Aptiv PLC

and welcome to the Aptiv Q4 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 of Investor Relations and Corporate Development. Please go ahead, ma'am. Thank you, Jenny.

Good morning, and thank you for joining Aptiv's fourth quarter 2023 earnings conference call. The press release and related tables, along with a 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 fourth quarter and full year 2023 results, as well as our 2024 outlook, are included at the back of the slide presentation and earnings press release. During today's call, we will be providing certain forward-looking information that 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. Joining us today will be Kevin Clark, Actives 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, Jenny. Thanks, everyone, for joining us this morning. Let's begin on slide three. Apto vented the year on a solid note with fourth quarter results broadly in line with our expectations, demonstrating our ability to execute in a less predictable market. Touching on a few highlights, new business bookings reached $7.7 billion, the result of continued demand for our portfolio of industry-leading advanced technologies. Revenue was $4.9 billion with growth over market impacted by the UAW strike and customer mix, which Joe will go through in more detail later. Operating income totaled $600 million. reflecting a 90 basis point margin increase, a strong flow-through on volumes and operating performance, more than offset headwinds from FX, commodities, and the UAW strike. We repurchased $300 million of stock during the quarter, given our share price and cash position. In summary, our team is doing an exceptional job executing in a fast-changing environment, identifying opportunities to provide solutions to our customers, while at the same time working to mitigate headwinds from ongoing cost pressures. Turning to slide four, we delivered on our commitments and achieved record results in 2023, despite having to navigate through unexpected developments. New business bookings were a record $34 billion, reflecting continued strong demand for our products. As vehicles become higher contented and more software defined, customers are increasingly seeing the value of Aptiv as an important technology partner, particularly across our smart vehicle architecture, active safety, and high voltage electrification portfolio, where we lead the industry in delivering high performance, flexible, and cost-effective solutions. Aptiv is also positioned to benefit from the transition to the software-defined future across several other industries, with opportunities accelerating in the telecom, aerospace and defense, and industrial markets. Revenue increased 12% to over $20 billion in 2023, A new record level principally driven by our high growth active safety and high voltage product lines. Strong top line growth contributed to a record $2.1 billion of operating income. Operating margin increased 150 basis points to 10.6% as strong volume flow through an operating performance more than offset the headwinds from FX commodities and the UAW strike. Lastly, we generated record operating cash flow of $1.9 billion for the year providing flexibility around capital deployment, allowing us to proactively repurchase shares and pay down debt. Moving to slide five, as I already mentioned, bookings reach $34 billion, our third consecutive year of record new business awards. It includes nine different customers who each award adaptive over $1 billion in new business. Advanced safety and user experience bookings total the record $12 billion, driven by active safety bookings of $3.4 billion, representing a combination of next-gen hardware and perception software building blocks, as well as full-system turnkey solutions, the strength of which is reflected in over $11 billion of cumulative bookings over the last three years, and $5.2 billion of customer awards for our smart vehicle architecture solutions with three different OEMs, bringing cumulative awards since the launch of our SVA products to over $10 billion with eight different OEMs. Signal Power Solutions new business bookings reached a record of over $22 billion, in part due to a record $6.2 billion in high-voltage electrification bookings, up roughly $2 billion over 2022, representing awards from both traditional and new mobility providers, bringing cumulative high-voltage customer awards to roughly $14 billion since 2021. Our industry-leading portfolio, combined with our global reach and ability to execute highly complex programs perfectly positions Aptiv to win new business and gives us a clear line of sight to 35 billion of business awards in 2024. Turning to slide six to review our advanced safety and user experience segments, full year highlights. We achieved significant commercial success across all of our key product lines, further solidifying our position as a partner of choice with our OEM customers. Building on its leading market position, Wind River continues to experience solid commercial traction across a variety of end markets. In the fourth quarter, one of Canada's largest communication service providers selected Wind River Studio for their full O-RAN deployment in North America. Amran, a leader in healthcare systems and industrial automation, also chose Wind River Studio for their industrial edge platform development. And within automotive, Hyundai Mobus expanded their existing relationship with Wind River by selecting Wind River Studio to help reduce development time and costs, from product design to system validation and mass production testing. Demand for Aptos' full system solutions across active safety, user experience, and smart vehicle architecture also remains strong, with major bookings across all geographic regions, including with Japanese OEMs and emerging Chinese local players, bringing a growing pipeline of additional opportunities. To best support our customers while further optimizing our cost structure, We implemented several initiatives across our engineering and supply chain functions. To accelerate and streamline our product development process, our ASUX engineers have incorporated Wind River Studios DevSec Ops toolchain into their programs. We've also centralized our engineering activities in India to a new and larger technology center in Bangalore, where Aptiv and Wind River teams can better collaborate on our software product platforms, allowing us to double our engineering capacity in the country thereby enabling the cost-effective rotation of our engineering footprint. From a supply chain perspective, we're on track to fully map our global supply chain into a digital twin by year-end. During 2023, we fully mapped our semi-providers, increasing our visibility and improving our ability to