Aptiv PLC

Please stand by. We are about to begin. Good day, and welcome to the Aptiv Q1 2023 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jane Wu, Vice President, Investor Relations and Corporate Development. Please go ahead.

Thank you, Allie. Good morning, and thank you for joining Aptiv's first quarter 2023 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 active.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 first quarter financials, as well as our full year 2023 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 that reflects Aptiv's current view of the future financial performance and may be materially different for reasons that we cite in our Form 10-K and other SEC filings. 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.

Thanks, Jane, and thanks, everyone, for joining us this morning. Beginning on slide three, we had a strong start to the year, showcasing our ability to continue to execute in a dynamic macro environment. Touching on a few of the highlights, revenue increased 15% to $4.8 billion last a new record for quarterly revenue, representing six points of growth over underlying vehicle production, supported by strength across all regions and product lines, particularly in our ASUX segment. Operating income and earnings per share totaled $437,091, respectively, reflecting solid flow-through on volume growth and contributions from our recent acquisitions, Wind River and Intertable Automotive. Partially offset by periodic supply chain disruptions, and unfavorable foreign exchange and commodity prices. New business bookings total $13.9 billion, driven by a record level of customer rewards for our smart vehicle architecture and high-voltage solutions, further demonstrating our strategic value to our customers as the industry accelerates towards the fully electrified software-defined vehicle. Turning to slide four, while the overall macro environment remains challenging, we're beginning to see supply chain improvements that are broadly in line with our expectations. Our 15% revenue growth in the first quarter was supported by a 9% increase in underlying global vehicle production, principally driven by stronger than forecasted customer schedules in North America and Europe. We continue to benefit from consumer demand for more feature-rich, highly electrified vehicles, which could further accelerate with more stringent government regulations. such as a recent EPA proposal that would result in electric vehicles representing at least half of U.S. new car sales in 2030. Although supply chain issues persist, we're now seeing sequential improvements in the overall supply of semiconductors, which is translated into more stable vehicle production schedules. While we work to position ourselves to benefit from these near and long-term tailwinds, we remain focused on optimizing our business foundation ensuring that we have the right talent and operational footprint to execute on our current and future platforms. We continue to enhance our regional operating model and expand our global execution capabilities by rotating our engineering resources to our technology centers located in India and Poland and establishing new engineering centers in Cairo, Egypt and Monterey, Mexico, which are emerging hubs for software talent. We also continue to address increasing material and labor inflation through supply chain resilience initiatives and the rotation of our manufacturing footprint to best cost locations. The majority of our direct material spend is now mapped in our digital network model, providing greater visibility into our global supply chain and enabling us to better predict and minimize the impact of supply constraints. In addition, our execution of strategic long-term agreements for select semiconductors has better positioned us to secure supply for the future, ensuring that we're aligned to our customers' product roadmaps and solidifying our position as a reliable and trusted partner of choice. And lastly, we continue to shift manufacturing capacity with higher direct labor content to best-cost countries or regions and invest in high-return production automation initiatives, all of which has enhanced our operating execution and positioned us well for commercial pursuits. Moving to slide five, the pace of our new business bookings is a true testament to the value that we bring to our customers, not just for the strength of our portfolio of advanced technologies, but also for our track record of strong execution. As mentioned, first quarter new business bookings totaled $13.9 billion, more than double last year's first quarter amount, and just under last year's record quarterly booking of $14.2 billion. Advanced safety and user experience bookings totaled $6.4 billion, driven by $5 billion in smart vehicle architecture bookings, which doubled our cumulative customer rewards for SVA to a total of $10 billion over the last two years, with eight different OEMs, and nearly $1 billion in active safety bookings, including a global radar program with a Japan-based global OEM, and a program with Geely, which represents the seventh OEM to adopt Aptiv's ADAS platform, leveraging our full system solutions to optimize ADAS performance up to L2+. Signal and Power Solutions new business bookings totaled $7.5 billion, including a record $1.8 billion in bookings for high voltage electrification solutions comprised of awards from both traditional and new battery electric vehicle OEMs across our high voltage electrical architecture and engineered components product lines. We continue to see a very balanced bookings profile underscoring the strength of our high voltage portfolio and providing a clear line of sight to exceed last year's $4.5 billion in high-voltage business awards. Overall, the pace of our strategic engagement with customers is only accelerating, and we remain highly confident in achieving our target of $32 billion in new business awards for the full year. Further validation is a value we deliver as the only provider of end-to-end full-system solutions. Turning to slide six to review our advanced safety and user experience segment highlights, In the first quarter, ASUX achieved record revenue of $1.4 billion, growing nine points above underlying vehicle production. Growth in active safety was strong across all regions as production of our Level 2 and 2 Plus ADAS solutions continued to ramp. While user experience grew in line with the market, consistent with our expectations. As I mentioned, we're experiencing strong commercial momentum with our smart vehicle architecture solution. The $5 billion of new business awards during the quarter includes a large zone control award with a major North American-based global OEM and an additional award from a major European-based global OEM for a central vehicle controller. Diving more deeply into our progress with Wind River, although the acquisition only closed at