Q1 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Strong growth in the Active Safety segment with a 25% revenue increase in the quarter and expected over 20% growth for the year, supported by $2 billion in bookings in this quarter alone.
- Increased share repurchases, doubling the 2024 target to $1.5 billion, as management views the stock as undervalued and intends to continue buybacks at healthy levels, demonstrating confidence in future prospects.
- Significant improvement in ASUX margins through cost reductions and operational efficiencies, with margins expected to be maintained at higher levels throughout the year.
- Aptiv has lowered its full-year revenue guidance due to decreased global vehicle production, especially in BEVs, with estimates of global vehicle production down 1% from prior forecasts.
- The company is experiencing foreign exchange headwinds, particularly from a stronger Mexican peso and Chinese RMB, which are negatively impacting operating income.
- Customer schedule reductions in both legacy OEMs and global EV-only OEMs have led to lower production schedules, further impacting Aptiv's top-line growth.
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High-Voltage Revenue Outlook
Q: Is 20% CAGR in high-voltage revenue still achievable?
A: Challenges have arisen in high-voltage revenue growth, leading us to reduce our 2024 outlook to 5% from the previously expected 20%. While customers remain committed to battery electric vehicles, we anticipate a richer mix of plug-in hybrids in the near term. Significant schedule reductions occurred late in the quarter and in April, but they've now stabilized. -
Margin Improvements and Cost Reductions
Q: What led to strong Q1 EBIT margins?
A: We achieved our best Q1 EBIT margin since 2018 due to a stabilized macro environment and focused cost reductions. Last year, we reduced salaried payroll by over 10% through delayering and consolidation efforts. We plan to continue operational improvements across all aspects of our cost structure. -
Shift to Chinese Local OEMs
Q: How is Aptiv positioning with Chinese local OEMs?
A: Our bookings have significantly rotated, with over 70% now from Chinese local OEMs in China. Revenue from local Chinese OEMs is over 50%, and we expect to further close the gap in the next 12 to 24 months. We're well-positioned for growth in China and to support Chinese OEMs as they expand globally. -
Growth Over Market Guidance
Q: Is growth over market guidance biased to lower end?
A: Yes, we're currently closer to 6% of our 6%-8% growth over market range based on the 2024 outlook. This reflects recent dynamics in customer schedules over the past month. -
Active Safety Business Outlook
Q: Is 20%+ growth in ADAS still expected?
A: Absolutely. We're forecasting over 20% growth in active safety for the year. Consumer demand remains strong, and we secured close to $2 billion in bookings this quarter alone for active safety. -
Capital Allocation and Share Buybacks
Q: Will high share buybacks continue?
A: At current stock levels, we will continue buying back stock at healthy levels, as we view our stock as undervalued. We also plan to pursue acquisitions to build our software capabilities and diversify revenues in 2024, 2025, and beyond. -
Automation and Cost Savings
Q: How will automation impact costs?
A: Automation addresses labor availability, cost, and complexity issues. We're expecting a 30% reduction in labor hours, leading to significant cost savings. Our baseline automation is currently at 15%. -
Price vs. Inflation Dynamics
Q: How are price and inflation affecting you?
A: We've shifted from direct material inflation to dealing with labor inflation. We're taking cost actions to address this and expect a long-term net price decrease of around 1.7%. In Q1, pricing and commodities had about a $35 million positive impact on revenue. -
Vehicle Production Outlook
Q: Are you seeing downside to global production?
A: Yes, we've reduced our vehicle production outlook by one point, primarily due to declines in BEV production. In April, both legacy global OEMs and EV-only OEMs decreased schedules, which is impacting our top line. -
FX Impact and Hedging
Q: How significant is FX impact from peso and RMB?
A: The Mexican peso impact is more significant than the RMB. We've hedged 90% of our peso exposure below MXN 17. Despite the peso not strengthening as anticipated, we've offset the impact by reducing costs. -
Positioning with Emerging Chinese OEMs
Q: How are you positioned with new Chinese players?
A: We're working with virtually all leading Chinese local OEMs, including emerging players like Xiaomi and Huawei. These OEMs aim to export and manufacture outside China, and we're well-equipped to meet their global requirements. -
Pivoting Between Powertrains in SPS
Q: Can you pivot between different powertrains easily?
A: Yes, while different product lines are involved, we have some ability to pivot within existing facilities. Transitioning between BEV, hybrid, and plug-in hybrid involves some adjustments but isn't significantly disruptive. -
Segment Margins Outlook
Q: How should we think about AS and SPS margins?
A: For Advanced Safety and User Experience (AS&UX), we expect to maintain margins around 10.5% to 11% for the full year, ending around the mid-10% range. For Signal and Power Solutions (SPS), margins are projected to be around 12% to 12.5% by year-end. -
AI/ML Impact on Development
Q: How is AI/ML changing your business decisions?
A: AI and machine learning allow us to advance more rapidly and cost-effectively, benefiting product development like our radar solutions. In our Gen 6 ADAS platform, AI/ML helps reduce perception system costs and computing requirements. We balance these benefits with the automotive industry's unique safety and traceability needs.