Good day, and welcome to the Aptiv Q3 2022 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jessica Kourakos, Vice President of Investor Relations and ESG. Please go ahead.

Thank you, Bettina. Good morning, and thank you for joining Aptiv's Third Quarter 2022 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 www.aptiv.com. Today's review of our financials exclude amortization, restructuring and other special items and will address the continuing operations of Aptiv. The reconciliation between GAAP and non-GAAP measures for our Q3 financials as well as our full year 2022 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, which 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, including uncertainties posed by the COVID-19 pandemic, the ongoing supply chain disruptions and the conflict between Ukraine and Russia. Joining us today will be Kevin Clark, Aptiv's Chairman and CEO; and Joe Massaro, CFO and Senior Vice President of Business Operations. Kevin will provide a strategic update on the business, and Joe 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.

Thank you, Jessica, and thanks, everyone, for joining us this morning. Beginning on Slide 3. We had a strong third quarter, so let me touch on a few of the highlights. New business bookings totaled over $5 billion, bringing the year-to-date total to over $25 billion, already outpacing last year's record full year amount of $24 billion, and cementing another record year in 2022. Revenue increased 33% to $4.6 billion, representing 9 points of growth over underlying vehicle production, driven by the strength of our safe, green and connected product portfolio. We continue to execute well despite the constrained environment and macro headwinds. EBITDA and earnings per share totaled $673 million and $1.28, respectively, reflecting flow-through on volume growth and material cost recoveries partially offset by costs related to material inflation and supply chain disruptions. We remain on track to reach this year's target of $500 million of material cost recoveries and $100 million of cost reductions, increasing our profitability and enhancing the resiliency of our business model. And lastly, we continue to invest in growth opportunities as reflected by our agreement to acquire Intercable Automotive Solutions which further strengthens our high-voltage product portfolio. Turning to Slide 4. Aptiv's industry-leading portfolio of electrical architecture products and full system-level capabilities, uniquely positions us to optimize vehicle architecture systems. Intercable Automotive is an industry leader in the design and manufacture of high-voltage busbars and interconnect solutions. The company has an outstanding management team that has developed a portfolio of innovative high-voltage power solutions, including their seventh generation busbar product that they've leveraged into very strong relationships with several leading European automotive OEMs. The partnership between Aptiv and Intercable will enhance the strength and breadth of our combined product portfolios, allow Intercable to leverage Aptiv's global scale, manufacturing footprint, especially in North America…

Thanks, Kevin, and good morning, everyone. Starting with a recap of the third quarter financials on Slide 9. As Kevin noted in his opening comments, revenues of $4.6 billion were up 33% with 9 points of growth above underlying vehicle production. Adjusted EBITDA and operating income were $673 million and $525 million, respectively. EBITDA margins expanded 330 basis points versus third quarter last year and grew 560 basis points sequentially, reflecting flow-through on increased volumes of approximately 32%, both year-over-year and sequentially, continued progress on customer recoveries of direct material inflation, as well as other performance and cost savings actions, partially offset by a return to a more normalized price down environment and the impact of FX, commodities and nonmaterial cost increases. EPS in the quarter was $1.28, an increase of over 150% from prior year, reflecting higher net earnings. And operating cash flow totaled $437 million, a significant improvement from the prior year and sequential quarters. As I will discuss in a moment, we will be updating our full year cash flow guidance to reflect the higher expected investment in certain key inventories to help better navigate supply chain constraints and prepare for 2023 launch activities. Capital expenditures for the quarter were $212 million. Looking ahead at the third quarter revenues in more detail on Slide 10. Adjusted revenue growth of 33% reflected both our growth over market as well as the rebound in global vehicle production from the prior year, which was heavily impacted by semiconductor shortages. Growth across all regions was led by our key product lines, including high voltage and active safety and reflect some improvement in supply chain conditions. However, despite this relative improvement, we continue to operate in a constrained environment with both direct and indirect impacts on our customers and operations. Direct material…

Thanks, Joe. I'll wrap up on Slide 13 before opening up the call to questions. Our business is built on a strong foundation and continues to gain momentum as we close out 2022 despite the constrained environment and macro headwinds that Joe just touched on. Our strategic alignment with our OEM customers has really never been better as reflected in our continued strong revenue growth over market and the pace of our new business bookings. We continue to make progress recovering the increases in material input costs while also further optimizing our cost structure, and we continue to smartly deploy capital both organically and inorganically to further strengthen our competitive position. These actions have translated into a significant improvement in our margins as evidenced by this quarter's results and are providing momentum and a strong entry point for 2023. As Joe just mentioned, in light of the current macro environment, we'll provide a detailed update on our 2023 outlook when we release fourth quarter earnings, but you can expect us to focus on delivering continued strong revenue growth over market and margin expansion in a challenging environment. With that, we can open up the line for questions.

