Aptiv PLC

Good day and welcome to the Aptiv Q3 2022 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jessica Kirakos, Vice President of Investor Relations and ESG. Please go ahead.

Thank you, Bettina. Good morning and thank you for joining Aptiv's third quarter 2022 earnings conference call. 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 amortization, restructuring, and other special items, and will address the continuing operations of Aptiv. The reconciliations between GAAP and non-GAAP measures for our Q3 financials, as well as 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 for reasons that we cite in our Form 10-K and other SEC filings, including uncertainties posed by the COVID-19 pandemic, the ongoing supply chain disruptions, and the conflict between Ukraine and Russia. Joining us today will be Kevin Clark, Aptiv's Chairman 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 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, Jessica, and thanks, everyone, for joining us this morning. Beginning on slide three, we had a strong third quarter, so let me touch on a few of the highlights. New business bookings totaled over $5 billion, bringing the year-to-date total to over $25 billion, already outpacing last year's record full-year amount of $24 billion. and cementing another record year in 2022. Revenue increased 33% to $4.6 billion, representing nine points of growth over underlying vehicle production, driven by the strength of our safe, green, and connected product portfolio. We continue to execute well despite the constrained environment and macro headwinds. EBITDA and earnings per share totaled $673 million and $1.28 respectively, reflecting flow-through on volume growth and material cost recoveries, partially offset by costs related to material inflation and supply chain disruptions. We remain on track to reach this year's target of $500 million of material cost recoveries and $100 million of cost reductions, increasing our profitability and enhancing the resiliency of our business model. And lastly, we continue to invest in growth opportunities, as reflected by our agreement to acquire InterCable Automotive Solutions, which further strengthens our high-voltage product portfolio. Turning to slide four, APTA's industry-leading portfolio of electrical architecture products and full system-level capabilities uniquely positions us to optimize vehicle architecture systems. InterCable Automotive is an industry leader in the design and manufacture of high-voltage bus bars and interconnect solutions. The company has an outstanding management team that's developed a portfolio of innovative high-voltage power solutions including their seventh-generation bus fire product that they've leveraged into very strong relationships with several leading European automotive OEMs. The partnership between Aptiv and InterCable will enhance the strength and breadth of our combined product portfolios, allow InterCable to leverage Aptiv's global scale and manufacturing footprint, especially in North America and China, further strengthen our capabilities to design and deliver fully optimized high-voltage architecture solutions that reduce vehicle weight, mass, and cost, and we can leverage these synergies to accelerate the revenue and earnings growth of our combined businesses. We look forward to closing this transaction later this year and welcoming InterCable Automotive to the Aptiv team. Turning to slide five to review our segment highlights. Our full system solutions across both the brain and nervous system are accelerating the development of the electrified software-defined vehicle of the future. In the advanced safety and user experience segment, our portfolio of technologies is helping to increase the penetration of advanced active safety solutions, including a third quarter business award from a major local Chinese OEM for our next generation ADAS platform, representing our seventh major active safety platform customer. In addition, during the quarter, we secured a high volume award with a large customer in Asia to provide our next generation integrated cockpit controller. And lastly, we continue to build a growing pipeline of software revenue opportunities with an increasing number of North American, European, and Asian OEMs, which we're confident will begin to turn into customer awards in 2023 and beyond. In the signal and power solution segment, As the demand for vehicle electrification continues to accelerate, we're experiencing significant growth in our high-voltage business, which will reach $1.2 billion in revenues this year and accounts for 25% of year-to-date new business awards in the segment. In addition, we continue to successfully leverage our vehicle architecture capabilities to drive revenue diversification and strong growth in the commercial vehicle and non-automotive markets. which increased 24% during the quarter. And lastly, our industry-leading position as a full system solution provider of high-voltage architecture, combined with our capabilities in vehicle electronics and software systems, has uniquely positioned us to expand our portfolio into power electronics solutions and battery management systems, further broadening our offerings and strengthening our position as the industry leader in vehicle architecture. Moving to slide six, how we put innovation in motion. During the quarter, Aptiv was named a 2022 PACE Award winner for our Central Vehicle Controller, which is scheduled to begin production in 2023 with a major Chinese OEM. This high-performing compute platform is a key piece of the architecture that translates software code into physical action, efficiently and securely controlling the flow of data on and off the vehicle, managing communication for current and emerging high-speed protocols. and reducing complexity by up-integrating critical body functions. This particular central vehicle controller is a first-to-market solution and a critical element of our smart vehicle architecture and is essential to enabling the software-defined vehicle. We are increasingly collaborating with our OEM customers to bring these innovative solutions to market, as evidenced by our recent participation in the ICB 2022 conference in Wolfsburg, Germany. where we showcased our portfolio of full system solutions for both hardware and software to VW CEO, Oliver Blumey, and his management team pictured here. With Aptiv's brain and nervous system capabilities, we're uniquely positioned to reduce complexity through architecture optimization while enabling the full abstraction of software from hardware. Increasingly important to automotive OEMs, our system-level design capabilities enables breakthrough levels of assembly automation increasing quality while also reducing complexity and cost. And as customers migrate to next-generation architectures capable of supporting software-defined solutions, it's important that they have the right software tools to develop the applications they support. This is why Aptiv is investing in end-to-end cloud-native software development tools, which we previewed at ITB and will unveil at CES in 2023. Feedback from IZB was overwhelmingly positive, providing an opportunity to increase our level of collaboration with OEM customers and further validate inaptive as a trusted technology partner. Turning to slide seven to provide an update on new business awards. As I mentioned, third quarter new business bookings totaled $5.1 billion, bringing our year-to-date total to $25.4 billion, surpassing our previous full-year record. further validation of the strength of our portfolio of advanced technologies and our ability to deliver exceptional value for our customers. Advanced safety and user experience bookings during the quarter totaled $1.4 billion, bringing the year-to-date total to a record $11 billion. Driven by the continued strong adoption of advanced active safety solutions, including the new business award I mentioned previously from a major local Chinese OEM for our next-gen ADAS solution, which will leverage our scalable ADAS platform to support a wide range of advanced safety features. Bookings for our signal and power solutions segment reached $3.7 billion during the quarter, including another strong quarter for high-voltage electrification awards, bringing the year-to-date total to roughly $3.5 billion. We've seen a very balanced bookings profile across our high-voltage product offerings, underscoring the strength of our industry-leading portfolio of advanced technologies. Another strong quarter of new business awards, while at the same time successfully negotiating material cost recoveries with our OEM customers, is further validation of the uniqueness of our portfolio, the strength of our customer relationships, and our flawless operating execution. Turning to slide eight, despite the constrained environment and macro headwinds, we continue to take actions to increase the underlying resiliency of our business model and deliver sustainable value creation by enhancing our portfolio of full system solutions to increase our addressable content on the electrified software-defined vehicles of the future, recovering increased material input costs and optimizing our cost structure, smartly deploying capital to further strengthen our capabilities to meet the evolving needs of our customers, and intelligently diversifying our revenue base into less cyclical non-automotive markets. We're confident that these actions will position us to continue to create value as the industry transitions to the electrified, software-defined vehicle and will be reflected in an acceleration in new business bookings, continued strong revenue growth over market, meaningful margin expansion, and strong cash flow generation. With that, I'll turn the call over to Joe to go through the financial highlights in more detail.