Good day, and welcome to the Aptiv Q1 2025 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Betsy Frank, Vice President, Investor Relations. Please go ahead.

Thank you, Jess. Good morning and thank you for joining Aptiv’s First Quarter 2025 Earnings Conference Call. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at aptiv.com. Today’s review of our financials exclude amortization, restructuring and other special items and we’ll address the continuing operations of Aptiv. The reconciliations between GAAP and non-GAAP measures for our first quarter results as well as our financial outlook are included at the back of the slide presentation and the earnings press release. During today’s call, we will be providing certain forward-looking information that reflects Aptiv’s current view of future financial performance, and may be materially different for reasons that we cite in our Form 10-K and other SEC filings. Joining us today will be Kevin Clark, Aptiv’s Chair and CEO; and Varun Laroyia, EVP and CFO. 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.

Thank you, Betsy, and thanks everyone for joining us this morning. Let’s begin on Slide 3. Aptiv started the year strong, with first quarter results exceeding our guidance range due to higher-than-expected vehicle production volumes, principally in China, and solid growth in non-automotive end markets as well as strong operating performance, demonstrating our ability to adapt to a dynamic market environment while continuing to execute on our strategy, including the separation of our EDS business, which remains on track. Touching on a few of the first quarter highlights. Revenue totaled $4.8 billion, down 1% as a result of lower vehicle production in North America and Europe and negative customer mix. Operating income reached a first quarter record of $572 million, an increase of over 5%, reflecting strong operating execution and the benefit of ongoing cost reduction initiatives, which, along with share count reductions, drove earnings per share to a first quarter record of $1.69. And lastly, operating cash flow totaled $273 million, positioning us to accelerate our original deleveraging plan. We completed our $3 billion accelerated share repurchase program on April 1st, which reduced our share count by 18%, bringing the percentage of shares retired over the last 12 months to 20%. In summary, our team continues to do an excellent job executing on what we can control, while also addressing the evolving needs of our customers and increasing the robustness of our business model. Turning to Slide 4. We’re confident that the long-term growth drivers of our business remain fully intact. The future is electrified, software-defined and connected, and Aptiv is well positioned to enable this transition across multiple end markets. However, we’re currently in a period of uncertainty due to rapid changes in global trade policies and their impact on demand in the markets we serve, particularly in…

Thanks, Kevin, and good morning, everyone. Starting with the first quarter on Slide 11. Aptiv delivered strong financial results in the quarter, reflecting robust execution across all three segments, with continued progress on cost savings and margin improvement actions and cash flow generation in a backdrop of a dynamic market environment. Revenues were $4.8 billion, down 1% versus the prior year. And growth was impacted by lower vehicle production in North America and Europe as well as customer mix in China, in particular, for our EDS business. Adjusted EBITDA and operating income was $758 million and $572 million, respectively. Operating income margin expanded 80 basis points versus prior year, primarily driven by strong execution of our operating performance initiatives, including the continued rotation of our engineering and manufacturing footprint to best cost locations. These actions more than offset the impact of FX and commodities, which was a 50 basis point headwind on margin. Earnings per share was $1.69, an increase of 46% from the prior year, reflecting the flow-through of higher operating income as well as the benefit of share repurchases, net of higher interest expense and the restructuring of the Motional joint venture. Operating cash flow was strong, totaling $273 million, and capital expenditures were $197 million in the quarter. Looking at first quarter revenues on Slide 12. Revenue of $4.8 billion was driven by lower vehicle production levels, partially offset by growth from new program launches and strong growth in adjacent markets, which were up mid single-digits. Net price and commodities were a positive to the top line, while foreign exchange was a headwind of $64 million, primarily related to the euro, China renminbi and the Korean won. Moving to the right panel of the slide. Despite a weaker production environment in North America, revenues were only down…

