actually pretty balanced. I mean, I'd go back to sort of some of that discussion we had at Investor Day.
Dan Levy: But then to Kevin's prepared remarks.
Speaker Change: And the price recoveries from customers, is that continuing to play a role here? That's in that price comment. Yeah, that's in that...
Unknown Executive: We've seen... We've seen the direct material inflation come down, and as a result, we've seen less, you know, less recoveries. And at this point, the vast majority has been included over the past, you know, four-plus quarters has been included in the peace price. You know, I think we're hoping for just some sort of an update on where the SVA discussions are with your customers. To start with just the underlying trend, more and more OEMs are headed in this direction.
Speaker Change: That's in that nice net price comment. That's obviously come down, right? We've seen We've seen the direct material inflation come down and as a result we've seen less, you know less Recoveries and at this point the vast majority has been included over the past, you know, four plus quarter has been included in peace price
Speaker Change: Great, thank you. Second question is just on SVA and your presence with customers. Obviously
Speaker Change: You know, I think we're hoping for just some sort of an update on where the SVA discussions are with your customers. You had mentioned
Speaker Change: over the quarter that there was a $2 billion cancellation. Maybe you could just talk about
Speaker Change: $8 billion, I think, you know, coming through, market share, anything you've talked about. And then even if you're getting, you know, if some of these programs are going away,
Speaker Change: Can you just talk about the other content that you still have that shows that even if you've lost that content, there is still some offset on the high voltage or other pieces of the architecture.
Speaker Change: Yeah, yeah, let me take a shot at it. So, listen, pretty good line of sight as it relates to smart vehicle architecture.
Speaker Change: To start with just the underlying trend, more and more OEMs are headed in this direction.
Unknown Executive: So I would say that... To the extent that, you know, our approach to smart vehicle architecture is, you know, obviously, we've talked about it, we've developed a system solution, but we sell components that go into that. And, you know, and those opportunities are on both ICE as well as EV platforms. So in areas like active safety or user experience, it's very agnostic as it relates to what the PowerPoints
Speaker Change: So I would say the recognition to get to where they want to get from a hardware architecture, software architecture, to be more software defined.
Speaker Change: They need to re-architect both the hardware as well as the software. So I would say global recognition that that needs to be done. Executing that can be difficult. You're seeing that, right, with certain OEMs and that's impacting timing.
Speaker Change: To put it in perspective, two years ago, at this point in time, we had a pipeline for smart vehicle architecture that included four OEMs.
Speaker Change: Today we have a pipeline for smart vehicle architecture that includes over 20 OEMs.
Speaker Change: across the globe.
Speaker Change: So the pipeline is actually larger.
Speaker Change: As it relates to any delays or push-off of programs, they have existing platforms that, as I mentioned, they need to be upgraded and enhanced.
Speaker Change: and you know this year alone we have in our pipeline and hey we won't win all of these and some of these quite frankly we're probably less interested in
Speaker Change: But we have opportunities that are over 10 billion dollars.
Speaker Change: So there is significant opportunity out there for us to help OEMs bridge the gap.
Speaker Change: and you know and those opportunities are on both ICE as well as EV platforms.
Speaker Change: or Electrify platform.
Speaker Change: So in areas like active safety or user experience, it's very agnostic as it relates to what the PowerPoint architecture is.
Speaker Change: Thank you very much. Thank you.
Speaker Change: And maybe anything on the share dynamics or just competitively how you think you're stacking up versus others on SVA?
Speaker Change: We're doing some work with with select OEMs. We're very selective in terms of the business we pursue. There are at times
Speaker Change: Desires for OEMs to have fairly customized solutions.
Unknown Executive: We've productized our system and components that go into smart vehicle architecture. So we're looking for standardization and technologies that we can bring across multiple OEMs versus developing customized solutions for a given OEM. We'll move next to Mark Delaney with Goldman Sachs. Your line is open, please go ahead.
Speaker Change: We've productized our system and components that go into smart vehicle architecture.
Speaker Change: So, I'm not sure, you know, share is the right way to look at it at this point in time, but we sit, you know, we're very well positioned just given our portfolio products and our experience in this area. Great. Thank you.