[Operator Instructions] Our first question today comes from Rod Lache of Wolfe Research.

Good morning, everybody. I was hoping first to just maybe better understand the year-over-year earnings bridge that you had this quarter. So you did on an adjusted basis, 256 of EBIT and you're getting to $525 million this year. You mentioned 32% conversion on the $1 billion of volume, which obviously will be more than accounting for that growth. Could you just talk to the net impact of commodities. That $199 million tailwind, what was the net effect netting that out? And were there any out-of-period benefits in that number?

Yes, Rod, it's Joe, let me start. So FX, we mentioned the revenue number is about $226 million on the year-over-year. On the OI, that flow through is about $20 million numbers on FX and commodity. So obviously, picking up lower euro and then the really the start of the RMB weakening at the end of the third quarter, although that obviously picks up in the fourth quarter as well and will pick up in the fourth quarter based on everything we're seeing. Listen, from an out-of-period perspective, a lot of puts and takes with customer recoveries, inflation, some premium freight that we'll get reimbursed for, for next quarter, but nothing overly material from a net perspective. Really just -- again, there's a lot going on in the quarter. So you've got a few things go into different directions. But if you got the volume flow through and the FX impact, you really got sort of the net there.

Okay. So it sounds like mostly FX in that number and that recovery was mostly offset by higher costs, if I understand that correctly?

Yes. The only other thing I'd say - and I mentioned in my prepared remarks, we're seeing a return to a more normalized price down environment. So we've got price down to 1.7%. That had been -- we've been holding off on price downs until we got through all the customer recovery. So as we communicated last quarter, we expected to return to sort of more of a normal operating cadence with our customers. So you got that price down at 1.7% as well.

Okay. And you opened the door to 2023. And I know you can't really give a lot of detail yet. But last quarter, you mentioned that on a seasonally adjusted basis, we should be thinking that margins are around 10% in the back half. And it seems like you're kind of tracking to that. You're at an $18 billion run rate of revenue. So that's about $1.8 billion of EBIT. Is it still correct that there's around $100 million of additional kind of unrecovered costs that you're -- that you need to go after for next year?

I'm not sure we talked about a 10% to 10.5% jumping off point. I think that's generally holding operationally from everything we're seeing. We're sort of tracking to that. My only caution there would be, I think we're going to have to evaluate or one should evaluate sort of the FX impact. There could be about 0.5 point of headwind to that range if these FX rates hold going into next year. But operationally, I'd say things are happening as we had expected.

Rod maybe if I can just chime in on price recoveries. The team has done an excellent job as it relates to recapturing material cost increases and translating that now into POs with our OEM customers. So we feel good about heading into 2023 with respect to that particular category. Obviously, what we need to go after next year is partly influenced by what we see from a material inflation standpoint, if there's some incremental increases going into 2023. So we're well positioned as it relates to what we've translated into POs this year heading into next year. If there's more material inflation, we'll go back to OEM customers with increased prices. The OEM customers are aware of that. And then secondly, just to Joe's point on FX, I think Joe highlighted it on it in his comments a couple of times. When you look at the recent movement in the Euro and the RMB, we've seen a significant change over the last month or two. So I think there's a question there as it relates to what's the trend in currencies heading into 2023 and what sort of movements do we see.

Great. And just lastly, Kevin, any updated thoughts on investment in Motional just in light of what we've heard from Ford and just elsewhere in the market?

