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    Aptiv PLC (APTV)

    CFO Change

    Business Description

    Aptiv is a leading global technology and mobility architecture company that primarily serves the automotive sector. The company specializes in designing, manufacturing, and assembling vehicle electrical architectures and developing advanced safety and user experience technologies. Aptiv's offerings include connectors, wiring assemblies, sensing and perception systems, electronic control units, and autonomous driving technologies, catering to the industry's shift towards electrified and software-defined vehicles . The company serves the 25 largest automotive original equipment manufacturers (OEMs) worldwide .

    1. Signal and Power Solutions - Designs, manufactures, and assembles vehicle electrical architecture, including connectors, wiring assemblies, harnesses, cable management, electrical centers, and high voltage and safety-critical distribution systems. Provides the backbone for signal distribution and computing power, supporting increased vehicle content and electrification.
    2. Advanced Safety and User Experience - Enhances vehicle safety, security, comfort, and convenience through technologies such as sensing and perception systems, electronic control units, multi-domain controllers, vehicle connectivity systems, cloud-native software platforms, application software, and autonomous driving technologies. Aligns with industry trends towards software-defined vehicles and connected services.

    Q2 2024 Summary

    Initial Price$80.13April 1, 2024
    Final Price$68.44July 1, 2024
    Price Change$-11.69
    % Change-14.59%

    What went well

    • Strong Financial Position Supports Shareholder Returns: Aptiv has maintained a robust balance sheet, ending the quarter with $1.4 billion in cash and €700 million in marketable securities. Cash from operations is between $600 million to $800 million, positioning the company to execute a significant $5 billion share repurchase authorization, including a $3 billion accelerated share repurchase program. This reflects management's confidence in Aptiv's long-term growth prospects.
    • Margin Expansion Driven by Operational Efficiencies: The company is experiencing margin improvement due to balanced initiatives, including the reduction of supply chain disruption costs and decreased engineering expenses as a percentage of sales. Engineering costs are returning to the targeted 6% to 7% of sales, indicating operational efficiency gains contributing to margin expansion.
    • Commitment to Investment Grade Rating While Enhancing Shareholder Value: Aptiv plans to maintain its investment-grade credit rating even as it returns capital to shareholders through the share repurchase program. Management intends to manage debt levels to return to current leverage ratios by the end of next year or early 2026, demonstrating prudent financial management alongside initiatives to enhance shareholder value.

    Q&A Summary

    1. Capital Allocation and Buyback Decision
      Q: Why did you decide to lever up for buybacks?
      A: Management sees the stock as significantly undervalued and considers the buyback the most attractive investment opportunity. Despite leveraging up, they remain confident in their strong cash flow over the next few years to reduce debt while continuing to invest in the business.

    2. Margin Improvement and Cost Actions
      Q: What's driving margin strength and future trajectory?
      A: Margin improvement is balanced across various initiatives, including elimination of $160 million in supply chain disruption costs, reduction of engineering expenses by $75–$100 million, and strong operational performance. They expect run-rate EBIT margins in the mid-12% range in H2, setting up well for their 12.5% target in 2025.

    3. Growth Outlook and Bookings Guidance
      Q: How should we view medium-term growth and bookings?
      A: The company is targeting mid-single-digit revenue growth next year, assuming flat vehicle production. Bookings are on track for $35 billion this year, despite normal quarterly lumpiness, and management remains confident in this target.

    4. Reduction in R&D Investment
      Q: Are you cutting R&D due to increased buybacks?
      A: While they see the stock as undervalued, they acknowledge slowing investment in certain areas like high-voltage electrification and smart vehicle architecture, reducing engineering spend by $75–$100 million this year. However, they continue to prioritize positioning for industry trends and challenges.

    5. China Market Dynamics
      Q: How are shifts in China impacting your business?
      A: Revenue from local Chinese OEMs is now over 50% and growing quickly, with bookings over 60% for Chinese locals. The challenge lies with two multinational customers experiencing significant volume reductions. Adjusting the customer mix has been a priority, and they are addressing market changes.