Speaker Change: Good morning. Thanks very much for taking my questions. The company had several launches that were supposed to occur in the second half of 2024 that allowed for an acceleration in growth over market. With your now 4% growth over market assumption for 2024, that still does require a meaningful step up relative to what you reported for the first half. So maybe you can help investors better understand your confidence and visibility into those.
Speaker Change: Launches occurring and to what extent that's been a piece of the conservatism you mentioned compared to schedules
Unknown Executive: Yeah, I would say from a launch standpoint, it probably depends on mix. So I'd be careful on first half, second half as it relates to revenue. Because the reality is, you know, you need to start the launch, and there's a ramp up, and it takes a period of time for it to come to full revenue. So, I would say, as you look at the 2024 calendar, you prefer to have a heavier weighting in the back half of Q3, which we had, and then the first half of the back half of 2023. I'm sorry. And then the first half of 2024, right? That would be your preference.
Speaker Change: Yeah, I would say from a launch standpoint it probably depends on mix So I'd be careful on on first half second half as it relates to revenue Because the reality is you know you need to start the launch and there's a ramp up and it takes a period of time
Speaker Change: For come to come to full revenue. So so I would say as you look at 2024 calendar you prefer to have a heavier weighting in the back half of q3 which we had and then the first half of The back half of 2023. I'm sorry
Speaker Change: and then the first half of 2024, right? That would be your preference.
Unknown Executive: That's how our launches are timed. We watch this by region, by business unit, by product line. Yeah, Mark, I'd say it's the launches themselves. And we haven't seen any cancellations.
Speaker Change: That's how our launches are timed. We watch this by region, by business unit, by product line.
Unknown Executive: To Kevin's point, a lot of these have started at lower volumes earlier in the year, so they're impacted maybe by vehicle production total schedules from customers, but generally, from a launch perspective, remain on track.
Speaker Change: So they're impacted maybe by vehicle production total schedules from customers But generally from a launch perspective remain on track. I'll go back to Kevin's earlier comment I mean the select customers that we called out
Kevin Clark: They're roughly 70% of the revenue reduction in the back half of the year, right? And then we have the conservatism overlay on sort of top of that. So...
Speaker Change: Okay, that's helpful. Thanks. My other question was on Wind River. I believe you assumed mid-teens growth for Wind River revenue this year. Can you give an update on where that's tracking? And maybe as you think about Wind River longer term, can you talk about the momentum with customers, especially in the automotive space and the prospect for any additional wins? Thanks.
Unknown Executive: I mean, the select customers that we called out about Wind River longer term, can you talk about the productivity that they're looking for? The fact that for the last, you know, the last few quarters, we've been using Studio Developer on our new program launches. So that integrates into the engineering organization, organizations of both SOWs as well as OEMs.
Speaker Change: Yeah, yeah, so, so, um,
Speaker Change: Revenues last year were timed stronger in the first half of the year. So when you look at it from a year-over-year standpoint.
Speaker Change: Opportunities and launches in aerospace and defense and telecommunications and industrial and automotive.
Speaker Change: Growth opportunities in automotive, we've had significant success in the China market just given the nature of the new platform introduction.
Speaker Change: It's easier to introduce a solution like the Wind River VXWorks solutions or Helix Hypervisor on a platform that you are launching, a new platform versus an existing platform.
Speaker Change: gaining traction on Wind River Studio Developer
Speaker Change: that OEM customers are having with software development.
Speaker Change: The Productivity that they're looking for, the fact that
Unknown Executive: So they're seeing the benefits from a quality and efficiency standpoint. And, you know, the growth profile remains intact, and, you know, to date, most of our progress in the automotive space has really been in China. Hey, thanks a lot for taking my question. I'm wondering if you could just provide more details on some of the cost tailwinds in the quarter. I think you mentioned the elimination of supply chain and COVID costs that might have been maybe $40 to $50 million. But according to my math, you were probably achieving something closer to $175 million in net performance and productivity. You mentioned engineering. I think engineering was a tailwind as well.
Speaker Change: So, you know, the growth profile remains intact and, you know, to date, most of our progress in the automotive space has really been in China.
