Aptiv PLC

to the Aptiv Q2 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 second 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 gap and non-gap measures are included at the back of the slide presentation and the earnings press release. Unless otherwise stated, all references to growth rates are on a -over-year basis. 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 Chief Executive Officer, and Varun Laroja, Executive Vice President and Chief Financial Officer. Kevin will provide a strategic update on the business and Varun 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. Thanks,

Betsy. Thanks,

everyone, for joining us

this morning. Excuse me. Starting on slide three, we had a solid quarter both operationally and financially. Our strong business foundation coupled with strength in the underlying markets we serve enabled us to produce record second quarter results. Our unique capabilities from the center to the cloud provide our customers with flexibility and scalability while further strengthening our competitive mode. Our product portfolio is aligned to the accelerating trends of electrification, automation and digitalization that are happening across multiple industries and it's reflected in our new business bookings. Over the last decade, we've built a resilient business model that has enabled us to operate efficiently even in this dynamic environment. We leverage our global scale while executing in region for region, close to our customers in the most important geographic markets around the world. And we're constantly working to increase the efficiency of our operations and further optimize our cost structure, which allows us to remain agile, respond quickly to changes and closely partner with our suppliers and customers to avoid any production disruptions. I'm proud to tell you that as a result of those efforts, we received the Volkswagen Group Award for Resilient Supply Chains during the quarter. The recognition reflects the real time end to end visibility that we have across our global supply network that's enabled by the digital twin we have built over the last five years, giving us the ability to react quickly and keep our customers connected. Lastly, with a focus on maximizing shareholder value, the spin-off of electrical distribution systems remains on track and we look forward to sharing more information on our progress at the upcoming Investor Day in November. Moving to our results, our second quarter revenue growth of 2% reflects strengths across multiple areas of our business and the benefit of stronger than expected vehicle production in the North American market. Operating income totals 628 million, reflecting flow through on volume growth and strong operating performance, more than offsetting significant headwinds related to foreign exchange and commodity prices. And when combined with the lower share account resulting from our recently completed accelerated share repurchase program, drove record earnings per share. Lastly, we generated 510 million of operating cashflow, further strengthening our balance sheet and providing us with capital allocation flexibility. Baron will discuss each of these elements in more detail later. Moving to slide four to review our second quarter revenue growth, we have a total of 2.4 billion new business bookings. Our portfolio of advanced technologies and industry-leading supply chain capabilities led to 5.4 billion of new business awards, positioning us for another year of strong bookings. We'll get into more detail on each of our segments shortly, but a few of the highlights include Advanced Safety and User Experience Business Awards, totaled 1.8 billion, driven by active safety bookings of 1.2 billion. Customer awards in our engineered components group reached 2.4 billion, ranging across our full portfolio of interconnect, high-speed cable assemblies, bus bars, and cable management products across a broad range of customers and end markets. And new business bookings and electrical distribution systems totaled 1.2 billion, and included both low-voltage and high-voltage customer awards across each of our geographic regions. Let's move to the key developments in each of our business segments during the second quarter. Moving to slide five for an update on our Advanced Safety and User Experience segment, where revenues declined low single digits in the quarter. The result of -single-digit revenue growth in active safety in Wood River, offset by the ongoing roll-off of legacy user experience programs we've referenced previously. In a recent slowdown in production schedules on select ZECR and NEO programs in China, we expect these to remain headwinds for the next few quarters. Looking ahead, we executed multiple strategic program launches across each of our product lines. The highlights include an ADAS system spanning multiple brands for a leading European OEM, enhancing the performance of their current ADAS solution and enabling them to meet the latest regulatory requirements, an in-cabin sensing solution across multiple brands with a leading European OEM, our first in-cabin sensing program with this customer, opening the door to other opportunities, and a user experience solution for one of the flagship platforms of a luxury European OEM. Moving to new