    6. Impact of SVA Delays and Opportunities
      Q: What is the impact of SVA delays on revenue?
      A: While some OEMs are delaying smart vehicle architecture (SVA) programs, the pipeline has expanded from 4 OEMs two years ago to over 20 today. Opportunities exist in upgrading existing platforms with legacy ADAS and user experience solutions, representing over $10 billion in potential business this year.

    7. Capital Structure and Leverage Post Buyback
      Q: How will the buyback affect your leverage?
      A: With cash from operations of $600–$800 million and $1.4 billion in cash, the company is in a strong position. Adjusted debt to EBITDA is around 2x, and they intend to maintain investment-grade ratings, aiming to return to current leverage levels by late 2025 or early 2026.

    8. Wind River Growth and Outlook
      Q: What is the status of Wind River's growth?
      A: Wind River is tracking for mid-teens growth, with second-half weighting. Significant opportunities are emerging in aerospace, defense, telecommunications, industrial, and especially automotive, with most progress in China.

    9. OEMs Doing SVA In-House
      Q: Are OEMs shifting SVA development in-house?
      A: It's OEM-specific; some may want to design their own SVA, but Aptiv focuses on standardized, cost-effective solutions. They avoid custom solutions unless profitable, and with a pipeline involving 20 OEMs, there are ample opportunities.

    10. Acquisition Strategy
      Q: Are you pursuing acquisitions like HellermannTyton?
      A: The company remains focused on investing in high-margin businesses and expanding into non-automotive markets. Previous acquisitions like HellermannTyton have doubled revenues and been highly successful.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Electrical/Electronic Architecture--------
    Powertrain Systems--------
    Electronics and Safety--------
    Thermal Systems--------
    Eliminations and Other(12)(11)(14)-(48)(15)(15)(16)
    Signal and Power Solutions3,4643,6793,6873,57414,4043,4873,5123,443
    - Electrical Distribution Systems------2,0512,014
    - Engineered Components Group------1,6291,594
    - Eliminations------(14)(14)
    Advanced Safety and User Experience1,3661,5321,4411,3565,6951,4291,5541,427
    - Active Safety------758768
    - Smart Vehicle Compute and Software------134109
    - User Experience and Other------676564
    Total Revenue4,8185,2005,1144,91920,0514,9015,0514,854
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    North America1,7781,9341,8671,6167,1951,8161,8771,762
    - United States----7,021---
    - Other North America----174---
    Europe, Middle East and Africa1,7111,7581,6301,6396,7381,7121,7071,551
    Asia Pacific1,2361,3941,4951,5725,6971,2851,3731,445
    - China--------
    - Other Asia Pacific--------
    South America9311412292421889496
    - United Kingdom--------
    - Germany--------
    - France--------
    Total Revenue4,8185,2005,1144,91920,0514,9015,0514,854
    KPIs - Metric / QuarterFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Number of Scientists, Engineers, and Technicians22,00022,00022,00022,200-22,20022,20022,200
    Number of Patents and Protective Rights9,5009,5009,50010,000-10,00010,00010,000