Speaker Change: But on my math, you were probably achieving something closer to $175 million in net performance and productivity. You mentioned, I think, engineering was a tailwind as well.
Unknown Executive: And just big picture, you've talked before about incremental margins in the 18 to 22% range. With these cost actions, do you see that trending higher as we look out? Yeah, listen. I think we're, you know, continuing to make progress. I'm gonna stay away from long-term sort of margin projections. We've obviously talked about where we thought 2025 looks.
Speaker Change: And just big picture, you've talked before about incremental margins in the 18 to 22% range. With these cost actions, do you see that trending higher as we look out?
Unknown Executive: And I think we're on that 12 and a half percent. And I think we continue to track towards that if you look at where we'll be in the back half of the year. You know, as I mentioned earlier, it's really a balance right where we're seeing really strong manufacturing performance agree with your COVID supply cost chain numbers coming out of the disruption costs coming out, and engineering coming back in line.
Speaker Change: And I think we're on, that's at 12.5%, and I think we continue to track towards that if you look at where we'll be in the back half of the year.
Speaker Change: You know, as I mentioned earlier, it's really a balance, right, where we're seeing really strong manufacturing performance, agree with your COVID supply cost chain numbers, the disruption costs coming out.
Unknown Executive: And we're seeing really strong performance coming out of the operations of the business as well. So you know, it's really if you go back to sort of how we thought about margin enhancement over, you know, back at investor day, we had that 1.7 billion of what we thought was going to be in performance over three years. About 300 of that was the supply chain disruption coming out. The remainder we talked about being sort of, you know, equal improvements over the course of the three years across manufacturing, logistics, engineering, and SG&A. And that's really what we're seeing. So it's fairly balanced. There are no big one-off items in there.
Speaker Change: And we're seeing really strong performance coming out of the operations of the business as well. So, you know, it's really, if you go back to sort of how we thought about margin enhancement over, you know, back at Investor Day, we had that $1.7 billion.
Speaker Change: of what we felt was going to be a performance over three years. About 300 of that was the supply chain disruption coming out.
Speaker Change: The remainder we talked about being sort of, you know, equal improvements over the course of the three years across manufacturing, logistics, engineering, and SG&A. And that's really what we're seeing. So it's fairly balanced. There's no big one-off items in there.
Unknown Executive: It's really the business operating well. As we talked about at the end of last year, we took a..., made a decision on what I'll call overhead costs and took out a significant amount of overhead costs. We talked about a $50 million number; we're seeing that come in, as well. So it's fairly well balanced.
Speaker Change: It's really the business operating well. As we talked about at the end of last year, we took a...
Unknown Executive: And I think it puts us, you know, if you look at where run rate margin or, sort of, back half h2, even margins will be in sort of those mid-12s. That sets us up, I think pretty well for the 12.5 we were talking about in 2025. Okay, great. And just one last one.
Speaker Change: As well, so it's fairly well balanced, and I think it puts us, you know, if you look at where run rate, margin, or sort of back half, H2, even margins will be in sort of those.
Unknown Executive: Following up on Dan's question earlier on SVA, just trying to think about the trade-off here, you know, between the reduction that that you would see in SBA architectures in terms of wiring content, I know that's a lower margin business for you. But in a situation where you may not be winning as much in engineering components or high-voltage connectors, just trying to think about those those architectures as we look ahead, Yeah, well, the math we used to do, to make sure I understand your question, relates to SVA versus traditional architecture, and our product portfolio is effectively right.
Speaker Change: Okay, great. And just one last one. Following up on Dan's question earlier on SVA,
Speaker Change: in engineering components or high voltage connectors. Just trying to think about those architectures as we look ahead.
Speaker Change: Yeah well the math we used to do, make sure I understand your question, is it relates to SVA versus traditional architecture in our product portfolio is effectively
Unknown Executive: $3 would go in, and roughly $1.50 would go out. Like that was the net. And most of that would be in and around the wire harness, right? That's where you'd see the net chain.
Speaker Change: Right, $3 would go in and roughly $1.50 would go out, like that was the net, and most of that.
Unknown Executive: As it relates to incremental opportunities, thanks for taking the questions. I could do this as a follow-up if necessary, but just getting this question, the leverage that you guys are at for Operations. I would love any kind of numbers associated with that.
