Aptiv PLC

Good day and welcome to the Aptiv Q4 2022 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jessica Caracos, Vice President of Investor Relations and ESG. Please go ahead.

Thank you, Lynette. Good morning and thank you for joining Aptiv's fourth quarter 2022 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 amortization, restructuring, and other special items, and will address the continuing operations of Aptiv. The reconciliations between GAAP and non-GAAP measures for our Q4 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, Aptos 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.

Thanks, Jessica, and thanks, everyone, for joining us this morning. Let's begin on slide three. 2022 was another year with record new business bookings and strong growth over market, driven by our industry-leading portfolio of advanced technologies, as well as our continued flawless execution that's kept our customers connected in this challenging environment. Highlights for 2022 included $32 billion of new business bookings, driven by significant active safety, high voltage, and smart vehicle architecture awards. $17.5 billion of revenues, representing 15 points of growth over vehicle production during the quarter, bringing our full-year growth over market to 11 points. Operating income and earnings per share for the full year of just under $1.6 billion and $3.41 respectively reflected the benefit of strong revenue growth and customer recoveries, partially offset by costs related to COVID and ongoing supply chain disruptions, which Joel will cover in greater detail a little later. We also enhanced our portfolio of safe, green, and connected technologies with the additions of Wind River and InterCable Automotive, both of which closed during the fourth quarter. I'll expand on these as well as our enhancements for our operating model on the next slide. As the industry transitions to fully electrified software-defined vehicles, we continue to enhance both our operating model and industry-leading portfolio to further strengthen our capabilities to solve our customers' toughest challenges. As legacy functional and domain-based architectures are increasingly replaced by approaches aligned to Aptiv's smart vehicle architecture, it impacts both the way we design and sell our solutions. This means further strengthening our one Aptiv account-based model, positioning us to engage earlier in the development process and therefore more effectively design, specify, and deliver optimized solutions across our portfolio, resulting in stronger customer relationships, and greater ability to capture value from all our full system solutions. We further enhanced our regional operating model by increasing local capabilities and empowering those closest to the customer to address their needs quickly and efficiently. Additionally, the continued rollout of our net promoter system has resulted in actionable insights to improve our efficiency, our resiliency, and service levels, thereby increasing customer intimacy. Lastly, Proactive initiatives and risk mitigation actions related to our supply chain have contributed to our ability to keep customers connected through significant disruptions, giving them confidence in our ability to execute on current and future platforms. At the same time, we recognize that the software-defined electrified vehicles consumers are demanding will require innovative new solutions, and we're investing organically and inorganically to position ourselves for that future. Our acquisition of Wind River significantly strengthens our capabilities in software with an industry-first cloud-data software platform that speeds development, streamlines deployment, and enables full lifecycle management for the software-defined vehicle, significantly reducing cost and time to market for our customers while also unlocking new business models. The acquisition of InterCable Automotive enhances our portfolio of high-voltage bus bar and interconnect technologies. and provides near-term synergies as we expand InterCable's manufacturing capacity in North America and in China. Lastly, we're also investing organically in solutions that further expand our portfolio of industry-leading high-voltage electrification solutions, such as integrated power electronics and battery management systems. To help fund these initiatives, we've implemented structural cost reductions that will save roughly $100 million in annual expense, which will take full effect throughout 2023. These actions further improve the efficiency of our underlying cost structure while allowing us to make investments that better position Aptiv for long-term outperformance. As shown on slide five, nowhere is the strength of our track record and portfolio more evident than in our new business bookings performance. 2022 bookings reached a record $32 billion, an increase of over 30% from last year's record of $24 billion. Advanced safety and user experience bookings total a record $12 billion, driven by $4.2 billion of customer awards for our smart vehicle architecture solutions across three different OEMs, including central vehicle controller and power data central bookings with the Volkswagen Group, bringing cumulative customer awards for SVA products since our launch to over $5 billion with five different OEMs. Active safety bookings of $5.2 billion, representing a combination of next-gen hardware and perception software building blocks, as well as full-system turnkey awards, including an award from a large European-based global OEM, as well as a Chinese OEM, BYD, which represents the seventh customer to select Aptiv's scalable platform to efficiently support a wide range of advanced safety features. The strength of our portfolio of active safety solutions is reflected in the $20 billion of cumulative bookings since 2018. Signal Power's solution to business bookings