Aptiv PLC

Good day and welcome to the Aptiv Q4 2024 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.

Thank you, Jess. Good morning, and thank you for joining Aptiv's fourth quarter 2024 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 fourth quarter and full year 2024 results, as well as our first quarter and full year 2025 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 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 Chair and CEO, and Varun Laroia, Executive Vice President and Chief Financial Officer. Kevin will provide a strategic update on the business and Varon 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. Let's begin on slide three. Aptive ended the year on a solid note with fourth quarter results in line with our expectations, demonstrating our ability to execute in today's dynamic market environment. Touching on a few of the highlights, new business bookings reached a fourth quarter record of $10.1 billion, reflecting the strength of our portfolio of industry-leading advanced technologies. Revenue totaled $4.9 billion. That's down 1%. The result of strong revenue growth from new program launches across key product lines, offset by continued weakness in production schedules at select OEMs, primarily in Europe and with multinational joint ventures in China. Quarterly operating income reached $623 million. reflecting strong operating performance and ongoing cost reduction initiatives, which also, along with share repurchases and the restructuring of APTA's ownership interest in the Motional Joint Venture, drove earnings per share growth of 25%. Lastly, operating cash flow totaled a record $1.1 billion, allowing us to accelerate our deleveraging, which Ron will discuss shortly. In summary, Our team is doing an exceptional job addressing the evolving needs of our customers while also operating efficiently and further optimizing our cost structure. We're going to the next slide to cover our major achievements during 2024. NASA has continued to capitalize on the safe, green, and connected megatrends, reaching numerous technology milestones during the year, including two awards for full-system Gen6 ADAS platforms one of which is from an EMEA-based OEM that also includes in-cabin sensing and our full suite of Wind River embedded and studio developer software. Multiple program launches with Mahindra that utilize our integrated cockpit controller, which consolidates multiple ECUs into a single compute platform capable of supporting higher levels of performance and scalability. And the expansion of our portfolio of 48-volt connectors to meet the increasing demand from OEMs. We're also capitalizing on strong commercial traction with the local Chinese OEMs, leading the transition to software-defined vehicles, reflected in 16% revenue growth with the domestic OEMs and our recent SVA Zonal Controller Award from Cherry that includes both Wind River and Aptiv Software. And lastly, Wind River's launch of Elixir Pro, which has generated significant interest from the broader enterprise Linux ecosystem, with launch partners including AWS, Capgemini, Intel, SEIC, and Supermicro. These notable achievements during 2024 validate the strength of our industry-leading portfolio and have resulted in new business bookings of $31 billion, including record bookings for Signal and Power Solutions, record operating income and earnings per share, reflecting our strong operating performance and optimized cost structure, and record operating cash flow. positioning us to continue to invest in the business while also accelerating the return of a significant amount of capital to shareholders, which will result in more than a 20% reduction in outstanding shares. We continued executing on our long-term strategy while also launching a record number of new vehicle programs and increasing the resiliency of our supply chain. We're extremely proud of our accomplishments in 2024 and the performance of the active team. Moving to slide five to review new business awards. As I mentioned on the previous slide, our industry-leading portfolio of advanced technologies enabled us to reach just under 31 billion of new business awards during the year. Advanced safety and user experience bookings totaled 4.4 billion, driven by active safety bookings of 2.7 billion, including the two Gen 6 ADAS platform awards I mentioned earlier, as well as Gen 6 radar awards with a German luxury OEM, and two large Japanese OEMs. Signal and Power Solutions bookings reached $26.4 billion, including $8 billion in the engineer components group across the full product portfolio and multiple end markets, and a record $18.4 billion in the electrical distribution systems business. And lastly, across all product lines, a record $7 billion of new business in China, of which over $5 billion was with top local Chinese OEMs, and a U.S.