    Executive Team

    NamePositionStart DateShort Bio
    Kevin P. ClarkChairman and Chief Executive OfficerMarch 2015Kevin P. Clark has been a director since March 2015, when he became Aptiv's President and CEO. In April 2022, he was named Chairman and Chief Executive Officer. He joined Aptiv in 2010 as Chief Financial Officer .
    Joseph R. MassaroVice Chairman, Engineered Components GroupNovember 2024Joseph R. Massaro was named Vice Chairman, Engineered Components Group in November 2024. He joined Aptiv in 2013 and held various roles, including Senior Vice President and Chief Financial Officer .
    William T. PresleySenior Vice President and Chief Operating Officer, President, Signal & Power SolutionsDecember 2022William T. Presley is the Senior Vice President and Chief Operating Officer since December 2022, and President of Signal and Power Solutions since September 2020. He joined Aptiv in January 2019 .
    Obed D. LouissaintSenior Vice President and Chief People OfficerJanuary 1, 2023Obed D. Louissaint is the Senior Vice President and Chief People Officer, effective January 1, 2023. He joined Aptiv from IBM, where he held various human resources positions .
    Benjamin LyonSenior Vice President and Chief Technology OfficerDecember 2022Benjamin Lyon is the Senior Vice President and Chief Technology Officer, effective December 2022. He joined Aptiv from Astra Space, Inc., where he was Chief Engineer and Executive Vice President .
    Katherine H. RamundoSenior Vice President, Chief Legal Officer, Chief Compliance Officer, and SecretaryMarch 2021Katherine H. Ramundo has been the Senior Vice President, Chief Legal Officer, Chief Compliance Officer, and Secretary since March 2021. She previously held roles at Howmet Aerospace Inc., ANN, Inc., and Colgate-Palmolive .
    Matthew M. ColeSenior Vice President and President of Advanced Safety and User ExperienceJanuary 2023Matthew M. Cole is the Senior Vice President and President of Advanced Safety and User Experience, effective January 2023. He joined Aptiv from Tech Transformations .
    Varun LaroyiaExecutive Vice President and Chief Financial OfficerNovember 8, 2024Varun Laroyia was appointed as the Executive Vice President and Chief Financial Officer, effective November 8, 2024. He previously worked at LKQ Corporation and held roles at CBRE Group Inc., Johnson Controls, and others .

    Questions to Ask Management

    1. Given your decision to leverage up the balance sheet to fund a $5 billion share repurchase program , how do you justify this aggressive capital return strategy in light of potential economic uncertainties and the need to invest in future growth opportunities?

    2. With some OEMs expressing a desire to develop their own software architectures and potentially reduce reliance on Tier 1 suppliers , how does this trend impact your long-term growth prospects and your strategy to provide standardized solutions rather than customized ones?

    3. Considering potential delays in OEMs adopting software-defined vehicle architectures and the associated reduction in wiring content , how do you anticipate this affecting your revenues and margins, especially in lower-margin areas like wiring harnesses where content could be reduced?

    4. As you plan substantial share repurchases funded by increased debt, how confident are you in your ability to maintain investment-grade credit ratings and deleverage the balance sheet, particularly without relying on asset sales or one-off cash inflows?

    5. Your updated financial outlook reflects confidence in margin expansion despite lower OEM production schedules ; can you elaborate on the specific drivers of this margin improvement and how sustainable they are, especially given that net pricing and commodity recoveries are decreasing?

    Share Repurchase Program

    Program DetailsProgram 1Program 2
    Approval DateJanuary 2019 July 2024
    End Date/DurationAugust 2024 Q2 2025 (scheduled)
    Total Additional Amount$2.0 billion $5.0 billion
    Remaining Authorization$0 $2,515 million
    DetailsCompleted Flexible repurchase options