Yes. Listen, Motional continues to be very successful in terms of advancing the technology road map. I'm sure you saw the announcement as it relates to Uber and the plan to integrate the Motional solution or motional vehicles in the Uber network in the United States. As it relates to the Ford announcement, as it relates to Argo, listen, I think there's an element of -- our perspective on autonomy has probably been a bit different than most OEMs that are out there. When we originally made our investments in Automatica and nuTonomy, a big piece of our strategy was with respect to how do we take those technologies that are utilized for vehicle nuTonomy and how do we pull those forward into active safety solutions, which is what we're doing today, which is that technology or a portion of that technology, a portion of that know-how is embedded in our current generation ADAS platform. In addition, Motional is a customer of Aptiv. So when you think about perception systems and other items, they're actually a customer. So we've always viewed, right? I think we've talked about it in the past, we've always viewed autonomy as kind of the far in of the spectrum as it relates to active safety. So from a strategic standpoint, a business standpoint, it's fairly well integrated into what we're doing operationally today.

Okay. Thank you.

Our next question comes from Itay Michaeli of Citi. Please go ahead.

Great, thank you. Good morning, everybody. Just two quick ones. First on the Q4 guide. Just hoping you can maybe share your latest LVP views for the year. and maybe any particular bias of the low or high end of the confirmed range for 2022?\ And then Joe, going back to 2023, any early thoughts on how we should be thinking -- how you're thinking about global LVP for next year?

Yes. Itay, let me start with 2023. It's just there. We're still working through that. There's a tremendous amount of puts and takes at the customer levels we haven't seen schedule. So it's really too early for us to have a view on the numbers or the direction. As it relates to Q4, we're basically holding the guide. I think if we were to look at it, there's certainly some potential for upside, particularly with China production. Although more recently, we've seen probably more pullbacks in some China production schedules versus increases. But I understand there is a desire in that market to build more vehicles. The way I view the guide at the moment, we're certainly confident in the midpoint to the extent there's bias to the top end of the range. I think it's going to be a trade-off between vehicle production increases and China, Europe holding steady and then just how big an FX impact as sort of offsets on the top line. So that's really what we're looking at and really sort of the driver of holding the guide is to the extent you pick up some revenue on upside in China, which we'd admit is possible. We don't quite see it yet in schedules, but understand the bias there from customers. We are mindful of just the revenue impact on the -- from the FX perspective.

Itay, I can just qualitatively, I just want to reiterate Joe's point. Although supply chains seem to be improving. The reality is we're seeing continued volatility in customer schedules, right, week-to-week. And maybe more recently, more volatility to the downside on the China production schedules, which we did not see in Q3.

Got It. That’s helpful.

Our next question comes from Joe Spak of RBC Capital Markets. Please go ahead.

Thanks so much. Good morning. Joe, maybe just a little bit more on this decision to build inventory. It sounds like it's pretty customer or launch specific? I just want to get a little bit more understanding on your thinking because we just saw a competitor at least on the connector side, they had sort of built prior inventory and they're sort of leading some of their inventory go down now because they feel better about the supply chain. So, is this just you being extra cautious in terms of building your own stock? And is that a new normal? Or should we expect that to come down over the course of a year or so?

Yeah. Listen, I think it is broadly speaking, Joe, in the electronic space, pass electronics, semiconductor is obviously a big part of that. I'd say it is specific around some heavy launch activity we expect in the first half of next year wanting to make sure we've got adequate supply, sort of getting the supply when we can. There's also an element and my ASUX comments around growth over market so to speak to it, we are still seeing customers impacted by lack of availability. So I understand the comments you're referring to from TEL, but broadly speaking, across that electronics supply chain, I don't think this is just an active issue because some of the impacts we're seeing on customers, we were not (inaudible). You're still seeing some constraints on semis and passive electronics. So it's making sure we're running into -- the decision was basically not to take inventory down as much as we originally planned in the fourth quarter and hold on to what we have, continuing to order to make sure we're protected next year. And I would say from an unwind, it's very hard to call at the moment. I don't think this is a new normal multiple years. Could we sort of be running at higher levels for the bulk of 2023. I think that's possible, depending on how we see things improve.

If I can add, I think we should be really, really clear. Sorry, Joe. It relates to specific programs that we're launching in 2023 and relates to specific vendors who've been challenged from an overall supply chain standpoint. And to Joe's point, it's not the new normal to the extent their capabilities or their capacity increases, we have the ability to ratchet down orders during 2023. So we're doing what we can to protect our customers and, quite frankly, protect ourselves from a supply chain standpoint.

