Aptiv PLC

Good day and welcome to the Aptiv third quarter 2020 earnings conference call. My name is Tracey and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Thank you, Elena Rossman, Aptiv Vice President of Investor Relations. You may begin your conference.

Thank you, Tracy. Good morning, and thank you to everyone for joining Aptiv's third quarter 2020 earnings conference call. To follow along with today's presentation, our slides can be found at ir.aptiv.com. Today's review of our actual financials exclude restructuring and other special items and will address the continuing operations of Aptiv. The reconciliation between GAAP and non-GAAP measures for our third quarter financials are included at the back of today's presentation and the earnings press release. Turning to the next slide, you can see here a disclosure on four looking statements which reflect Aptiv's current view of future financial performance, which may be materially different from our actual performance for reasons that we cite in our Form 10-K and other SEC filings. including uncertainties posed by the COVID-19 pandemic and the difficulty in predicting its future course and impact on the global economy. Joining us today will be Kevin Clark, Aptiv's President and CEO, and Joe Massaro, CFO and Senior Vice President of Business Operations. Kevin will provide a strategic update on the business, and then Joe will cover the financial results and outlook for the remainder of the year in more detail. With that, I would like to turn the call over to Kevin Clark.

Thanks, Elena. Good morning, everyone. Beginning on slide three, our strong third quarter results reflect our culture of continuous improvement, which has created a more sustainable business that thrives in any environment. Our portfolio of safe, green, and connected technologies has translated into year-to-date revenue growth, which is 10 points over underlying vehicle production. And our optimized cost structure is a competitive advantage. positioning us to withstand the 50% plus reduction in this year's second quarter volumes and remain EBITDA break-even. Our culture of flawless execution has allowed us to ramp up production to meet the rapid rebound of customer schedules while managing through the challenges related to labor availability and a tightening of the global supply chain. With zero customer disruptions in a quarter that we experienced a 60% sequential increase in vehicle production. The proactive portfolio and cost structure actions we've taken over the last few years to strengthen our business model have positioned Aptiv to outperform in any environment with more sustainable earnings and cash flows, a disciplined and proven approach to value creation, and the flexibility to accretively deploy capital. I'm proud of how well our team has performed during this challenging year, and I'm grateful for their commitment to our culture, that drives continuous improvement, ensuring Aptiv can outperform in any environment. Moving to slide four, the strong rebound in vehicle production, combined with solid operating execution, contributed to strong financial results in the third quarter. Revenues increased 3% to $3.7 billion, representing seven points of growth over vehicle production. EBITDA and operating income totaled $581 million and $389 million respectively, and adjusted earnings per share reached $1.13. Looking at each region, government fiscal policies and improved business conditions boosted vehicle production 11% in China, and OEMs in North America and Europe are aggressively restocking vehicle inventories, resulting in the strong ramp-up in vehicle production and which translated into a year-over-year decline of only 1% and 8% respectively during the quarter. The increase in COVID-19 cases during the quarter, especially in Mexico and Eastern Europe, created supply chain disruptions principally related to Tier 2 and Tier 3 electronics and component manufacturers, which resulted in volatile customer schedules, leading to some operational headwinds. We're closely monitoring the more recent spike in COVID-19 cases in both Europe and North America and the potential impact on the global supply chain and customer schedules, but have not reflected incremental disruptions in our outlook for the fourth quarter and 2021 global vehicle production. Joe will cover our fourth quarter and FOIA guidance in more detail shortly. As shown on slide five, third quarter new business bookings totaled $4.6 billion. REPRESENTING A MORE NORMALIZED RUN RATE FOR NEW BUSINESS REWARDS. YEAR-TO-DAY BOOKINGS REACHED 10.5 BILLION, BENEFITING FROM A MEANINGFUL INCREASE IN NEW BUSINESS WIN RATES, PARTIALLY OFFSET BY THE DAY-TO-DAY OPERATING CHALLENGES RELATED TO COVID-19. ADVANCED SAFETY AND USER EXPERIENCE SEGMENT NEW BUSINESS BOOKINGS TOTAL JUST OVER 2 BILLION YEAR-TO-DAY, AS A HANDFUL OF CUSTOMER REWARDS INITIALLY PLANNED FOR THIS YEAR HAVE BEEN PUSHED TO 2021. And new business bookings for our signal and power solution segment totaled more than $8 billion year-to-date, including $1 billion of high-voltage electrification awards driven by the increased demand for electrified vehicle platforms. For the full year, we now expect new business bookings in the range of $16 to $17 billion, roughly flat to 2019 levels, when adjusted for our current outlook for lower global vehicle production. The cumulative amount of our new business bookings over the last few years gives us tremendous confidence in our ability to sustain strong above-market growth across both of our business segments, validating the strength of our portfolio of market-revolving technologies aligned to the safe, green, and connected megatrends. Looking at our business segments in more detail, beginning on slide six with advanced safety and user experience, As the need for more complex software, hardware, and systems integration expertise increases, our unique ability to offer highly functional, scalable, and optimized solutions across the active safety and user experience domains has driven continued strong revenue growth over market, despite