business bookings, we continue to see momentum with our flexible and scalable Gen6 ADAS platform as evidenced by two major awards. First, a leading North American OEM is selected active for their next Gen ADAS solution that runs across a range of vehicles, supporting features with scale up to hands-free driving. We're also awarded a full system ADAS program with LeapMotor, a Chinese EV OEM for the European market, which includes an RTOS from Wind River running on a China local SoC and an AI-powered vision stack from StradVision. These awards demonstrate how our global ADAS expertise, open architected platforms, and global footprint make us a partner of choice for a wide range of OEMs. In user experience, we were awarded a next-generation digital cockpit program for a German luxury OEM, which incorporates Wind River Studio for -the-air updates and life cycle management, providing enhanced connectivity, performance, and personalization. Wind River also had a range of strategic customer awards across multiple end markets, which include Wind River Studio for Hyundai Mobus to power their software development and deployment and life cycle management for automotive applications, Wind River Cloud Platform for a multinational telecom company, an Edge platform solution and safety certification for a leading US aerospace and defense prime, and an Edge platform for advanced medical imaging systems with a leading healthcare equipment provider. At the same time, we expanded Wind River's Edge AI ecosystem by establishing multiple strategic partnerships with AI players, including Zedata, Noda AI, SEMA.AI, and DeepX, which will help advance the deployment of AI across diverse Edge applications and industries. Moving to slide six to review the highlights for our engineered components group, which delivered solid -single-digit revenue growth in the quarter. We launched several strategic programs and secured strong new business awards across our portfolio. Notable program launches include a high-voltage charging inlet on a luxury European OEM platform, enabling expanded charging access across multiple regions, low-voltage ECU connectors for a leading Chinese OEM's commercial vehicle program, and an up-integrated high-voltage electrical center for a large Korean OEM for next-generation electrical and electronic architectures. Moving to new business bookings, these awards underscore our role in advanced signal power and data distribution. During the quarter, we received high-speed cable assembly awards to enable next-generation features, including L2++ hands-free driving for local Chinese OEMs such as BYD, Geely, and Changna. InterCable Automotive's first bus bar award for a new autonomous vehicle program with a leading US-based EV manufacturer, a high-voltage inlet award for a luxury European OEM, and an award for our rapid power reserve, providing highly reliable redundant power for a variety of critical functions for areas with Huawei systems. Notable awards outside of the automotive sector include an award in aerospace and defense with a leading manufacturer and operator of small satellites for use in low-Earth orbit, and bookings for mission-critical applications from a leading US defense company. Moving to slide seven to review the second quarter highlights for our electrical distribution system segment, which delivered solid -single-digit revenue growth. Beginning with new program launches, we gained incremental high-voltage content on a recent launch of a refreshed vehicle platform from a US-based global EV manufacturer. We also launched a high-voltage battery wiring program for a leading Korean OEM that will be used across multiple electric vehicle programs for the Asia-Pacific market. Moving to new business awards, we continue to book programs in both high- and low-voltage architectures. We increased our share of wallet on current vehicle programs with local Chinese OEMs, including Leap Motor's new flagship SUV and a new extended-range electric SUV from IAM Motors, SAIC's EV brand. In India, we were awarded low-voltage harnesses for a next-gen platform with Tata, and a significant low-voltage harness award on a top-ten European battery electric vehicle platform with a luxury European OEM. Continuing to slide eight, I'd like to provide some context on our outlook before Varen takes you through our update in more detail. As intended, we're providing third quarter and updating our full-year 2025 financial guidance. Our first half results benefited from -than-forecasted vehicle production, likely reflecting some pull forward of demand. And we capitalized on this market backdrop with strong manufacturing, engineering, and supply chain performance across each of our segments. Looking at the second half of the year, we remain in a period of uncertainty, driven by evolving trade and regulatory policies, and remain cautious that consumer demand could weaken in the back half of the year, which we've reflected in our updated guidance. Our team remains relentlessly focused on navigating the dynamic environment, serving our customers, and delivering strong financial results that enhance shareholder value. I'll now turn the call over to Varen to go through our second quarter results and third quarter and full-year 2025 guidance in more detail. Thanks,