Okay. One, maybe just a question on sort of probing '23 a little. I understand you mentioned that could weigh on that 10% to 10.5% jumping point you previously mentioned. But I guess I just -- if most of the cost recoveries you talked about in this third quarter were in period in response to sort of the prior question, it would seem like that alone sort of weighed by 50 bps. So is that an offset? I mean, I guess, we don't really know like maybe the recoveries continue and that's going to sort of continue to be a drag or next year. I guess I just want to understand like what sort of assumption on recoveries was in that 10% to 10.5% starting point?

Yes, it was the $0.5 billion and sort of -- it was $0.5 billion and basically getting that $0.5 million of inflation covered with recoveries round numbers, and that's happening and then we'd roll that into piece price next year. So that is on track. That's really not connected to the FX or the 10% to 10.5% discussion. Like I said, operationally, I think we're hitting the things we need to do. I just -- again, it's a caution, the FX number significant in Q3 is going to be significant in Q4. And if you look at just where some of those key rates were in the first half of 2022 versus if we were to ever end at sort of current spot levels, there is going to be an impact there.

Okay. Maybe just one quick one. You mentioned Wind River for '23. I think it's been 10 months since you made that announcement, any update.

Yes. We're just - we continue through the regulatory process at this point in time. So that's where we stand.

Okay, thank you.

Our next question today comes from Adam Jonas of Morgan Stanley. Please go ahead.

Thanks, everybody. First question is on commoditization of ADAS. You have this pretty dominant Tier 2 supplier of ADAS system on a chip that's looking to become a Tier 1. Qualcomm announced this monster auto backlog integrating ADAS into infotainment. Apple is reportedly speccing out a 10 camera path of optical system and expanding CarPlay. So how fast is ADAS becoming commoditized in your opinion? And what does this mean for the ASUX business?

Yes. I don't - Adam, I'll take that. Listen, we don't view it as becoming commoditized. We have -- as I mentioned, we won another full platform program in China in addition to the large European program that we were awarded earlier this year. It's important that as a supplier, whether you're a Tier 1 or you alluded to the Tier 2 that you have the ability from a perception system standpoint across multiple perception systems, you have the ability to do sensor fusion, you have the ability to do integration and you have the ability to build domain controllers hardware. And with respect to the players that you're referencing, I'm not aware of any of them that have had the experience and the capability across each one of those areas. So we view ADAS as an important area. We don't view it as an area that will become commoditized as we've talked about in the past. It's obviously an important feature for our customers. It's obviously a feature that helps them sell cars. And it's a feature that they make a lot of money on. And we continue to be very well positioned in it. We continue to invest to further enhance and strengthen our position in the space.

Kevin. Just a follow-up on decelerating EV penetration or the risk of decelerating penetration. I mean we're still going to have growth from a low base of EVs, but we're seeing battery cost inflation and geopolitics at least at the margin work against affordability, the affordability argument of EVs and many legacy OEMs still struggling to get accessible, affordable models out. I'm thinking, do you agree that there's a risk that could flatten at the margin flat in that EV adoption curve. And if the pace of EV growth is slower, and we sell more ICE architectures for longer, can you remind us, is that a positive, negative or neutral to your SPS margin?

Well, yes, it's a great question. I'd say kind of 2 things on it. I think what you referenced as a potential risk to EV adoption, it is a possibility that it slows EV adoption. Our view is that it doesn't flatline EV adoption. With respect to our position from a high-voltage electrification standpoint, we're effectively the only player that can provide the full vehicle architecture solution. What we're finding is more and more customers coming to us to take more of the overall content to provide the cable management, the wire harness, the connector and now within our cable automotive, the busbar content as well. So regardless if we see slowing, we think there is a huge opportunity for us to capture more content. And then as I mentioned in my comments, in addition, we're investing in capabilities in and around power electronics as well as battery management systems. We're in discussions with customers as it relates to both products as we speak. And we'd expect customer awards to be forthcoming. So we believe it will be a continued high-growth area, and we feel as though we're well positioned, quite frankly, to expand our share of wallet, Adam, in that space. When you look at content differential to get to the last part of your question, high-voltage electrification, especially battery electric vehicles, probably what you're alluding to, the content opportunity for Aptiv is significant. Internal combustion engine typically has content vehicle architecture content of about $500 per vehicle. When you move to a fully battery electric vehicle, that's closer to $1,500. So it's a meaningful uptick in the content opportunity.