Thanks, Varun. I’ll wrap up on Slide 18 before opening the line for questions. We exceeded expectations in the first quarter, driving strong operating execution despite a dynamic market, with record first quarter earnings and cash flow, and we’re well positioned to continue our strong operating performance through the balance of the year. As Varun and I have reviewed, we’re confident in our second quarter guidance as well as our initial full year outlook, which excluded the impact of tariffs, and we’ll update our full year outlook once we have greater visibility to customer demand for the second half of the year. In the meantime, we hope that the added visibility we’ve provided to our tariff exposure and the actions we’re taking to mitigate the impact as well as the framework we provided to consider different vehicle production scenarios and the corresponding impact on earnings and cash flows has been helpful. With our resilient business model and the proactive cost structure actions and supply chain measures we’re taking to position the company for continued success, we’re confident in our ability to deliver operational efficiencies while executing our long-term strategy. With our solid business foundation, we believe that Aptiv’s approach to innovation will drive continued penetration of our electrified, software-defined and connected solutions across industries, further accelerated by the separation of EDS, which will create two independent public companies, each with its own unique product portfolio and financial profile, with greater flexibility to pursue their own market opportunities and capital allocation strategies and optimally positioned to address customers’ needs, while accelerating value creation for shareholders. Operator, let’s now open the line for questions.

Thank you. [Operator Instructions] And our first question comes from Joe Spak with UBS.

Thanks. Good morning everyone. Kevin, just want to sort of go over the outlook and the messaging and make sure I understand. So is it fair to assume that for the second quarter, everything is based on what you’re seeing now, including any tariff impact and mitigation? And in the second half, taking a little bit of a wait-and-see approach, but it’s really the volume part you don’t have visibility on, not the tariff impact? And if that’s the case, I guess, what markers are you really looking for to give you some more confidence to provide an update for that back half? Is it what your customers do with the pricing? Is it some economic markers? Just want to understand how you’re thinking about it.

No. Joe, I think you did a pretty good job kind of encapsulating our view on things. We have – the business is operating extremely well. We’re executing well, and that’s reflected in our first quarter results. And we have visibility obviously to April production, May production schedule and through June. And we feel fairly confident in those. We clearly have our arms around tariffs and tariff impact. As we tried to highlight in our comments, for us, they’re very manageable given – the guidance that’s been given from the administration with respect to their plan as it relates to USMCA and where we actually have tariff exposure. So there are things that we’re doing working with our customers in terms of obviously minimizing those tariffs. And to the extent we’re unable to – we’ll continue to pass those costs on to our customers and they’ll pass those costs on as price increases to their end customers. As it relates to the back half of the year, we really want to give it some time to see how longer-term schedules play out. So the question for us is really vehicle production, which hinges on consumer demand, what the pricing strategies will be for our OEM customers and again, how that translates to schedules and what that means for us from a vehicle production standpoint. As it relates to direct tariff impact, the reality is absolute exposure is actually pretty small. It’s something we can manage through and to the extent we can’t. We’ve been working with our customers to push that through to them.

That’s helpful. Maybe just one more big picture question on sort of some of the more recent developments. I think in your prepared remarks you mentioned the possibility to look to move high value production back to the U.S. I understand this is probably like very early stage. But in the context of thinking about the different parts of your business, I don’t think that means the harness business. Maybe you can just provide some indication of sort of what type of manufacturing you think could move back. And if there’s any rule of thumb to sort of think about some of the capital cost to relocate a facility.

Sure. Yes, it is early days. It definitely does not include the wire harness business. That’s not a business that would fit or make sense to do production in the United States. So maybe certain parts of our portfolio within AS&UX or ECG business where we can highly automate the manufacturing process and working with our OEM customers, we can increase U.S. manufacturing, do it in a cost effective way. We do have footprint today in the U.S. I would presume early days. We would leverage that existing manufacturing footprint for at least early steps or the initial steps in terms of increasing manufacturing. But we haven’t finalized or gotten to a point where I could provide you with capital investment or overall impact or percentage of our manufacturing that we would move here.

Thank you very much.

We will go next to Dan Levy with Barclays.

Hi. Good morning. Thanks for taking the question. Kevin, I’m wondering if you could first just talk to perhaps real time, what are you seeing on advanced content bidding launch? Has any of that been impacted or delayed given some of the macro uncertainty?