Kevin, and good morning, everyone. Starting with our second quarter financials on slide nine, Aptiv delivered record financial results reflecting strong execution, continued progress on our operational efficiency programs, and the benefit of our ASR completed in the quarter. Revenues were a record $5.2 billion, up 2% on an adjusted basis. I'll talk more about our revenue performance on the next slide. Adjusted EBITDA and operating income both grew 4%, marking record levels on an absolute basis. Operating income margin expanded 10 basis points, primarily driven by the strong performance on our operating and cost structure initiatives, including our continued footprint rotation to best cost locations. These efforts were offset by the impact of FX and commodities, which were a 120 basis point headwind on margin, largely driven by the Mexican peso, where we land in natural operating hedge. Earnings per share was $2.12, an increase of 34%, reflecting the flow through of higher operating income, benefits of share repurchases, net of higher interest expense, the restructuring of the emotional joint venture, and lower tax expense in the quarter, driven by the timing of certain discrete items. Operating cashflow was 510 million, and capital expenditures were $149 million. Turning to the next slide and looking more closely at second quarter adjusted revenue growth on a regional basis. In North America, despite vehicle production being down year on year in the region, revenue grew 3%, driven by growth in both active safety and electrified programs. In Europe, revenue was down 1%, slightly better than vehicle production in the region, driven by growth in commercial vehicles. And in China, revenue declined 1%, which reflects the unfavorable impact of customer mix in the ASUX segment. Moving to our segment performance in slide 11, and again, I'll refer to revenue growth on an adjusted basis. Starting with ASUX, revenue of approximately 1.5 billion was down 3%, primarily driven by the two factors Kevin mentioned previously. Partially offsetting these was a 6% growth in active safety revenue, driven by strong volumes and take rates across major customers in North America and Europe. ASUX adjusted operating income grew 5%, with 90 basis points of margin expansion. A 150 basis point headwind from FX and commodities was more than offset by our ongoing performance and cost savings initiatives. And the lapping of a customer receivable issue in the second quarter of last year that was resolved in the third quarter. The associated settlement from a year ago will present a temporary headwind to margin next quarter. For ECG, revenue of $1.7 billion increased 5%, and was driven by growth in Europe and continued traction with local China OEMs, which grew by more than 30%. ECG adjusted operating income declined 4%, while margin contracted by 160 basis points has flowed through from stronger volumes, was more than offset by the impact of unfavorable FX, commodities, and labor inflation. And lastly, for our EDS business, revenue of 2.2 billion increased 5%. This was driven by strong volume growth in North America and Asia Pacific, while commercial vehicle revenue grew by 17%. EDS adjusted operating income grew by 18%, with 70 basis points of margin expansion, going to strong flow through on volume growth and execution on footprint optimization, which more than offset a 90 basis point margin headwind related to FX. Now let's review our balance sheet on the next slide. We generated 510 million of operating cash flow in the second quarter, with a change versus prior year owing to investments in working capital. Our cash flow as measured on a last 12 month basis remains very strong, at well in excess of $2 billion. We ended the second quarter with over 1.4 billion of cash and approximately $4 billion in total liquidity. And as I discussed on our Q1 earnings call, we paid down 175 million on our Pan-European Factoring Facility in early April. Year to date, we have paid down approximately $700 million of pre-payable debt, well ahead of our original deleveraging schedule. With net leverage at two times, our balance sheet continues to provide us with flexibility to execute on our strategic initiatives while selectively pursuing growth opportunities. Turning now to our guidance, which we have updated for the full year and have established for the third quarter. Starting with revenue growth expectations on slide 13. We continue to forecast active weighted global vehicle production to be down 3% for the full year 2025, equating to approximately 92.5 million units. Relative to our original 2025 outlook, this reflects stronger volumes in China offset by slightly weaker volumes in North America. Based on our vehicle production assumptions, we expect adjusted revenue growth at the midpoint of our guidance to be up 4% in North America driven by content growth with key customers, as well as growth in commercial vehicles. Down 1% in Europe, slightly better than vehicle production in the region, and down 2% in China, which largely reflects our revenue mix between the local OEMs and multinational GAVs. For the third quarter specifically, we forecast active weighted global vehicle production to be down 2% and adjusted revenue growth in North America to be up 9% with strength across all end markets and partially reflective of an easier comparison from a year ago. Europe down 1% driven largely by low production in the region, and China down 4% driven by customer mix across all segments. Moving on to other components of our guidance. Our full year revenue outlook of 20.15 billion at the midpoint continues to reflect a 2% adjusted growth rate with higher midpoint, a function of favorable FX. We expect low single digit adjusted growth at each of our three segments. Adjusted EBITDA and operating income are expected to be approximately 3.19 billion and $2.42 billion at the midpoint, up 3% and 2% respectively, and unchanged from prior guidance. While FX is a benefit to our top line, primarily owing to the Euro, conversely, it is a headwind to our bottom line due to peso related costs. Higher commodity prices are also a headwind, and these are being offset by stronger performance. Adjusted earnings per share is estimated to be in the range of $7.30 and $7.60, up 19% at the midpoint. This is 15 cents higher than our prior range, reflecting a lower share count following the completion of our ASR program and favorable net interest expense as we have delevered ahead of schedule. Lastly, we expect operating cashflow of $2 billion, 100 million lower than our prior guidance, owing to accelerating actions associated with the EDS separation that were originally slated for early 2026 into 2025. And on capital expenditures, we expect these to be approximately 4% of revenue. For the third quarter, we expect revenue growth of 3% on an adjusted basis at the midpoint, with operating income margin of .6% at the midpoint. An adjusted EPS to be in the range of $1.60 and $1.80. While our foliar tax rate remains unchanged at 17.5%, owing to the timing of discrete items, the tax rate in the second half of the year will be higher than the first half. Looking more broadly at the foliar, we remain cautious that markets could weaken in the second half, and our guidance reflects this. Combined with revised effects and commodities assumptions, this bridges the delta in our second half expectations relative to our original guidance provided in February, which we believe is prudent given the ongoing macroeconomic uncertainty. Our current guidance reflects our exposure to tariffs based on trade policy as it currently stands, and does not include the impact of tariffs that have not yet been implemented, including the copper tariffs that were announced overnight. As we have previously discussed, our direct exposure to tariffs is minimal, in large part because of a high compliance with USMCA, and our low level of non-USMCA imports into the US. In the limited areas where we have exposure and cannot change sourcing going to the industry setup, we've been able to pass on the incremental costs. With our resilient business model and relentless focus on optimizing performance, we remain confident in our ability to deliver strong execution regardless of the environment. With that, I'd now like to hand the