    Past Guidance

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: $20.1 billion to $20.4 billion, adjusted revenue growth of 1% .
      2. Global Vehicle Production: Down 3%, growth over market of 4% .
      3. Segment Growth:
        • ASUX growth over market: 10%
        • SPS growth over market: 1% .
      4. Operating Income: $2.4 billion, operating margin of 12% .
      5. Earnings Per Share (EPS): $6.30 at the midpoint .
      6. Operating Cash Flow: $2.15 billion, up 13% from the prior year .
      7. Share Repurchase: $5 billion authorization, $3 billion accelerated plan .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: $21.15 billion, adjusted revenue growth of 5% .
      2. Operating Income: $2.5 billion, 11.8% of revenues .
      3. Earnings Per Share (EPS): $6.05 per share at the midpoint .
      4. Share Repurchases: $1.5 billion .
      5. Operating Cash Flow: Increased outlook .
      6. High-Voltage Revenue Growth: Reduced to 5% .
      7. Global Vehicle Production: Down 1% .
      8. Foreign Exchange Rates: MXN 17 to the dollar .
      9. Copper Price Assumption: $4.35 .
      10. Chinese RMB Exchange Rate: 7.15 .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Revenue: $21.3 billion to $21.9 billion, 7% increase at the midpoint .
      2. Operating Cash Flow: $2.3 billion .
      3. Capital Expenditures: Approximately 5% of revenues .
      4. Adjusted Operating Income Margin: 120 basis points expansion .
      5. Adjusted Earnings Per Share (EPS): $5.55 to $6.05, 19% growth .
      6. Share Repurchases: Up to $750 million .
      7. Growth Over Market: 6% to 8% .
      8. Global Vehicle Production Forecast: Flat, approximately 93 million units .
      9. Regional Vehicle Production Expectations:
        • North America: Up 1% at 16.5 million units.
        • Europe: Down 2% at 18 million units.
        • China: Flat at 30 million units .
      10. High-Voltage Growth: Approximately 20% .
      11. EBITDA and Operating Income: $3.28 billion and $2.55 billion at the midpoint .
      12. Foreign Exchange Assumptions: Euro at $1.10, RMB at 7 .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information about Aptiv's guidance for Q3 2024. The available information is from the Q2 2024 earnings call, and there is no mention of specific guidance for Q3 2024.

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Amphenol Corporation - Competitor in the Signal and Power Solutions segment .
    • Draexlmaier Group - Competitor in the Signal and Power Solutions segment .
    • Lear Corporation - Competitor in the Signal and Power Solutions segment .
    • Leoni AG - Competitor in the Signal and Power Solutions segment .
    • Molex Inc. (a subsidiary of Koch Industries, Inc.) - Competitor in the Signal and Power Solutions segment .
    • Sumitomo Electric Industries - Competitor in the Signal and Power Solutions segment .
    • TE Connectivity, Ltd. - Competitor in the Signal and Power Solutions segment .
    • Yazaki Corporation - Competitor in the Signal and Power Solutions segment .
    • Bosch Group - Competitor in the Advanced Safety and User Experience segment .
    • Continental AG - Competitor in the Advanced Safety and User Experience segment .
    • Denso Corporation - Competitor in the Advanced Safety and User Experience segment .
    • Harman International (a subsidiary of Samsung Electronics) - Competitor in the Advanced Safety and User Experience segment .
    • Hyundai Mobis - Competitor in the Advanced Safety and User Experience segment .
    • LG Electronics - Competitor in the Advanced Safety and User Experience segment .
    • Magna International - Competitor in the Advanced Safety and User Experience segment .
    • Panasonic Corporation - Competitor in the Advanced Safety and User Experience segment .
    • Valeo - Competitor in the Advanced Safety and User Experience segment .
    • Visteon Corporation - Competitor in the Advanced Safety and User Experience segment .
    • ZF Friedrichshafen AG - Competitor in the Advanced Safety and User Experience segment .

    Latest news

    Recent developments and announcements about APTV.

    Corporate Leadership

      CFO Change

      ·
      Nov 7, 2024, 12:00 AM

      Joseph R. Massaro, the current Chief Financial Officer (CFO) of Aptiv PLC, will step down from his position effective November 8, 2024. He will be succeeded by Varun Laroyia, who has been appointed as the new Executive Vice President and CFO of Aptiv .

      Leadership Change

      ·
      Nov 7, 2024, 12:00 AM

      Joseph R. Massaro is stepping down from his position as Chief Financial Officer to lead the Engineered Components Group. William T. Presley will step down from his role as Vice Chairman and Chief Operating Officer on November 22, 2024, to pursue other opportunities. Varun Laroyia will assume the role of Executive Vice President and Chief Financial Officer effective November 8, 2024 .

      CFO Change

      ·
      Nov 7, 2024, 12:00 AM

      Joseph R. Massaro, the current Chief Financial Officer (CFO) of Aptiv PLC, will step down from his position effective November 8, 2024. He will be succeeded by Varun Laroyia, who has been named Executive Vice President and Chief Financial Officer .