Aptiv PLC

Please stand by. We're about to begin. Good day and welcome to the Aptiv Q1 2025 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Betsy Frank, Vice President, Investor Relations. Please go ahead.

Thank you, Jess. Good morning and thank you for joining Aptiv's first quarter 2025 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 first quarter results, as well as our financial 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 Varen LaRoya, EVP and CFO. Kevin will provide a strategic update on the business, and Varen 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.

Thank you, Betsy, and thanks, everyone, for joining us this morning. Let's begin on slide three. Aptiv started the year strong with first quarter results exceeding our guidance range due to higher than expected vehicle production volumes, principally in China, and solid growth in non-automotive end markets, as well as strong operating performance, demonstrating our ability to adapt to a dynamic market environment while continuing to execute on our strategies. including the separation of our EDS business, which remains on track. Touching on a few of the first quarter highlights, revenue totaled $4.8 billion, down 1% as a result of lower vehicle production in North America and Europe and negative customer mix. Operating income reached a first quarter record of $572 million, an increase of over 5%, reflecting strong operating execution and the benefit of ongoing cost reduction initiatives. which along with share count reductions drove earnings per share to a first quarter record of $1.69. And lastly, operating cash flow totaled $273 million, positioning us to accelerate our original deleveraging plan. We completed our $3 billion accelerated share repurchase program on April 1st, which reduced our share count by 18%, bringing the percentage of shares retired over the last 12 months to 20%. In summary, our team continues to do an excellent job executing on what we can control while also addressing the evolving needs of our customers and increasing the robustness of our business model. Turning to slide four, we're confident that the long-term growth drivers of our business remain fully intact. The future is electrified, software-defined, and connected, and Apt is well-positioned to enable this transition across multiple land markets. However, we're currently in a period of uncertainty due to rapid changes in global trade policies and their impact on demand in the markets we serve, particularly in the automotive market. We've not experienced major changes to underlying demand in our business to date. We delivered strong first quarter results, and our second quarter is tracking well, with limited changes to OEM production schedules. However, it's difficult to determine how the changing market dynamics will impact the second half of the year. Given the situation, while we remain confident in our initial full-year outlook that excluded the impact of tariffs, we'll continue to closely monitor any demand changes in the markets we serve, and we'll provide an update to our full-year outlook when visibility improves, hopefully later this quarter. In the meantime, we're proactively adapting our business to the evolving landscape of trade policies customer mix, and EV adoption. Our resilient business model enables us to remain agile and responsive, leveraging our in-region, for-region, commercial and supply chain strategy, flexible cost structure, and comprehensive portfolio of advanced technology solutions to adapt to the dynamic environment while also addressing the needs of our customers. Turning to slide five to provide you with additional detail on our exposure to the recent tariff announcements, and the actions we're taking to mitigate any impacts on our business. We prioritize being close to our customers, and over the last several years, we've worked to establish a localized supply chain and cost-effective manufacturing footprint. As a result, our cross-regional trade exposures between the U.S. and China and the U.S. and Europe, for example, are minimal, with activities ongoing to further reduce any exposures. As we've discussed, our principal trade exposure is within North America, with more than 95% of our U.S. trade flows actually between the U.S. and Mexico. We import just under $5 billion of product annually from Mexico, of which over 99% is USMCA compliant. We're working to mitigate the tariff impact by further optimizing our supply chain and identifying additional localization opportunities, shifting our manufacturing footprint, including the possibility of relocating certain high-value production to the U.S., strategically building inventory of select products to ensure flawless execution on current programs and new launches, while also preserving balance sheet flexibility. And any remaining tariff amount that cannot be mitigated will continue to be passed on to our customers. Our team is doing a great job navigating the dynamic environment while continuing to serve our customers maximize our operating performance, and deliver value to our shareholders.