call back to Kevin for his closing remarks. Thanks, Ern. I'll wrap up on slide 15 before we address any questions. We exceeded expectations in the second quarter, delivering record revenue, operating income, and earnings per share. And we remain well positioned to continue our strong operating performance through the balance of the year. Our continued strong execution, despite the macro uncertainty, is a function of our resilient business model and our proactive efforts around our product portfolio and cost structure, to position apt to perform in all macro backdrops. We continue to see robust demand for our portfolio of industry leading products across our full sensor to cloud technology stack, which is uniquely positioned to benefit from the continued transition towards a more electrified, automated, and digitalized future across multiple end markets. And we remain vigilant on positioning active for long-term success through proactive portfolio management with the forthcoming separation of EDS being a great example of our commitment to increasing value to our shareholders. Operator, let's now open the line for questions.

Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We request that you limit your questions to one initial with one follow-up so that we may take as many questions as possible. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. Our first question comes from Etai McKelley at TD Cowan.

Great, thank you. Good morning, everyone. Just first question. Good morning. Just first question on the degree of visibility you have at the moment for Q4 production, the guidance that they complies, a healthy decline year over year, but pretty strong outgrowth on your part. I'm just kind of curious how far visibility do you have right now in terms of the schedules themselves?

Yes, we've talked about previously. We get schedules out through, based on where we sit today, out through the end of the year. Obviously, the closer to where we are today, the stronger the schedules. So I'd say fairly firm EDI schedules, typically ranging from two to four weeks out from where we sit today. And then less firm as you go, as you move beyond that. At this point in time, we've not seen any significant change in schedules relative to where we were a month ago. I think there's an element of, as we look at what actually will flow through from a production standpoint, given the dynamic market, given the strength that we saw in the second quarter, given our kind of discussions with OEMs and kind of a view that there was some element of pull forward, and that OEMs to some extent manage the supply base through their demand signals. We took a relatively conservative outlook for the back half of the year, which we previously had when we initially gave guidance in February in the front half of the year. So we get visibility, but just in light of the dynamics, we've decided to be somewhat conservative or believe it's prudent to be conservative.

That's very helpful. Thanks, Kevin. And as a follow-up, the changing US emissions standards, some automakers are expressing an intent to shift their mix to larger vehicles and take an opportunity. And I'm curious whether that does present any content opportunities for you on that presumed mix shift that may happen next year.

You're talking about movement from EVs to ICE vehicles? Or

more like larger vehicles within ICE, more SUVs, even larger vehicles given emissions.

Yeah, so to be transparent, we've already seen some of that this year. We saw some of that in the second quarter. So our outlook for growth in the EV that we originally had at the beginning of the year, we'll certainly end up below our original outlook. That has been more than offset with both production schedules as well as content. So absolute production schedules as well as content, certainly on large trucks in North America. So we've in fact offset that headwind from a slowdown of EV adoption in

North America.

We'll go next to Mark Delaney with Goldman Sachs.

Yes, good morning. Thank you very much for taking my questions. I had a question on the bookings target of 31 billion. You spoke to award progress in some areas, but also an uncertain macro backdrop and the bookings target is two-h weighted. So can you help investors better understand the visibility you have into reaching the 31 billion for your target and any key drivers that you see that would contribute to the increase in bookings in two-h?

Yeah, so there is a cadence for bookings. I would say we have a very strong funnel with significant visibility to bookings. I would say we have a high level of confidence sitting here that they will achieve the target that we've presented to investors. I would also tell you it's taking a little bit longer to get bookings finalized and documented. Just in light of the environment we're in, the reality is our OEM customers across the globe are spending a lot of time kind of managing through the evolving trade and regulatory landscape in addition to working with suppliers like ourselves on new business awards. So I would say we have a reasonable level of confidence that we'll be back and loaded. We saw some amount of protracted periods between RFQs and awards last year and we had a strong year last year. I think you'll continue to see us have a strong year this year as well.

Thanks for that, Kevin. My other question was in the non-automotive areas, the companies had a goal of diversifying and better addressing some of these other areas, industrial aerospace defense. Can you speak a bit more on what you're seeing there and whether or not you were able to grow faster in some of these non-automotive end markets?

Yeah, so growth has been, was certainly strong in the first quarter, was kind of a low single digit this quarter. In the back half of the year, based on our visibility, we believe it'll be solid double digit growth. I mentioned during my prepared comments from a booking standpoint, both within the ECG business as well as the ASUX business awards in the industrial sector, whether it's aerospace and defense or it's broadly speaking industrial. And we'll end this year with actually that particular customer category or sector being our fastest growing market. So we're making significant progress and

gaining traction. Thank you.