-based global electric vehicle OEM. With a broad portfolio of advanced technologies that provides OEMs with increased flexibility at a competitive cost, we have a clear line of sight to over $31 billion of new business awards in 2025. Turning to slide six to review the highlights for Advanced Safety and User Experience segment, which achieved record revenue and earnings in 2024, underscoring the competitiveness of our product portfolio, and the strength of our operating capabilities. Revenues increased 2%, driven by double-digit growth in North America with local OEMs in China, partially offset by low single-digit declines in Europe and Asia Pacific. Active safety revenues increased mid-teens, partially offset by a decline in user experience revenues due to the roll-off of legacy programs. Operating margins were over 12%. The benefit of the continued rotation of our engineering footprint to India and our ongoing adoption of Wind River's DevSecOps tools, which have improved the productivity of our software developers by over 20%. Wind River revenues increased 14% in the fourth quarter, primarily driven by studio operator awards in telco. But full-year revenues were down slightly, the result of the continued slowdown in investment in 5G infrastructure in telco, impacting closure rates on commercial opportunities, and a longer selling cycle for studio developer in the automotive and industrial markets. Increase investment in Wind River's commercial and product organization during the year to enhance our existing portfolio of products, including VXWorks, operator, and developer, and also build new products, such as Elixir Pro, which we're confident will drive strong revenue growth in 2025. In addition, the advancements in AI is providing Wind River with incremental growth opportunities workloads to the edge. Overall, advanced safety and user experience provide solutions that increase flexibility while lower cost, making us a partner of choice for our customers. This is reflected in our recent awards, including a central computer award for active safety and user experience applications across multiple Geely brands, an award for an integrated cockpit controller from a major global truck manufacturer, additional awards with leading Japanese OEMs, for a Gen 6 radar solution, and an award with Boost Mobile to provide core-to-edge cloud infrastructure for the world's largest Open RAN deployment, which demonstrates Wind River's leadership position in the telco industry. Turning to the signal and power solution segment on slide seven, revenues declined 3% during the year, with electrical distribution systems impacted by lower vehicle production schedules with select OEMs in North America and Europe, and two multinational JVs in China, an engineered components group benefiting from growth in non-auto markets offset by lower high voltage revenue. To drive further margin expansion in electrical distribution systems, we're accelerating the rotation of our manufacturing footprint to Central America and North Africa, while also increasing the automation of select manufacturing processes, targeting automation levels of 30% by 2026 and over 50% in 2030, as we've discussed previously. We've also demonstrated strong commercial momentum across all regions, as reflected in fourth quarter bookings, including a significant electrical architecture award with a major North American OEM for their light and heavy-duty truck platforms, over $1 billion of new business awards with leading local OEMs in China, and several customer awards for interconnect solutions in the aerospace and defense, space, and industrial markets. Moving to slide eight, I wanted to touch on our recent announcement to separate the electrical distribution systems business from Aptiv, creating two optimally positioned independent companies, each with its own unique product portfolio and financial profile, and with greater flexibility to pursue their own individual market opportunities and capital allocation strategies. By enhancing strategic and operational focus, we're positioning both Aptiv and EDS to more effectively address the evolving needs of our customers and to further capitalize on market opportunities, which we believe will drive even greater success and value creation for both companies. We're targeting the completion of the separation by March 31, 2026, subject to final approval by Aptiv's Board of Directors and customary conditions. In the meantime, we'll continue to keep investors updated as the separation progresses, and we'll host investor days for both Aptiv and EDS in the fall of this year. Moving to slide nine in our outlook for 2025, we remain confident that the trend towards greater levels of electrification, automation, digitalization, and connectivity will continue. With our portfolio of advanced technologies, Aptiv is well positioned to address the evolving needs of our customers and to further capitalize on market opportunities across multiple industries. The market remains dynamic, and the recent announcements regarding trade policy has created incremental uncertainty, which could impact supply chains and vehicle production. As a result, as we will discuss shortly, we believe it's prudent to include additional conservatism for North American vehicle production in our current outlook for 2025. But to be clear, our outlook has not factored in changes in tax, trade, or tariff policy by the new administration. We'll monitor the situation closely and take actions as necessary while continuing to capitalize on growth opportunities, including the continued growth in electric vehicles and ongoing adoption of advanced ADAS solutions globally, and improved customer mix by new vehicle program launches and continued penetration and accelerated growth with the leading local Chinese OEMs. And we'll continue to optimize our cost structure, pursue strategic capital deployment opportunities, including further debt paydown, bolt-on M&A, and the opportunistic return of cash to shareholders, and flawlessly execute the EDS separation targeted for the first quarter of 2026. I'll now turn the call over to Varun to go through the numbers in more detail.