Speaker Change: As it relates to incremental opportunities, again, our customers don't remain static. So to the extent they are pausing on something, delaying, or stopping,
Speaker Change: A step change in vehicle architecture, not all the way to SVA, where
Speaker Change: The wire harness is changed, mass is taken out, it's replaced with things like high-speed cable assemblies and other items like that that reduce weight and mass, improve performance.
Speaker Change: That's what I was referencing in the $10 billion opportunity that I talked about in this particular calendar year. So there are opportunities in and around those spaces that didn't exist previously.
Speaker Change: Right that that weren't there for for ourselves. So that's an incremental revenue opportunity as well
Unknown Executive: Yeah, cash, hey Thomas, Joe, cash from operations is, call it six to eight hundred million. You know, we finished the quarter with billion four of cash, and we have another 700 million of Market Electrical Security. So we're in a good position. You know, as we end the quarter, adjusted debt to EBITDA, call it right around two times. Net debt, obviously, is lower.
Speaker Change: Yeah, cash, hey Thomas, Joe, cash from operations is, you can call it six to eight hundred million.
Speaker Change: You know, we finished a quarter of the billion four of cash, and we have another 700 million
Speaker Change: actually, of Market Electrical Security. So we're in a good position. You know, as we ended the quarter, adjusted debt to EBITDA, call it right around two times. Net debt, obviously lower. So we're in a really good position. I mean, we've
Unknown Executive: So we're in a really good position. I mean, we've, we've, And then a quick follow-up on SVA, and we talked a lot about that, but you know one thing we've been hearing from some of the OEMs, mostly on the premium side, is what appears to be, at least their public statements, their desire to? do as much as possible kind of where that's not necessarily the case, or, could you mention, you have the option?
Speaker Change: You know really kept that balance sheet
Speaker Change: and work over the course of next year to, you know, when we do the final debt offering to support the ASR.
Speaker Change: And then a quick follow-up on SVA and we talked a lot about that but
Speaker Change: What appears to be at least their public statements, their desire to do as much as possible kind of
Speaker Change: on their own or, you know, maybe utilize Tier 1s less. Is it a dynamic where there's a differentiation between maybe premium OEMs wanting to differentiate for their own brand, whereas maybe mass market OEMs
Unknown Executive: You know, turning out in this context, like a mass market versus premium thing or kind of design of the particular smart vehicle architecture. That maybe touches on the point. Our, you know, years of history in and around power and data distribution are just how do you do it effectively, efficiently, at the lowest cost, at the lowest cost? How do you reduce weight and mass?
Speaker Change: kind of design of the particular smart vehicle architecture. That maybe touches on the point.
Speaker Change: Where I talked about, we don't view this as particularly differentiating for a unique OEM. Our focus, just given our
Speaker Change: Our, you know, years of history in and around power and data distribution is just how do you do it effectively, efficiently, at lowest cost, at lowest cost.
Speaker Change: How do you reduce weight and mass? We feel like, obviously, our solution.
Speaker Change: is the best solution. If a particular OEM wants to go down the path that you talked about, they certainly can.
Speaker Change: We're focused on avoiding customized solutions for OEMs, so that's not business we have pursued or we would pursue.
Unknown Executive: We feel like, obviously, our solution is the best solution. If a particular OEM wants to go down the path that you talked about, they certainly can. Um, so, you know, I'm not sure I naturally at the end of the day. It's, you know, our pipeline today includes programs with 20 different OEMs versus four two years ago.
Speaker Change: It's that differentiating or important for an OEM to own, but if they elect to do it and if we have a product that meets their needs that we can sell profitably, that's certainly something we'll do. If not, it's something we won't do and we'll move on.
Speaker Change: to the next OAM, as I mentioned.
Speaker Change: You know, our pipeline today includes programs with 20 different OEMs versus two years ago four. So there's plenty of opportunity that's out there.
Kevin Clark: So there's plenty of opportunity that's out there. I will now turn the conference back to Kevin Clark for any additional or closing remarks. Alright, thank you everybody for joining our call today. We really appreciate your time. Thank you, Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.
Speaker Change: Thank you for watching!