We'll go next to Dan Levy with Barclays.

Hi, good morning. Thanks for taking the questions. Great. I wanted to start with a question on the implied growth in the second half and specifically the implied growth over market. I think in the first half, the growth over market or your organic growth relative to underlying active markets was something like one to two points. You're guiding to, I believe, for the full year roughly five points. So there is some acceleration in the back half on that outgrowth. Maybe you could just talk about some of the assumptions in the second half, growth change.

Yeah, I think first when you look at growth on a -over-year basis, you certainly need to focus on Q4 of last year and what we saw from a global vehicle production relative to current outlooks, ours or IHS. So I think you got to keep that in mind. When you unpack our acceleration of growth in the back half where you see the most significant sort of pickup is certainly within the ASUX business. You also see significant pickup in growth as it relates to our EDF business. So those would be the two biggest drivers. I would say from an overall growth rate, ECG stays roughly in line with how it's grown year to day. And then if you unpack ASUX, a big piece of that is the ongoing launch of ADAS programs principally in North America and Europe, partially offset by that reference to Chinese OEM programs that will be a headwind, but we'll still see acceleration and growth. And at EDF, we see strong growth continuing certainly in the third quarter, part of that -over-year comp. And then actually slowing a little bit in the fourth quarter, which is also a, if you remember fourth quarter last year, EDF had a very strong fourth quarter last year, so the comp is pretty tough.

Great,

and there's not one specific launch that you're dependent on or that this is a way to do, correct?

No, listen, we're launching, this year we'll launch over 2,500 programs, Dan. So it's multiple programs that are being launched during the year that affect that back half influx.

Okay, great, thank you. And then the second question is around capital allocation, and maybe you could just revisit the framework specifically with the EDS spin. Now it sounds like you're pulling that forward. How should we think about capital allocation dynamics in the future post EDS spin, and especially on the inorganic side, what types of targets you may be seeking?

Sure, so first, we're not pulling the EDS spin forward. We're still on a path where we'll spin the business at the end of the first quarter of 2026. We're obviously just given the size of that business. There's a lot of time spent by management focusing on moving that, continuing to move that forward. So I wanna make sure I'm correct you on that. As it relates to capital allocation, starting with the EDS spin, that's a business that we're very focused on having very manageable leverage out of the gate. So there'll be an element of leverage on that business and the dividend to active, that cash will be used to pay down some amount of that. We'll continue to de-leverage during the back half of this year and into 2026, certainly at Romainco, partly as a result of earnings growth, partly as a result of select debt pay down. When we look at priorities from a capital allocation standpoint, it, as of right now, we've made the decision for the first couple quarters that we're gonna really sit on cash, evaluate the environment, we'll continue to sit on cash during this quarter. And then priorities are really first M&A opportunities in the engineered components and in the ASUX space. Principally in assets that have exposure outside of the automotive market.

Great, that's helpful, thank you. We'll go next to Joe Spack with UBS.

Thanks, good morning everyone. Maybe, Kevin, just to start, just a few points of clarification. One, when you're saying second quarter, pull forward to demand, I just wanna be sure, you're talking about consumer demand of vehicles and you're shipping to that, or do you think there was actual channel inventory built, like you shipped more than production? And then, I'll answer that.

Yeah, I think an element of both the schedules we receive from our customers and the number of vehicles our customers produced. So I think it's a mix, obviously, those two are aligned. I think, Joe, it's difficult to be precise on how much of that took place, but just based on our dialogue with customers and kind of the timing of changes, I think it's reasonable to assume that there's some element of pull forward or production.

Fair enough. The second clarification, just on the implied three-Q, four-Q guidance, it looks like revenue is really pretty flat, three-Q to four-Q, but big step up in margins. Is that just sort of the normal seasonality you see in engineering recoveries, or is there anything else that sort of drives that fourth quarter margin higher than the third quarter?

Yeah, from a year over year growth rate, it's really important that you look at the prior quarters, right? And to a certain extent, we were impacted slightly differently by business Q3 and Q4 last year. And if you look at overall production, you'll see a few anomalies in Q3 and Q4, right? Q4 vehicle production last year was the highest Q4 it's been. I think you can go back for a very long period of time, and I think on a sequential basis, it was up roughly 10%, give or take a couple points. So when you look at that fourth quarter growth rate on a year over year basis, a portion of our business, especially our EDS business, gets impacted. Q3, given our customer mix in Q3, obviously you'll see strong growth there. So I think it's important you look at it that way. I think as you look at margin, how margin plays out in Q3, Q4, it's really about the continued benefit of the cost actions we've taken last year and this year and the timing associated with those. And then it's to your point, Joe, it's the timing of engineering credits which tend to be back and loaded in our business, principally more of that in the fourth quarter than the third quarter.

