Aptiv PLC

Good day and welcome to the Aptiv fourth quarter 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Chris Tillis, Director of Investor Relations. Please go ahead.

Thank you, Kevin. Good morning and thank you for joining Aptiv's fourth quarter and full year 2021 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 exclude restructuring and other special items and will address the continuing operations of Aptiv. Reconciliations between gap and non-gap measures for our Q4 and full-year financials, as well as for our full-year 2022 outlook, are included at the back of the slide presentation and the earnings press release. During today's call, we will be providing certain forward-looking information which reflects Aptiv's current view of future financial performance. and 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 supply chain and global economy. Joining us today will be Kevin Clark, APTA'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 Joe will cover the financial results and 2022 outlook 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, Chris, and thank you everyone for joining us this morning. Beginning on slide three, during 2021, we experienced record growth over market and record new business bookings, driven by our industry-leading portfolio of advanced technologies aligned to the safe, green, and connected megatrends, as well as our success keeping our customers running through the ongoing supply chain disruptions. Despite the increased efforts to keep our customers connected, our financial results validate the strength of our competitive position and the resiliency of our business model. Focusing on the highlights for the full year, new business bookings reached $24 billion and revenues totaled $15.6 billion, representing 15% growth, 15 points over underlying vehicle production. Operating income and earnings per share totaled $1.2 billion and $261 billion, respectively. reflecting the benefit of strong revenue growth, partially offset by increased operating expenses related to supply chain disruptions and material cost inflation, which Joe will cover in greater detail in a few minutes. Lastly, we continue to invest in organic growth initiatives, and as you know, recently announced an agreement to acquire Wind River, a leading provider of intelligent head software solutions, representing one more step in accelerating the intelligent transformation of Aptiv and positioning us to enable the software-defined future. This transaction uniquely positions Aptiv to provide comprehensive solutions that enable software to be developed faster, deployed more seamlessly, and optimized throughout the vehicle lifecycle. Setting the supply chain challenges aside, the Aptiv team is executing exceptionally well, continuing to proactively position the company for the future, increasing the efficiency of our underlying cost structure, while investing in high-growth, high-margin advanced technologies that increase the resiliency of our business model, which will lead to a stronger competitive position and increase value for our shareholders. Turn to slide four. As I already mentioned, we remain laser focused on executing our strategy and further enhancing our industry-leading capabilities. The macro headwinds we've faced over the past two years have validated the resiliency of our business model. showcased by the flawless execution of new program launches, as well as the record new business bookings and record revenue growth over market. Looking ahead, Aptiv will be in an even better position to capitalize on the safe, green, and connected megatrends, just as a path to the software-defined vehicles accelerating. Our scalable, advanced ADAS and in-cabin sensing solutions increase system performance while lowering costs, enabling the democratization of Aptiv's safety features. Our extensive portfolio of both low voltage and high voltage electrification solutions allows us to develop optimized vehicle architectures that significantly reduce vehicle weight and mass and lower overall vehicle cost. And our vehicle connectivity solutions provide our OEMs with the data analytics and insights that allow for continuous enhancements through the vehicle lifecycle and our fleet customers with the vehicle health data to minimize vehicle downtime. Collectively, Each of these offerings is a key foundational element for our smart vehicle architecture solution, and 2021 was a proof point for the market relevancy of our industry-leading portfolio of advanced technologies, which gives us the confidence to increase our framework for revenue growth to 8 to 10 points over vehicle production. As shown on slide 5, 2021 new business bookings total a record $24 billion. a $6 billion increase over the COVID-impacted 2020 amount, and a $2 billion increase over the previous record of $22 billion. Our unique portfolio of safe, green, and connected technologies, combined with our FOSS operating execution, continues to position Aptiv as a partner of choice for our customers. Advanced safety and user experience segment bookings totaled $6 billion for the year, including $2.8 billion in active safety awards. Bookings for our signal and power solution segment reached $18 billion, including a record $3.5 billion of high-voltage electrification awards. The