Yes. I would say the activity is as robust as it has been for a long time. I would say OEM settling on an ultimate path forward and ultimately translating that to customer award, Dan that has dragged out. We’ve seen that drag out for the last couple quarters. If you recall, it’s actually not too dissimilar to last year when earlier in the year booking awards were a bit lower and then we had stronger awards in the back half of the year. I think we’re in a situation where it will play out similarly this year. But the amount of activity, engagements and dialogue with our OEM customers, I would say, is at prior levels or quite frankly even higher.

Okay. Great. Thank you. And then the second question is perhaps you can just update us on the EDS spin. With all of the macro uncertainty and given the heavy footprint in Mexico, does any of what’s happening change or make you rethink parts of the plan? Or is that, hey, you can still – you’re going to maintain your footprint there, there’s still a presence you can pass through all the tariffs. It doesn’t change any of this. So how does this change EDS?

Yes. As it relates to the – if the question is around our plan to separate the EDS business, it doesn’t change it at all. Our real focus with EDS is, how do we continue to grow the business? How do we accelerate the standardization of the wire harness so that we can accelerate manufacturing automation and assembly automation in our customers’ plants? How do we minimize overall costs be labor or material? And then how do we continue to not only grow in automotive, but grow outside of automotive? And we think with the separation, it positions that business to more efficiently, more effectively, more rapidly, quite frankly, be able to do that. So it’s a great business. It’s the industry lead across all the regions that it operates in, and there’s obviously tremendous opportunity out there for that business to grow.

Great. Thank you.

We will move next to Shreyas Patil with Wolfe Research.

Hey, thanks a lot of taking my question. Maybe just to start with, I’m curious how to interpret the volume decline that would be implied in the guide in the back half? Because I think, Varun, you’re mentioning the low end of the guide would imply a 7% year-over-year decline if I’m just looking at IHS, which had incorporated the latest cuts due to tariffs. I believe they’re only assuming production will be down roughly 3%. So is the message that it’s just – there’s just not enough visibility to have confidence on a number? Or do you feel like third-party forecast still don’t accurately reflect the potential risks here to volume even after incorporating tariffs?

Yes. It’s – I’ll start, and then Varun should add to it. Listen, we use multiple sources, but we principally rely on customer schedules and our experience with customers as it relates to schedules and actual production. And as you guys know, IHS is a useful baseline. It’s a useful baseline, especially for folks that don’t have direct access to vehicle production schedules, but it’s not what we build our plans and forecasts off of. And the full year outlook, really, as we try to make clear, that is not guide. What we try to provide is a baseline of our initial assumption back in February. And then if you were to look at that range, from the midpoint to the bottom end of the range, what our assumption was for vehicle production. And then I think what Varun was trying to provide you with at that lower level of production, if you took our outlook for Q1 and Q2, what would vehicle production need to be to be at that level. And that’s the framework from which you guys can run whatever sort of vehicle production scenarios you would like to run to come up with your view on how does the business model perform in various volume environments. Varun, do you want to?

Yes. Just to kind of reiterate a couple of points that Kevin mentioned, Shreyas. So Q2 – as of Q1, actuals were active weighted, market was down 2%. What we’re guiding for Q2 is down 4%. When you take those two pieces into account to get to the bottom end of our previously provided guidance range, that gets you to the down 7% in the second half. That’s the framework to just build into your model.

Okay. And just – and that’s really the crux of the – that’s really the focus, I guess, is what I’m saying, right? In other words, it’s really just a volume question in the back half, and there is more uncertainty around that. Okay.

Just to make it clear. So the direct impact of tariffs, we have our arms around that, we have high level of confidence in that. We will not be impacted. What we don’t have control of is the impact of tariffs ultimately on vehicle production. And obviously as we get further out, we feel less comfortable and have less visibility there. The numbers that we walk to – walk through both the midpoint of our initial guidance as well as the bottom end of the range. We’re not trying to steer you anywhere. It’s not guidance. We’re trying to provide you with data points that you can use to run scenarios based on what your views are.

Okay. That’s really helpful. Maybe just a really quick one. Just what you’re seeing on the ground in China at the moment. You highlighted a number of new awards with Chinese OEMs, including Xiaomi. But when I looked at the quarter, it looked like production was up about 10% and revenues were up 2% for you. So just curious how you’re seeing that market?