All right, and then second question, just on the 85% of your day bookings are Chinese OEMs. Does that tend to come on quicker than some other bookings you have? Like we've heard from some other suppliers, there could be a pretty short period of time from when to launch, like around a year, and then maybe you could just shed a little bit of light on what's really driving this acceleration and how you're winning. Is it just a refocus on those customers? Are there new products? And are there any major differences in profitability? Anything like that?

Yeah, listen, we've been talking about this for quite some time. I wouldn't say it's new focus. It's focus we've had for the last couple of years where we're making progress. Joe, you're familiar with our China team. It's a China-based team that's localized our product capabilities, our engineering capabilities, manufacturing supply chain are all focused on the China market and have been for a very long period of time. So I think it's the strength of our product portfolio. I think we leverage our global scale. I referenced in my prepared comments, the award from Leap Motor for their European vehicles, our Gen 6 ADAS solution. We have other awards across our segments that relate to programs in China and outside of China. The major players, we have business awarded for both export as well as for programs that they're launching out of Europe or South America. There's more to come there. So it's an area we continue to focus on. And to your point, in terms of between award and launch, it's, I would say one year is long. I would say it's six to nine months, quite frankly, at this point in time from a pace standpoint. And that ranges anywhere from wire harnesses to interconnects to active safety or user experience systems. So it's very rapid. Having said that, it's a very dynamic environment. I made the comment about the Zekra Neo programs, which they're important customers, but we were on a couple of vehicle platforms, for example, with Zekra, where those platforms are not doing well in the China market. And we saw a fairly rapid reduction in production schedules beginning Q2 that'll affect us in Q3 and Q4 that we're working through. A positive is we continue to book a lot of business and we're confident we're able to replace that volume as we exit Q4 and head into next year.

Very helpful, thanks.

We'll go next to Emmanuel Rodster with Wolf Research.

Great, thank you so much. I wanted to get a few more thoughts for me on the trajectory of AS and UX revenues. They were down 3% in the quarter. You flagged some roll-offs of legacy UX programs, but generally, and then some unfavorable mix in China, but generally, can you lay out the growth narrative for this business? I think you have launches in the back half. How should we think about sort of like a forward growth trajectory for AS and UX?

Yeah, so it's a great question. And it's a business that sits in a place where content per vehicle is growing. Emmanuel, as you know, we have a headwind that we've talked about in terms of that legacy user experience program. That when you look at our overall growth rate on a quarter to quarter basis, year over year basis, however you wanna look at it, it's worth two to 300 basis points as that program winds down. And we get to finally laughing at beginning in Q1 next year. So that wind down ends at the end of the fourth quarter this year. So that's had over the last, this past year, certainly an impact on our overall growth rate. Active safety, our outlook for active safety is that it'll grow roughly 6% this year, so mid single digits. That unfortunately is a bit impacted by the China programs that I just mentioned, those OEM programs I mentioned. A couple of those are actually ADAS programs. So that is a bit of a headwind. But as you head into 2026, we're confident that we're in that mid single digit sort of growth rate as it relates to the ASUX business, just given new program launches, as well as that headwind coming to an end, that user experience headwind coming

to an end. Yeah, that's very helpful. And then second topic for me, I wanted to ask you about the ECG margins. They decreased in the quarter versus last year, even though organic revenues were actually up a very good clip. I think maybe some effects in commodities in there, but I guess more generally, where do you think ECG margins can go?

Listen, this quarter was all effects and commodity prices. So that was the headwind. We're facing significant headwinds principally as it relates to the PESO. We're hedged down to 19, and I'll let Baron talk about it, but that's been a significant headwind for that business, for the margin profile of our ADS business, and then to some extent, lesser extent, our ASUX business. Baron, I should let you answer this. Yeah, no, I think,

Jamin, you've pretty much answered that. Man, if you think of the points that Kevin just mentioned right on, and as you think of the second half of the year, we do see the seasonal uptick in margins in the ECG business also. So outside of the FX piece that we pulled out, kind of Mexican PESO, we do see ECG margins recovering

in the second half of the year. And I think in terms of ECG margin opportunity, right, where we sit today from an EBITDA standpoint, we'll end the year at roughly 22% sort of EBITDA margins. We'll continue to see those increase. 2022, they were at under 20. So we've seen significant improvement in margins. As we continue to grow, especially outside of automotive in the industrial sectors, where our margin rates are much higher, and just to remind everybody for us in this business, that sector's growing faster than our traditional automotive sector, we'll naturally see a creation of margins as well.

Great, thank you.

Thank you. So next to Chris McNally with Evercore.