the end of last year, we've experienced an acceleration in customer engagements and potential revenue opportunities. In February, we announced our early success leveraging Wind River software offerings integrated into APTA's ADAS platform to support L2-plus automation for the Geely program I mentioned earlier. And building off this early success in China, in March, a major local Chinese OEM selected APTA and Wind River for a joint advanced development program to design their next-generation vehicle architecture, spanning the full suite of software and hardware solutions from both Wind River and APTAs. Outside of the automotive market, Wind River continues to expand its business across the other mission-critical industries it serves. Aerospace and defense and telecom companies, for example, are relying on Wind River's solution to develop, deploy, operate, and service their software-defined products. And there's been a tremendous amount of commercial activity in these markets year-to-date, including the expansion of Wind River's Edge software within several leading aerospace and defense customers, for dozens of new programs. And more recently, a significant deployment of 5G cloud native capabilities to a major telco provider, further establishing the company's leadership in the 5G landscape, where it powers the majority of 5G deployments with global operators. These Wind River offerings were also showcased at Mobile World Congress in Barcelona, where Wind River successfully demonstrated how its studio platform is transforming the 5G and O-RAN space which has led to increased dialogue and new opportunities with additional large global telco operators. We're confident that these strategic engagements will lead to additional customer awards in the months to come. Turning to the signal and power solution segment on slide seven, we remain perfectly positioned to deliver next-gen vehicle architecture solutions that are optimized for weight, size, and total system costs, all the way from the grid to the vehicle. SPS growth over market totaled 5% during the quarter, supported by strong outgrowth in China of 13%, which was partially driven by increased demand for battery electric vehicles, and a 28% increase in high-voltage revenues, reflecting strong growth across all regions. The record $1.8 billion in high-voltage bookings during the quarter included a $400 million high-voltage charging award with a North American-based global OEM. which will be used across their BEV portfolio on platforms beginning to launch in early 2024. And our previously announced Power Electronics Award was an integrated battery management system, spanning both hardware and software, demonstrating our ability to develop new products to further expand our competitive moat. Moving to our other key acquisition, Intertable Automotive. Strong growth in the quarter was driven by program launches with key European customers. In addition, InterCable booked $500 million in new business awards, reflecting continued market demand and commercial traction with multiple OEMs. During the quarter, we've made significant progress expanding InterCable's operations in North America and China, now adding manufacturing capacity in Mexico to more effectively serve North American customers. As the global technology leader in high-voltage bus bars and interconnects, InterCable has continued to develop and expand its product portfolio. InterCable recently won their first cell-to-cell connection system award with a German OEM, marking the first time they brought their technology from outside to inside the battery. InterCable's focus on continuous product innovation, combined with active support in expanding their global manufacturing capabilities, has increased their pipeline of new business opportunities by 40% compared to last year, with the funnel continuing to grow. Moving to slide eight, building on our full-stack solution approach, we continue to see increased adoption of our smart vehicle architecture platform. As already highlighted, we have now successfully transitioned from the introduction of smart vehicle compute as a concept back in 2017 to $10 billion in cumulative SVA bookings today. and the accelerating demand for battery electric vehicles is providing a further catalyst for OEMs to take a clean sheet approach to vehicle architecture. To date, we've completed multiple advanced development programs for our smart vehicle solution, and many of these programs have translated into new business awards, successfully validating that SCA can reduce complexity, improve scalability, and unlock new software-enabled functionality, all while lowering the total system cost of the vehicle. With the addition of Wind River, we're now seeing increased interest in Aptiv providing a full system solution for both hardware and software from our customers. The industry is recognizing that the underlying software architecture of the vehicle must be modernized alongside the hardware architecture in order to unlock the full value of the car of the future. This involves truly up-integrating and serverizing the compute platform while addressing the demands of safety-critical, real-time applications. all of which our SVA solution, including Wind River's cloud-enabled software platform, can deliver. We're now engaged in discussions with a number of OEMs around the world regarding the combined active Wind River solution, particularly in China where customers move faster and have more quickly embraced what Wind River can enable in the software-defined vehicle. The automotive industry also needs to adopt a true DevOps approach in order to take full advantage of this new software hardware architecture paradigm. creating new business models enabled by full lifecycle management, which will lead to faster speed to market and increased flexibility, while at the same time reducing software development, deployment, and warranty costs for OEM customers. Before I turn the call over to Joe, I want to take a minute on slide nine to reiterate how Aptiv is uniquely positioned to create long-term value. Our portfolio of advanced technologies enable optimized, full-system solutions that improve performance, that lower costs, and accelerate the path of the fully electrified, software-defined vehicle. Executing our strategy has positioned us to further leverage the accelerating safe, green, and connected megatrends. And as a result, Aptiv is uniquely positioned to capitalize on opportunities in both the automotive and adjacent markets. As we've shown in our first quarter results, we're solidly on track to meet our 2023 commitments and well on our way to delivering on our 2025 financial targets and are perfectly positioned to further expand our competitive moat and deliver continued outperformance as a fast-growing, more profitable business. With that, I'll now turn the call over to Joe to go through the numbers in more detail.