cumulative amount of our new business bookings over the last few years across our portfolio of advanced technologies gives us confidence in our ability to sustain strong above-market growth across both of our business segments, further validating the resiliency of our business models. Turning to the highlights from our advanced safety and user experience segment on slide six. Revenues for the fourth quarter declined 1%, 15 points better than the reduction in global vehicle production. For the full year, revenues increased 13%, 13 points over vehicle production, reflecting the benefit of new program launches and increased penetration rates, which resulted in strong growth over market in our active safety product line. and continues strong growth in our user experience and connectivity and security product lines, driven by the launch of infotainment programs in Europe and in-cabin sensing programs in both North America and Europe. As the demand increases for more advanced active safety and user experience features, the need for more advanced software development, integration, and compute capabilities is required, and our industry-leading capabilities presents us with additional market share opportunities as evidenced by a new business award from Stellantis for our ADAS satellite architecture solution on the Ram pickup truck, building off of our earlier success launching a similar scalable active safety solution on the Jeep Grand Cherokee and Wagoneer. Several new business awards from Ford for the extension of our ADAS satellite architecture solutions across additional new vehicle platforms. Awards from Volvo for the extension of the first-of-its-kind Android infotainment solution powered by native Google Automotive Services with real-time OTA, onto new additional vehicle platforms. And lastly, further commercial validation of our smart vehicle architecture solution in China, with a new business award from Baidu for the development of a central vehicle controller. This high-performance compute platform will launch in 2023 on a vehicle produced by the Geely-Baidu joint venture, Jidoo, and will up-integrate central body functions and control the flow of data in and out of the vehicles. Moving to slide seven, fourth quarter revenues in our signal and power solution segment declined 6%, 10 points better than the decline in global vehicle production. For the full year, revenues increased 16%, 16 points over vehicle production, reflecting the increased production of high-voltage electrified vehicles, resulting in increased demand for both our low-voltage and high-voltage architecture solutions from traditional and emerging electric vehicle OEMs, and continued strong demand from engineer components for both automotive and non-automotive applications. We're perfectly positioned to support our customers globally with an industry-leading portfolio of high-voltage distribution, connection, and cable management solutions. which has translated into a significant increase in new business awards for high-voltage solutions, including an award for Rivian for low-voltage content on the electrified R1S and R1T models, an extension of our 2019 award on these vehicles, an award for high-voltage vehicle architecture covering several next-generation Stellantis vehicles, an important win as more European platforms migrate to full-battery electric vehicles, High voltage architecture awards with VW for additional ID models on their MEB platform, building off several high voltage bookings on the MEB platform in 2020. And lastly, an award from a major North American OEM for a wireless charging solution that will launch on several of their vehicle platforms. These new business awards validate our leadership position in optimizing high voltage power distribution for new vehicle architectures that deliver value for our customers. We continue to see an acceleration of powertrain electrification driven by both more stringent CO2 regulation and the increasing momentum for consumer acceptance. The fact that we have content on more than 50% of the battery electric vehicles launching over the next few years, we're confident that we will continue to experience very strong revenue growth from our high voltage electrification product line. Turning to slide eight, As I mentioned, in early January, we announced the agreement to acquire Wind River, a global leader in intelligent edge-connected systems. This acquisition reflects our commitment to accelerating Aptiv's software strategy. Together, we'll be able to provide a comprehensive edge-to-cloud software solution spanning the full intelligent system lifecycle across multiple industries. Our complementary software offerings will create new growth and value creation opportunities for Aptiv and our customers through a cloud-native platform that enables the development, deployment, and operation of software across the full vehicle lifecycle. As smart vehicle architecture enables the evolution of vehicle architecture and advanced feature adoption across domains, Wind River's proven solutions for mission-critical applications will play a key role in enabling the software-defined vehicle. Slide 9 provides an overview of our software strategy. We're at a tipping point in the automotive industry's transition to the software-defined vehicle. Consumers are demanding more advanced features for vehicle safety, comfort and convenience. 