Hey, Kevin, thanks so much, team. So I appreciate the conservatism. I think we all know there's a lot that needs to happen, particularly around the Mexico trade deal, which seems next. So Kevin, that's sort of my first five-level question. You guys are always pretty connected in DC, and if we step back, what do you think the industry is asking for at this point? Is it sort of 15% like all the other countries, or is there a case that USMCA-compliant vehicles could get something better? Just curious, super high level, what you think the industry is asking for, or really, in your opinion, should be asking for for good policy going forward?

Yeah, I try to avoid political policy. We can share with you our view. USMCA will definitely stay in place. There'll be some recalibration of certain aspects of USMCA. The administration is focused on bringing high-paying jobs back to the US. Our OEM customers in North America are supportive of that and are working with them to do that. So that will be the principal target. I can't answer, Chris, I'm not smart enough, whether there will be a lever where, to the extent, vehicles reach some sort of US content but manufactured in Mexico, whether or not they'll be subject to a lower tariff regime or not. I can say for us, I think this is the important thing, and Varen talked about, I talked about in his prepared comments, for US production, 95% of our product comes from Mexico. 99% of that is USMCA compliant. The announcement yesterday with respect to copper tariffs that will not work, we're clear, that will not impact wire harnesses. So that won't be an issue for us as we size the potential headwind based on what we know now, and we still don't have the information to give precise estimates, but it's relatively small and something that we can manage. So from our standpoint, whether the vehicle is manufactured in Mexico or it's manufactured here in the US, given how we're positioned and given how we think things will play out, we're in a good place. No,

that's great, and I appreciate the sensitivity, Kevin. I think it's only interesting because we're now starting to hear public discussions and players like VW on their call talking about almost OEM specific deals for reshoring, and obviously players like GM, big customers that are already announcing that. So look, it's gonna be an exciting August and September on that front, so we'll stay tuned. Then the last thing, just as that relates to your guidance, then is it fair to say that that minus 6% is sort of an industry number where we all were assuming a kind of rough due for based on tariff-related pricing? So is it okay to paraphrase that your minus 6% almost implies no new deal and that OEMs have to put due price and SAR goes down, so production goes down? Is that a fair case that that's sort of the, the conservativism here is assuming that we have to have price and negative SAR as a result. If something's better than that, then maybe this will be the upside.

Yeah, I think it's two things. I think it's a year over your cop with Q4 last year from a vehicle production standpoint, and then the presumption is that we have weaker consumer demand, whether that's driven by vehicle pricing or other issues that consumers are wrestling with, which obviously affects OEMs and OEM production, right? So, Chris, just taking a step back, I just, we looked at, as we look at the world, our presumption when we gave guidance in February was we were going to be more immediately impacted by tariffs under the presumption they were gonna be implemented much sooner. They haven't been. Our reasonably educated view is that there was some pull forward of production by our North American customers. Can't give you an exact number. And now we have that same concern we had back in February for the back half of this year. If we're wrong and vehicle production is stronger, we'll benefit, just like we did in Q1 and Q2. But sitting here today, we felt the most prudent thing to do was to be a bit more, and I don't know if you wanna call it conservative, that it'll be dependent upon what plays out, that we should assume that there is an impact on vehicle production in the back half, given the implementation of changing trade policies and tariffs.

Absolutely, Kevin, it makes complete sense. We'll go next to Colin Langan with Wells Fargo.

Oh, great, thanks for taking my questions. If I look at the quarter, you're mixed in China. I think you're about 10% under market. You're similar, a little better in Q1. When does that start to normalize? Especially you flagged some new wins with very short lead time. Does that actually start to narrow pretty meaningfully into the second half, and how should we think about it, maybe even into next year?

Yeah, I think it depends. Listen, Colin, we were making significant progress over the last two years. And we'll continue to make progress. Our target was to be at the same mix as in industrial production in China at the end of this year, or roughly at the end of this year. We were on that track. These vehicle programs or vehicles that I mentioned with respect to Zika and NIO obviously have a negative impact and set us back. So we'll continue to focus on where can we play where we can bring the most value and obviously drive the most profitability. China is a very dynamic market right now, extremely dynamic. And it's a critically important market for Aptiv, and we're very focused on it. But we're very focused on not only revenue growth, but how do we make sure that we get the margin expansion and the return on an investment as it relates to that market? And we can, we're confident of that. And we have a low cost structure. We continue to aggressively reduce that cost structure by rotating engineering activities, by leveraging global platforms, by reducing our sourcing costs as it relates to our supply chain. So the team's doing a great job. But it's important that we be focused on doing business with the right customers on the right platforms and ensuring that we don't end up in minimizing the risk of being in a situation like we're talking about today with respect to a couple customers on a few platforms that they've significantly reduced volumes having an impact on us. So we're working our way towards that, but our real focus is how do we grow earnings both in China as well as on an aggregate Aptiv basis?