proactively mitigate potential sourcing risks. Lastly, we've closely partnered with roughly a dozen local Chinese semiconductor suppliers for both China and non-China applications that are positioning us to meet increasing demand from our Chinese customers with local sources of supply and increasing the resiliency and flexibility of our supply chain for our global OEM customers. Turning to Signal and Power Solutions for your highlights in slide seven. From a commercial perspective, we've continued to benefit from our industry-leading portfolio and global scale. which uniquely positions us to deliver optimized vehicle architecture solutions for both emerging EV players and leading global OEMs. During 2023, we were awarded significant vehicle architecture programs by a global EV manufacturer, including optimized electrical distribution and 48-volt connection systems. In China, while we remain highly selective in our customer and platform choices, we're actively driving increased penetration of a select group of local OEMs. In 2023, bookings with China Local OEMs reached 3 billion, representing approximately 60% of the total SPS bookings in the region. InterCable Automotive had record new business awards and added four new global customers with their industry-leading bus fire technology, which enables more efficient power distribution and optimized battery pack design. We've also seen an increase in customer demand for our solutions that reduce complexity and weight, and cost, including our integrated power electronic solutions, which help integrate the onboard charger, battery distribution unit, and DC to DC converter. From an operational perspective, we've also implemented several initiatives to improve manufacturing efficiency. Within our electrical distribution business, we're launching our first highly automated production line, covering all aspects of system assembly. With this new technology, we expect to increase current automation levels to approximately 30% by 2026, putting us on a path to over 50% automation by 2030, which will improve efficiency and product quality while also reducing labor dependency and the associated exposure to inflationary pressures. At the same time, we've been building a more resilient and sustainable business by supporting the trend towards local production and minimizing cross-border flows of product. We continue to pursue manufacturing footprint rotations in multiple regions and have successfully established production capabilities for InterCable Automotive in North America to serve in-region customers. Turning to slide eight, at this year's Consumer Electronics Show in Las Vegas, we showcased our industry-leading portfolio of products through a full range of functional, fully integrated solutions, both in our tech theater as well as on the roads with drivable demo vehicles. This is best represented by our software-defined vehicle demonstrator, which showcased advanced ADAS and user experience applications embedded on Wind River's cloud-native software platform and running on Aptus smart vehicle architecture hardware. This was our first time driving a vehicle on public roads supported by SVA, further reinforcing our leadership in next-generation architecture. We demonstrated critical elements of our Gen 6 ADAS platform, including our urban point-to-point hands-free driving application, as well as in-cabin monitoring. We also showcased our high-voltage capabilities with a custom-built 800-volt electric vehicle. This vehicle included optimized high-voltage cabling and bus bars, connection systems, and integrated power electronics. We also introduced APTA's containerized battery management system, running on our central vehicle controller, both of which were supported by Wind River's VXWorks operating system, while telemetric data was visualized through Wind River Studio. Finally, all these solutions and more were available for deep dives in our technology theater. When taken together, the solutions on display represented our full system portfolio by showcasing capabilities from sensor to cloud. In total, we had over 1,000 stakeholders visit our pavilion, ranging across customers, vendors, and industry partners. And as a follow-up to CES, we schedule a wide range of customer engagements, including the Mobile World Congress in late February and customer-focused tech shows during the balance of this year. Our industry-leading product portfolio underscores our position as the partner of choice to develop and deliver next-generation solutions. Moving to slide nine, Before I turn the call over to Joe to walk through the financials, I wanted to provide some context on our outlook for 2024. As our industries continue to evolve, we're experiencing growing demand for our full system capabilities, spanning across hardware and edge-to-cloud software solutions. This increasing level of strategic engagement has turned into three straight years of record new business bookings and, in turn, will continue to drive strong revenue growth and implied growth above market. Joe will walk through our outlook for revenue growth in more detail, but we now expect our growth over market to be in the 6 to 8 point range, reflecting the changing pace of EV adoption and customer mix. As I highlighted earlier, we have proactively taken actions to reduce our cost structure, to adapt to the changing market environment, and to help offset ongoing inflationary pressures. We remain disciplined in our capital allocation approach, which will include further strengthening our competitive position with investments in advanced technology and capabilities that drive operational excellence. To that end, while our emotional joint venture continues to make progress on their technology roadmap, we've decided to no longer allocate capital to emotional and are pursuing alternatives to further reduce our ownership interest. Lastly, while we will continue to prioritize organic investments and strategic M&A opportunities that drive profitable growth, Our stock price presents an attractive opportunity to return capital to our shareholders, and we're targeting up to an additional $750 million in share repurchases during 2024. The last few years have presented the industry with unprecedented macro challenges, including COVID and supply chain disruptions. During this period, the management team has remained laser-focused on execution, enhancing our competitive position, and increasing the resiliency of our business models. which is reflected in our 2023 financial results and our outlook for 2024. And our conviction in the long-term value of our business is higher than ever, and we remain committed to delivering that value to our shareholders. With that, I will now turn the call over to Joe to go through the numbers more deeply.