the decline in vehicle production over the last few years. And our increasing capabilities in software development and data analytics positions us well for future high growth high margin opportunities in new markets. These industry trends and our unique capabilities underpin our outlook for eight points of growth over market in our advanced safety and user experience segment this year, reaching roughly $3.5 billion of revenues. Turning to slide seven, our OEM customers continue to launch advanced safety solutions across their vehicle platforms and democratize these features across their vehicle lineups, to meet increasing consumer demand, while at the same time, Europe and China NCAP standards are accelerating the adoption of advanced AP solutions. Several OEMs have decided to make automatic emergency braking, as well as other ADAS features, standard equipment in the US by 2022, all of which translates with significant demand from OEMs for level two and two plus ADAS solutions, seeding the next big wave of market penetration even if the industry experiences lower vehicle production volumes due to COVID-19. Our unique first-in-industry approach to compute centralization and scalable satellite architecture has strengthened our competitive position and sustained our strong revenue growth and is validated by the fact that we now provide OAN customers with more than 6 million radars annually, compared to only 1 million just five years ago. And our satellite architecture solution will be deployed across 10 million vehicles over the next five years. As such, we're confident that we will continue to grow our active safety revenues at a compounded rate of 25% per year over the next few years, reaching over $2 billion by 2022. Importantly, our Gen 2 ADAS platform will further increase our competitive moat with the deployment of next-generation perception systems and a higher level of software abstraction that will deliver even more consumer value while enabling new business models for Aptiv and reduce investment for OEM customers. Turning to our signal and power solution segment on slide eight, we're leveraging our industry-leading position in vehicle architecture to become the partner of choice for both our traditional and new emerging OEM customers. By integrating our broad portfolio of low high voltage solutions, including the conductor, connectors, electrical centers, and cable management systems, we're able to reduce the weight and physical size of the electrical distribution system by up to 40%, thereby reducing costs for OEM customers. We're also leveraging our expertise in harsh environment electronics to penetrate adjacent markets, such as the commercial vehicle, data telecom, and industrial sectors. Our momentum in our signal and power solution segment gives us confidence in delivering revenue growth of nine points over vehicle production this year, reaching $9 billion of revenues. Moving to slide nine, we continue to see an acceleration of powertrain electrification driven by both more stringent CO2 regulations, principally in Europe and China, and increasing consumer demand globally. Our complementary high-voltage distribution and connection systems as well as cable management solutions, leverage our low-voltage core competencies that include vehicle architecture optimization, system-level expertise, and global manufacturing and supply chain management to enable the acceleration of powertrain electrification by significantly reducing the weight and mass of the vehicle architecture through smarter, more efficient design, perfectly positioning assets to benefit from the two-fold increase in addressable content on a high-voltage electric vehicle. Our unique, holistic approach to designing, developing, and manufacturing system-level solutions for electrified vehicles makes Aptiv the partner of choice for OEM customers and has contributed to continued strong new business awards with both traditional high-volume OEMs, where we've recently been awarded new business on a series of conquest pursuits including with a leading major European OEM for innovative, long-range electrical vehicles that will begin launching in 2022. And with non-traditional battery electric vehicles focused OEM customers, where we've increased our share of wallet with an industry leader who's been expanding both their vehicle offerings and their global reach. As a result, high-voltage electrification continues to be our fastest-growing product line, with revenues increasing at a 40% compounded rate for the next few years, reaching roughly $1 billion by 2022. Turning to slide 10, NEVR's Aptiv's mission of enabling a safer, greener, more connected world had more meaning than it does today. The COVID-19 pandemic has led to a much broader perspective on how the global community views safety, both inside and outside of the vehicle. We've all become more sensitive to our environment and have had a glimpse of a greener world with fewer cars on the road and planes in the sky. And every day, we're all reminded of just how connected the world is and how much more it could be as more of us work remotely. We are proud of the progress we've made this year on our enterprise-wide commitment to corporate social responsibility, which can be explored in our 2020 sustainability report that was published in September It includes our sustainability framework, new 2025 commitments for each of our foundational pillars, which include people, product, planet, and platform, and newly adopted GRI and SASB reporting standards, which supplement our adherence to the United Nations Sustainable Development Goals. Our ability to meet these commitments on sustainability is built on a cultural foundation of always doing the right thing the right way. We believe that our long-term success and ability to create value for all our stakeholders are directly linked to building a more sustainable business and a directly related positive impact we have on our people, our portfolio, and our planet. I'll now hand it over to Joe Massaro for an overview of our financial results.