Got it, makes sense. You also mentioned that the guide doesn't include the copper tariffs, which I guess makes sense. But any way to frame that in terms of, I believe most of your contracts have passed through the provisions, is there a risk to numbers or from a dollar perspective or is this more of a margin dilution risk?

No, so this is not, this is derivative. So it's non-232, but it's manageable. Based on our analysis, and we don't have all the specifics, but we can, Garen and I can confidently tell you, this is something we can manage through from a supply chain standpoint. And to the extent we're not able to offset all of it, it's something that we've been having conversations with our customers regarding and we'll be able to push it through. Garen, you should. No, I think that's right.

All right, thanks for my questions. We'll go next to Tom Narayan with RBC.

Hey, thanks for taking the question. I know you guys have talked a lot about China. Just one more. So on that order book, the 85% to domestics, just curious if we could get a little more detail on that. I know one of the big catalysts was potentially, the fact that these domestic OEMs have to expand or want to expand outside of China, particularly Europe and that benefits you guys. Just curious as to commentary in that regard, is that a big factor that was driving the domestics that you were winning or is it just kind of across the board?

No, Tom, it's a great question. It's across the board. It's across the board. So we've been winning significant business, for example, with BYD over the last, in our ECG business over the last couple of years, in our EDS business over the last 12 months with opportunities in ASUX that we're working on now. Our focus is on strategic programs in China, vehicle programs, as well as I'd say, an additional focus on where are those OEMs taking vehicles offshore, whether that be through export or through production in Europe. There are a few of them that were spending a lot of time on their European or South American supply chain as they move production out and try to ramp up. So we're in front of those particular vehicle programs, but making progress. So I would say it's a bit of a two prong, but we feel like we can bring the most value quite frankly, or we can bring incremental value for those that need support outside of the China market.

Got it. And my follow-up, this is kind of more a high level question. In your prepared comments, there was a lot of big wins, it sounded like. And I was just curious as to those wins, are they mostly like on the ADAS side, are they mostly like, like is there a characteristic of where these wins are more than others? I've actually forgotten my question, but I'm just curious as to where, yeah, if you could just comment on where those wins are specifically.

Yeah, so our ADAS awards are in North America, Europe and China. We would tell you just given cost pressure that our OEM customers are under tariff and other, they're very focused on, I would say there's incremental focus and willingness to look at full system solutions that save them money. We talked about the award to leap motor, the award from leap motor rather, for their European vehicles that include locally sourced China based SSEs, strategy and vision solution, which is our reference vision solution for our Gen 6 ADAS platform. And then our Gen 6 ADAS platform, so very cost effective. Similarly with the North American OEM, a different vision solution, but it's an enhancement of our existing Gen 6 ADAS solution, adding more features, more capability, more scalability with significantly more focus on the trade off between performance and cost of performance. So in a, you know,

pardon me? I think I remember what I was gonna ask. I think I remember what I was gonna ask, sorry. Yeah, so this is something we've been hearing from a lot of the OEMs is, you know, the larger OEMs feel like on ADAS that, you know, there's a lot of, I wanna in-source and maybe some of the smaller ones, there's a, you know, maybe a propensity to outsource more. Just curious, like, is that what you guys are seeing, you know, like the larger OEMs have an inclination to perhaps want to take kind of piece parts of your ADAS portfolio as opposed to the entire suite? Or is that not the case that you're, they're winning kind of across the board? Yeah, we would

tell you now, we're seeing from OEMs less desire to do things internally. Now there may be some things that, you know, with particular OEMs where it might be a feature or some features within an ADAS stack, but that we're going to do it all ourselves. And listen, you're familiar with the OEMs that have tried doing that, have spent money doing it, and have not been overly successful. We would say that trend is reversed course. We will, we would say though, all of our OEMs are looking for open architected solutions where they have flexibility, that that's important, that they're scalable so that they can put higher performing, high cost systems on a more luxurious vehicle, and lower cost systems on entry vehicles. And to the extent you can do that with a single platform, it's less engineering costs for them. So all of them are looking for that sort of approach to things. So in a strange way, all of the cost pressure going on in the industry is actually helpful to our business model. But again, we're willing to provide the full system solution or part of the solution depending upon what the customer

is looking for. Yeah, thanks.

And that will conclude today's question and answer session. I will now turn the call back to Mr. Kevin Clark for any additional or closing remarks.

Thank you, operator. And thanks everybody for spending time with us this morning. We really appreciate your questions. Have a great rest of the day. Thanks.

Thank you, ladies and gentlemen. That will conclude the active Q2 2025 earnings call. We thank you for your time today. Thank you for your participation. You may disconnect at this time and have a great day.