Market remains strong. As Varun was talking about, we were significantly impacted by a global EV manufacturer that – from a production standpoint was down significantly on a year-over-year basis. So that impacted our growth in that particular region. But it’s still – we’re still seeing strong growth, we’re still seeing rapid adoption of advanced technologies. We’re still seeing a push towards electrification. So the trends we’ve been seeing over the last couple of years certainly remain intact.

Okay, great. Thanks.

We will go next to Mark Delaney with Goldman Sachs.

Yes, good morning. Thanks for taking my questions. First, on the auto production environment. I’m hoping to better understand how you arrived at the assumption for 4% lower production in 2Q. To what extent have customer schedules for April and May shown softening due to tariffs? And to what extent are you including your expectation that tariffs will lead to lower schedules this coming quarter beyond what customers are currently indicating?

Yes. So we – I’ll start. So again, we base our forecast on what we see from our customers as it relates to vehicle production schedules. They’re more reliant the closer they are to production date as you all know. OEM by OEM, platform by platform on a regular basis we go through and based on past experience and our outlook for the market, we adjust those schedules as it relates to our financial forecasts and what we communicate externally. So that’s what’s reflected in our Q2 guidance. We haven’t seen a significant swing in schedules at this point in time. It would be difficult for us to identify what’s directly tied to tariffs and what is not, as you can imagine. But we would say that schedules are largely in line with what we had anticipated back in February with slight movement between OEMs and between platforms.

That’s helpful. Thanks, Kevin. My other question was on EBIT margins. The 1Q EBIT margin was quite strong and better than I had expected. I think above your guidance as well. You talked about some cost actions as one of the drivers. But can you elaborate a little bit more on the different pieces and how impactful they were to the 1Q margin? Then if I look at the 2Q implied margin, it’s down obviously off of a very good 1Q level. But maybe just help us understand the walk on margins from 1Q to 2Q, please?

Yes, Mark, let me take that. So, yes, Q1, the teams just operationally performed incredibly well, whether it was material cost, strategic sourcing, engineering, each of those elements came through strongly. And so on the flip side of it more than offset any of the FX and commodity side of things. And then clearly, that is [ph] the guide that we just provided. We saw volume upside and the flow through on volume was strong also. So those are kind of the key underpinnings of the better Q1 performance coming through all the way from actual adjusted OI, all the way up to the margin level. And then with regards to Q2, again, it’s essentially in line with what we’ve been doing. So a lot of those activities obviously continue. But again, with regards to certain elements associated with engineering, for example, we have – we’ve been kind of doing some work on that front. And then FX is the other piece that we see will be a headwind. Again, this goes back to some of the hedges we have, specifically on the Mexican peso, which were a good flow for us a year ago. On a year-over-year basis, as we think about that, that will be impacting. So we really won’t get into the upside till the time we don’t get past the 2075 level. And then, obviously, with the weakening of the U.S. dollar against major currencies such as the euro and the Chinese renminbi, that’s the other element which impacts Q2. But otherwise, operationally, the teams are doing just an outstanding job in delivering margin all the way to the bottom line.

If I can just add to it, just without going through numbers, just to remind everybody. In 2024, we reduced our SG&A cost by over 10%. And in 2025, entering the year, we mapped out a plan. We’re executing on it to further reduce our SG&A expense by another 5%. And in light of just concern about the macro environment, have been more aggressive in terms of looking for opportunities to further reduce costs. So behind all of this is a concerted effort across the business to really focus on how do we drive overhead and SG&A costs out. And the team with under Varun’s leadership has done a great job across our functions and across our business units doing that.

Thank you.

We’ll go next to Colin Langan with Wells Fargo.

Oh, great. Thanks for taking my questions. Maybe I just wanted to make sure I understand the tariff commentary. So you have $5 billion of goods being imported. You said 99% is USMCA compliant, so that would imply almost no tariff cost if I’m right? And any thoughts on the new rules, it sounded like, based on the wording of the White House release, that it’s switching to USMCAs might be permanent. So the only risk for you would be really if it goes to a U.S. sourcing rule. Is that the right way to think about your exposure there?