Thank\, Kevin.

Our next question comes from Chris McNally of Evercore. Please go ahead.

Thanks so much team, And Joe I appreciate the sort of the added color on maybe some of the bias to the middle or the upper end of the range with sort of production still a little bit unclear. FX, obviously, a drain as the quarter went on in terms of spot rates. But can we dive in a little bit more to your China comments and some of the volatility around schedules. I think one of the obvious questions for people is what is the baseline for that comment. I guess your Q2 outlook was minus 4%. It seems the volatility now or the question is some range of China up 5% to maybe China up 9%. So it's obviously -- is it fair to think better, a lot better than what you had previously maybe adding to the organic growth? And then some of the questions is more around the last 2 months and what that means to '23/

Yeah, Chris, I think you're right. That original full year guide was down 4%. It's obviously strengthened. I think for us, that's exactly the point I was trying to make is how much higher could it be -- and then relative to -- as it relates to that guide, just how much of that gets sucked back in by FX. I'd say right now, again, I think something north of 5%, at least what we're seeing from customers would be tough to achieve, but no, our bias to the upside within the guide is related to China production. That's fair.

Okay. Super clear. And Joe, do you think right now the base for how customers are ordering is assuming that the VAT status, the tax payments will not be renewed sort of typical China, we won't find out until January 3, but the history here is like '16 and '17 is that you typically get 2 years. So do you have a view on whether we'll have the stimulus renewed into next year? And could we see a pickup in the China order rates once that happens in Q1.

I think I would say what we're seeing, there's a lot of noise in that market. I think it's hard to pull out incentives and sort of the puts and takes, pull heads at the moment. They're obviously, I think, coming out of that Party Congress. There's some discussions there around sort of market and how friendly the market gets over the coming couple of quarters. There is some heightened concern around COVID lockdown so that we're hearing, certainly not to the extent we saw in Q2, but renewed concern about that. So I think it's hard to pull out sort of 1 particular facet of that at the moment, Chris, Kevin, I don't know if you have...

No, I think you've covered it...

That's perfect. And if I could just sneak in one for the 2023. Is it also -- I'm not sure if you mentioned this, should we use the 8% to 10% as sort of a base of the outgrowth, whatever production ends up being?

Yes, yes, that's fair.

We will now take a question from Emmanuel Rosner of Deutsche Bank. Please go ahead.

Thank you very much. I guess in some of the words of caution that you were expressing earlier for 2023, one piece is there is clearly the FX headwinds, which is understandable. The other piece seems to be supply chain tightness, which I think you said could make it more challenging to recapture operating leverage. Are you thinking that this is the sort of volatility that would result into lower incremental margins than usual?

Yes. What I was referring to Emmanuel there, and we've talked about it really for different regions for the past couple of years, right? I mean one of the big benefits to our customers, ourselves, and I'm sure it's just not us from a supply perspective, it's the smoothness of production. Even if you're at a lower number, the ability to sort of set up and run without these stop starts from supply chain disruptions, just make for greater efficiency. And I think we'll be better year-over-year, obviously, just cautioning that to the extent we continue to see some of these disruptions, particularly in the first half of the year, again, as an industry, I mean, the disruptions we saw in North America, in Q3 were not related to our supply chain, but our customers were impacted. So it's just speaking to the abruptness of shutdowns and restarts. It does hurt from an operating leverage perspective.

Okay. And then also curious, how are you thinking about cost trajectory exiting the year and into next year? I found it interesting that you're back to more normalized price down, obviously, you would sort of like need a more stable cost base to sort of like be able to continue like this. So how should we think about it in terms of additional going forward, cost trajectory and any additional actions that would be needed?

Is your question around price downs Emmanuel or input costs?

The question is mostly around input cost, but I was wondering if going back to normal price downs, like suggests that you're saying costs are stabilizing or not.