5G and the cloud are creating opportunities to deliver vehicles that leverage connectivity. And lower battery costs are accelerating the penetration of high-voltage electrification, all of which is enabled through a significant increase in the amount of software content in the vehicle, growing from $30 billion today to $90 billion by 2030. OEMs are beginning to separate software from the underlying hardware, both technically as they transition to smart vehicle architectures and in how they're sourcing new programs. Aptiv is enabling OEMs to accelerate their transition to an electrified, software-defined vehicle by employing a more holistic engineering and development approach to optimize the hardware, the software, and the system solution that spans the full vehicle stack. Our industry-leading position in the development of high-performance, cost-optimized, automotive-grade hardware and deep software development capabilities deployed across millions of vehicles with multiple OEMs across the globe gives us confidence in our unique competitive position. The combined expertise and complementary technologies of Aptiv and Wind River further augmented with TT Tech's deterministic framework that enhances active safety software applications are uniquely positioned to assist OEMs in cost-effectively accelerating the development and the deployment of the software-defined vehicle. APTA's smart vehicle architecture solution optimizes the vehicle infrastructure while providing the necessary network redundancy and resiliency. Wind River's Studio Cloud native platform allows for the development, deployment, operation, and servicing of the vehicle software stack shortening development cycles, speeding time to market, and enabling full lifecycle management. And an open development environment allows for feature adoption and development from multiple sources, including Aptiv's active safety and user experience software, as well as OEM-developed software. In short, our strategy continues to be focused on accelerating the transition to the software-defined vehicle by offering a complete stack from high-performance hardware to cloud connectivity that enables value-added services, a software architecture that is open, that's scalable and containerized, easily upgradable and providing OEMs with the flexibility to efficiently integrate their own as well as other software and feature development, and that can be continuously certified for safety-critical applications, and providing full lifecycle management capabilities that enable attractive new business models. Moving to slide 10, some of the advanced technologies we've discussed were on display at this year's CES event in Las Vegas. Outside the pavilion, we showed a number of feature-rich vehicles with Aptis vehicle architecture, active safety, and user experience content already on board. Inside the pavilion, we featured a fully functioning smart vehicle architecture and continuous delivery platform. We hosted over 400 customers, both in person and virtually, from over 50 companies, including 25 OEMs. This year's CES event provided our customers with the opportunity to validate APTA's full system portfolio, generating significant interest in the future-defining products that we continue to develop and deliver to OEMs. Moving to slide 11, before I turn the call over to Joe, I wanted to comment on our outlook for 2022. As we've already discussed, we continue to face headwinds related to supply chain disruptions and material cost inflation. However, as we manage through these day-to-day challenges, we remain laser focused on executing our strategy to build a more sustainable business and deliver lasting value creation, which is translated into market share gains, accelerated revenue growth, and increased underlying profitability. driven by the development of advanced technologies that are accelerating the transition to electrified software-defined vehicles. As I mentioned earlier, as a result of the confidence we have in our competitive position, we've increased our outlook for growth over market to 8 to 10 points, further validated by recent strong revenue growth and new program awards. And our advanced technologies focused on the safe, green, and connected megatrends are enabling market share and content gains, which will translate into margin expansion, and earnings growth. Unfortunately, we expect supply chains to remain tight and disruptions to continue, but begin improving in the back half of this year. And inflationary effects, including rising material costs, are likely to be around for some time. But we're managing our cost structure and working to recover the increase in material costs through various pricing, product redesign, sourcing, and footprint strategies. Our strategic focus and operating execution, as well as the current headwinds, are reflected in the full year 2022 guidance that Joe will review with you shortly, which anticipates the continued expansion of our competitive moat, which will leverage into increased new business bookings, accelerated revenue growth, and increased margins in cash flow generation. With that, I'll now turn the call over to Joe to talk through the numbers.