reached a record $20 billion for the year, the result of strong growth in low-voltage vehicle architecture, including a $2 billion light commercial vehicle booking with a major North American OEM in the fourth quarter, and continued strong bookings in adjacent markets. A record $4.2 billion in of high voltage electrification bookings up from roughly $2 billion just a few years ago, including awards from several North American, European, and China-based OEMs, representing both traditional and new mobility providers across our electrical architecture and engineered components product lines, bringing cumulative high voltage customer awards to $14 billion since 2018. Our industry-leading portfolio, combined with our unparalleled ability to execute highly complex programs, even in today's challenging environment, positions us to continue to win new business, resulting in clear line of sight for roughly 32 billion of business awards in 2023. Moving to slide six to review the segment highlights. Beginning with the advanced safety and user experience segment, this past year we became the first technology provider to successfully launch a full-stack, hands-free Level 2 plus ADAS system with a European-based global OEM. This is a great example of our full system capabilities applied to active safety, as well as our flexible business model and open platform approach, which allows OEMs to leverage their own innovations, as well as those from Aptiv and other third parties, to deliver a unique, high-performing driving experience. We're also deeply engaged with several customers regarding Wind River's cloud-native software platform, which we're confident will lead to commercial awards over the course of 2023. Turning to the signal and power solution segment, we continue to be perfectly positioned with an industry-leading portfolio of electrification solutions that span multi-voltage distribution, connection, and cable management. Reflecting the accelerated demand for battery electric vehicles, The $4.2 billion of high-voltage new business bookings I referenced on the prior slide accounted for over 20% of the segment's total bookings, and high-voltage revenues increased 33% over the prior year, 28 points over vehicle production. In addition, our new offerings in power electronics and battery management systems are gaining traction, as demonstrated by a significant integrated power electronics and BMS award from a North American-based global OEM, where a solution will be used across all their best platforms beginning in 2025, and the pipeline of customers evaluating the deployment of a similar solution is growing. Our customers recognize our track record of flawless execution, which is the driver behind the customer service, quality, and supply chain awards we've received, the cost recoveries we negotiated, and the record level of new business bookings we've been awarded. Our full-system, edge-to-cloud vehicle architecture solutions have enabled us to pursue high-growth, margin-accretive opportunities that position us to continue to deliver outsized revenue growth and margin expansion for years to come. Moving to slide seven, at this year's CES event in Las Vegas, we brought the software-defined vehicle to life, showcasing Aptiv's unique full-stack capabilities. We debuted Wind River's software platform, fully integrated with a vehicle powered by FCA. This on-vehicle demonstration of the industry's first end-to-end cloud-native DevOps toolchain and vehicle software platform showed how these solutions improve development speed, quality, and efficiency, unlock new business models, and enable software functionality to evolve and improve over the life cycle of the vehicles. We also showcase our turnkey Gen6 ADAS platform, including differentiating KPIs and a public road demonstration. Our radar-centric solution, which is vision agnostic, utilizes artificial intelligence and machine learning to increase the availability, robustness, and efficiency of the perception system, resulting in a solution that can be up to 65% more energy efficient and 25% more cost-effective than equivalent vision-centric solutions. Lastly, we continue to highlight the commercial readiness of our smart vehicle architecture solution. First, by deeply integrating it into a production vehicle, which enabled us to demonstrate a wide range of the in-cabin user experience features, as well as the fusion of our interior and exterior sensing, resulting in greater safety, comfort, and convenience for passengers. And second, through our SVA demonstrator, which enabled guests to see firsthand how these advanced architectures reduce complexity, weight, and mass, while also showcasing our latest high-voltage electrification solutions. With over 400 customers, 150 partners, and 75 suppliers visiting the AptoCS pavilion this year, we reinforced our growing pipeline of commercial opportunities and set the stage for the deeper, more tailored engagements, which I referenced earlier. Moving to slide eight, before I turn the call over to Joe, I wanted to touch on our outlook for 2023, which Joe will cover in more detail. Building on the foundation from 2022, we expect a very strong year for new business bookings, revenue growth over market, and margin expansion. Our robust business model and portfolio of advanced technologies are resulting in sustainable value creation. We continue to widen our competitive moat with investments in advanced technologies and capabilities that drive our operational excellence. This has enabled us to demonstrate strong outperformance, even in a weak production environment. As demonstrated by our 2023 outlook, where we continue to expect 8 to 10 points of growth over vehicle production and 140 basis points of operating margin expansion and strong cash flow growth. With that, I'll now turn the call over to Joe to go through the numbers in more detail.