Yes. So maybe I'll take a shot and going back to Joe's last answer to your question. I think what you're hearing from us as a management team is although Q3 obviously improved results, our general view supply chain is improving. All the challenges aren't behind us. And we continue to see inflation, we continue to see volatility in schedules, which translates into volatility in production. That translates into a higher cost load as it relates to manning in our facilities as it relates in transporting goods, so inbound and outbound freight that, to a certain extent, is built into our current run rate so that we have an element of flexibility to continue to support our customers. Now our customers are -- we've been aggressively going to our customers and pushing through that price -- those cost increases to our customers. Our customers have been supportive of that. We would expect that there's an element of that, that continues into 2023. Certainly in the -- at least in the first half of the year. And just given the volatility in the overall macro headwinds, at this point in time, we're planning that some of that doesn't go away. We're pushing through as much of it as we can, but it's difficult to be precise as it relates to your predictions on what you think margin expansion and other items are going to be in the early part of 2023.

Okay. Thank you for the color.

We will now take our question from David Kelley of Jefferies. Please go ahead.

Good morning. And thanks for taking my questions. Maybe I want to follow up on Intercable. I was hoping you could talk a bit more about their product portfolio and your opportunity to leverage their expertise within your platform? And then how should we think about their potential contribution to that $1,500 BEV content opportunity you referenced earlier?

Yes. Intercable strong position, obviously, in high-voltage electrification. I mentioned in my comments, they're on their seventh generation busbar technology. So clearly, the industry leader from an overall technology standpoint. When you look at -- they have other products as well, interconnect, high-voltage interconnect solutions as well as electrical centers. It's a nice fit with what we do. A very strong position as it relates to busbars, a stronger position than what Aptiv currently has. So when you look at that product portfolio, certainly additive to the overall solution that we can bring to market. I think when you look at the overall busbar market, it's a little over $1 billion today. I think by 2026, it's expected to grow at about a 30% compounded rate. So 2026, 2027, it gets north of $4 billion. So significant revenue opportunity. Content per vehicle, depending on the nature of the busbar solution and the nature of the vehicle, it's anywhere between low end, call it, $100 to high end, close to $200 of vehicle content. So it's certainly meaningful. They have a very strong position in Europe with European OEMs, a very strong manufacturing position in Europe, a manufacturing footprint in China, we think there's an opportunity given our footprint in Asia, given our footprint in North America to expand their manufacturing footprint and introduce them to additional customers. So we view it as really a great opportunity to generate significant synergies. And Joe, did I miss anything?

No, I think that covers it.

Okay. Got it. Really helpful color. And just more broadly, realizing Wind River is still pending, but can you talk about your approach to acquisitions in 2023 given what feels like a shifting macro here.

Yes, David, it's Joe. I'll start that one. Listen, I think we continue to obviously wanted to grow the portfolio, both organically and inorganically. I think from an M&A perspective, obviously, you've got to be mindful of valuations as the macros are challenging for us to forecast. Obviously, as challenging to sort of potentially value other businesses. And on the private side, it usually takes a few quarters for valuations to catch up to public market. So we'll proceed cautiously, but we're still very much interested in the types of transactions like Intercable that strengthened bolt-on transactions, larger bolt-on transactions that strengthen the SPS portfolio around key growth areas. And then mindful of software opportunities that can help accelerate sort of the organic plan around SBA and the software-defined vehicle. As we've always said, though, we're very careful to make sure we're building our strategy and building our plan to hit from an organic perspective. And that M&A, the added capabilities or added product lines that come with M&A would be in addition to that. But obviously in market, we need to be a little bit more careful around valuations, but continue to execute on that strategy.

Got it. Thank you.

We will now move to John Murphy of Bank of America. Please go ahead.

Good morning, guys. Just two quick ones here. First, just on the volatility and schedules. I understand that it's depressing obviously the potential for incremental margins. But this is something that's been going on for almost 2 years now. And it just seems like we keep hearing the echo of this, and it seems like it's getting better, but then it's not, and that's certainly not your purview. It's outside of what you can control. What are the signs are -- what are the signs that you're looking for that we get some stability in schedules because, I mean, it sounds like it's just kind of popping up week-to-week and month-to-month, and it's very difficult to understand when it actually will start smoothing out. A - Kevin Clark Yes. John, I'll start. It's Kevin. Listen, it does start week-to-week and day-to-day to be honest with you. I'd say what we're seeing now are the swings are smaller. So with respect to peak to valley, you're seeing a much tighter curve. So that aspect is better. But there is still an element of when you think about manning from a manufacturing standpoint, when you think about inbound, outbound freight, those sorts of expenses, you're continuing to incur it, certainly at a higher level than sort of normal run rate. I'd say we feel like -- we're very close connected with our strategic semiconductor suppliers. We're very closely connected with our customers. Our supply chain and manufacturing teams are integrating, are talking to them and integrating with them on a day-to-day basis. So we have our arms around it and are able to react faster when we see swings, but they're still occurring. And Q3 supply chain was better than Q2. We expect Q4 to improve over Q3, but again, we're still seeing the supply chain tightness. And if there's any sort of event that occurs during a given day, week or month, you seem to have a boomerang effect in terms of the overall comment on ultimately vehicle production. And it's just something we're trying to stay close to. It's something that we're trying to manage through. And we just want to make sure that you guys understand it's still going on. It's not completely behind us. And we wish it were, but it's not. And we're doing our best to manage through it.