Yes. I think that’s a fair way to think about. Yes, we would say as it relates to at least current guidance and where we believe things are headed, exposure on the flows between Mexico and the U.S., at least at this point in time is de minimis, right? So it’s over 99% is USMCA compliant. And when you look at trade flows outside of Mexico as a partner, it’s a relatively small – it’s a relatively small number and it’s – most of that relates to directed buy from our OEM customers, and those are areas where we’re working with them, quite frankly to relocate manufacturing or move to other supply base of suppliers.

Got it. And if I look at the sales guidance, the way it is, it looks like you’re down maybe 1% in the first half at the midpoint of Q2. And then I believe that implies you’re up sort of 4% year-over-year in the second half. You’re talking about markets actually getting worse. So does that imply like a pretty major step up in growth over market in the second half? And what kind of visibility do you have there? How’s that acceleration?

Well, again, we’re not providing guidance for the second half. So I think that’s the clear point. We tried to again provide you with a framework of scenarios to walk through for you folks to consider. At this point in time, Colin, we’re not – we don’t have the visibility to forecast revenue for Q3 and Q4. And as soon as we feel like we have the visibility, we’ll update our outlook for the back half and provide full year guidance.

Okay. All right. Thanks for taking my question.

We will take our final question from Edison Yu with Deutsche Bank.

Hi, thanks so much. This is [indiscernible] for Edison. I was wondering if you can provide an update to that 400-performance number that you had provided back in February. It seems like you are boosting some performance actions. How should we think about maybe some of the incremental performance benefits for this year is something within your control?

Yes, let me take that one, Kevin. Listen, with regards to our performance number, clearly in the first quarter, the team did an outstanding job in going a long way in that number that you just mentioned. Q2 also we see moving in the right direction. Again, it’s the material, the manufacturing side of things. Offsetting labor economics, we’ve talked about labor economics being a headwind in a certain inflation related to labor in certain markets such as Mexico. While it has come down some in the previous years, it’s been running close to 20%. Even in this year we see it to be mid-teens. So again, the material manufacturing engineering in Q1 also performed better. And then the final piece, which I know Kevin gave me credit, but it takes a village to deliver these pieces is just a relentless focus on our cost structure. And so SG&A also is kind of coming through. But overall, the first half with regards to Q1 and what we’re forecasting for Q2, the performance numbers are intact. We made tremendous traction. And again, as of now for the second half of the year, a lot of it really depends in terms of what consumer sentiment will be, what production numbers will be. But needless to say, this is the management team that has time and time again risen to the challenge to deliver whatever the market environment may be. And I have no doubt that we do the same thing again for the second half also as soon as we get more clarity.

Yes, I would just add the biggest components of that are really manufacturing, engineering and SG&A. Those are the big components as it relates to performance.

Perfect. Thank you so much. My second question is on China mix. Can you remind us of the strategy there? Again, in Q1 we see that market grew by 10% versus 2% for Aptiv and just for that market. How should we think about growth for the year? And then you mentioned Q1 being mainly impacted by the EV customer. I believe for the full year you have previously mentioned that you’re selling [ph] up single digits for that EV customer. So I’m wondering if you can help us frame the impact for the year for China specifically.

Well, we’re not going to give full year guidance. I think what we previously said is in quarter-to-quarter just based on, some customer mix matters and their decisions on production. It can swing, which is it did fit this quarter. And we mentioned that single OEM that impacted our overall mix. When you look at our bookings rate over the last couple years, we’ve been moving at a level across each of the three segments. That is – should bring us more in line with kind of the forecasted mix of China local OEMs relative to the non-local, including multinationals and that large EV manufacturer that I was referring to. So by the end of the year you should expect that our revenues are – mix are roughly 70% with the China locals and 30% with the balance of the customers operating in or OEMs operating in that market.

Got it. Thank you.

Thanks.

I would now like to turn the conference back to Kevin Clark for any additional or closing remarks.

Great. Thank you everybody for joining us today. We really appreciate your time. Take care.

Thank you. This does conclude the Aptiv Q1 2025 earnings call. We thank you for your participation. You may now disconnect and have a great day.