Okay. And then just a second question, as we look at Slide 7. Obviously, the bookings are pretty remarkable this year, about $13.5 billion and what you're hiding in your in active safety, high-voltage and SVA, there's almost $12 billion that's outside of those 3 technologies. I'm just curious if you can give us some color on those. And as we think about those rolling on, maybe they roll on faster because they're sort of less leading-edge technology, but they might come on faster at higher margins and higher returns. So any color around that almost $12 billion is outside of those three.

Yes. Well, yes, it ranges for areas like user experience, like our traditional connector solutions, our traditional cable management solutions. They go on low-voltage vehicles or traditional vehicle architecture and voltage solutions. I mentioned user experience, so infotainment systems in cabin sensing. Systems, body and security systems. So there's a whole -- there's a number of different products, a number of different product lines that fill the balance of those bookings.

Is it fair to say, Kevin, though that those come on at higher margins and returns in the near term potentially. So those are important to watch for?

Yes. I think it depends on what the product line is. I'd say most are basically in line with what our traditional margin structure is across all of our product lines. Some of those that are higher volume, it may be a little bit higher.

Okay. Thank you very much, guys.

Our final question today comes from Mark Delaney of Goldman Sachs. Please go ahead.

Yes, good morning. Thank you very much for taking my questions. First on the implied 4Q revenue guidance, I think it's down sequentially relative to 3Q, even if we assume the company is coming in at the high end of the full year revenue outlook. Could you help us bridge what's going on with 4Q revenue compared to the third quarter? And then how much is maybe FX as opposed to other factors?

Yes. Listen, I think sequentially, it is down a little bit launch activity in Q3. The answer to Chris' question, Mark, obviously, we are potentially looking at additional volumes in China and balancing the FX impact to that. Year-over-year, and there's just some ebb and flows here as you think about the year-over-year as well, right? Year-over-year, we're still up 9%. If you recall, Q4 last year had some -- it was rebounding a bit from Q3 of last year, which was very depressed. So you've got a little bit of the ins and outs, but it really comes back to how much upside is from China and what the offset is with the FX. I think if you're looking at that sort of revenue top line number.

Okay. And then specifically on Europe. Last quarter, the company spoke of some weakness with some of the OEMs in Europe relative to reductions to their scheduled forecast, could you elaborate a little bit more on what you've seen transpire in Europe relative to the last update you gave 90 days ago, and as the magnitude or breadth of OEM schedule reductions in Europe changed at all?

Yes. No, good question. No, listen, I think we've -- Europe, for the most part, has sort of helped the schedules. It's what we've seen. I realized we were lower than sort of a lot of other folks out there. I think some of those other forecasts have come in. Not necessarily right to where we were, but have come in a lot sort of closer to us than maybe where they started. So I'd say European customer schedules, again, we're tracking. I think there's remains concerned around economic disruptions in Europe. And obviously, there's potential impact from energy shortages, although I would say the customers are a little bit more confident that they won't be impacted in Q4 than they were when we spoke in August. But no, as I mentioned in my comments in 2023, I think Europe remains a challenging environment for the foreseeable future, just given everything going on there.

Thank you.

Thanks. That concludes today's question-and-answer session. I would now like to turn the call back to Kevin Clark for any additional or closing remarks.

Great. Thank you, operator. Thanks, everyone, for joining us today. We really appreciate you taking the time. Take care.

That will conclude today's call. Thank you for your participation. You may now disconnect.