The paragraph is from the Aptiv Q1 2025 Earnings Call. It begins with the introduction of the call by Betsy Frank, Vice President of Investor Relations, who mentions that the financial review excludes certain items and notes the availability of related materials on their website. She highlights that the call includes forward-looking statements, with warnings about potential differences mentioned in their SEC filings. Kevin Clark, Aptiv's Chair and CEO, then reports that first-quarter results exceeded expectations due to strong vehicle production in China, growth in non-automotive markets, and strong operational performance. He also notes that the company's strategic initiatives, including the planned separation of the EDS business, are progressing as planned.

In the first quarter, the company's revenue decreased by 1% due to reduced vehicle production in North America and Europe, alongside a negative customer mix. However, operating income reached a record $572 million, driven by effective cost reductions and share buybacks, resulting in record earnings per share of $1.69. The company generated $273 million in operating cash flow, allowing it to accelerate its deleveraging plan. An accelerated share repurchase program reduced the share count by 18%. Despite uncertainties in global trade policies impacting demand, particularly in the automotive market, the company remains confident in its long-term growth, emphasizing a future focused on electrification and connectivity. While first-quarter results were strong, and the second quarter is progressing well, potential market changes could affect the year's second half. The company is monitoring demand changes and will update its outlook as conditions become clearer.

The company is proactively adapting to changes in trade policies, customer demand, and electric vehicle adoption by utilizing a resilient business model that includes a localized supply chain and manufacturing strategy. They are minimizing their cross-regional trade exposure, particularly between the U.S. and Mexico, and ensuring compliance with trade agreements. To mitigate impacts from recent tariff announcements, the company is optimizing its supply chain, considering relocating production to the U.S., and strategically managing inventory. Any unmitigated tariff costs will be passed on to customers. The company remains focused on maintaining strong operational performance and delivering value to shareholders.

In the first quarter, the company reported nearly $5 billion in new business bookings. Advanced Safety and User Experience bookings totaled $1.3 billion, buoyed by $800 million in active safety bookings. The Engineered Components Group reached $2.1 billion, while Electrical Distribution Systems accounted for $1.5 billion, including $1 billion for electrified vehicle platforms. In China, the company saw over $1.4 billion in bookings, with $1.2 billion from local Chinese OEMs. Despite trade policy and regulation uncertainties causing delays, the company is confident in achieving over $31 billion in new business awards this year. For the Advanced Safety and User Experience segment, revenues remained flat due to growth from North American and non-automotive customers, with active safety revenue up 9% and software revenue growing double digits. The company received the Automotive News PACE Pilot Innovation Award for its radar-based AI/ML solutions, which significantly enhance vehicle safety performance.

The paragraph highlights Wind River's achievements, including being ranked first in edge operating systems by VDC Research and demonstrating a strong presence at the Shanghai Auto Show, which attracted interest from Chinese OEMs and expanded business opportunities. It mentions multiple contract awards from local Chinese OEMs for active safety and smart vehicle computing solutions, an in-cabin sensing solution for a global OEM, and software platform awards in the aerospace, defense, and industrial markets, validating Aptiv's technologies. Additionally, it notes a 1% revenue increase for Aptiv's Engineered Components Group in the first quarter, driven by growth among Chinese OEMs and innovation in products like the newly launched mini-coax cable connectors.

The paragraph discusses ECG's recent business achievements, highlighting approximately $2.1 billion in new bookings across various sectors. Key awards include a high-speed cable assembly for Ethernet in connected vehicles and an Electrical Center award for a 48-volt vehicle architecture transition. It notes a 3% decline in revenues due to reduced light vehicle production and mentions the completion of two manufacturing site closures in China. ECG leverages its engineering tool, iHarness, for vehicle design and manufacturing programs. The company secured over $1 billion in new business in Asia-Pacific, including deals with Xiaomi and JAC Motors, and its first grid energy storage award in North America. Additionally, ECG is progressing towards making EDS a standalone company by next year's first quarter and announced a strategic partnership with ServiceNow to advance their Edge-to-Cloud enterprise offerings.

The paragraph discusses a strategic partnership that integrates ServiceNow's AI platform and CRM workflows with Wind River's cloud solutions, enhancing automation and operational resilience across industries like telecom, automotive, enterprise, and industrial sectors. Additionally, an expanded partnership with Capgemini aims to deliver advanced private cloud solutions, increasing global reach and accelerating technology adoption. The discussion then shifts to financial results presented by Varun Laroyia, highlighting Aptiv's strong performance, cost savings, and a slight dip in revenue due to lower vehicle production in certain regions. Adjusted EBITDA and operating income figures are also provided.

The paragraph outlines the company's financial performance, highlighting an 80 basis point expansion in operating income margin due to operational initiatives, countering FX and commodity challenges. Earnings per share increased by 46% to $1.69, aided by higher operating income and share repurchases despite higher interest expenses. The company generated strong operating cash flow of $273 million against $197 million in capital expenditures. Revenues reached $4.8 billion, with growth in new programs and adjacent markets, despite lower vehicle production and a $64 million FX headwind. North American revenues were slightly down due to weak production but buoyed by Active Safety growth, while European revenues fell 4% and China saw a 2% revenue increase through local OEM growth. The ASUX segment remained flat; Active Safety rose by 9%, while User Experience dropped 14% due to the expected roll-off of legacy programs.

The paragraph discusses financial performance and trends for different segments of a company. The company's software and compute revenue grew by 12%, driven by Wind River solutions' success in Aerospace, Defense, and Industrial markets. Adjusted operating income for this segment was $155 million, with a margin improvement due to performance initiatives and cost management. The ECG segment saw first-quarter revenue of $1.6 billion, up 1%, driven by a 24% increase in China, despite production declines in North America and Europe. Its operating income improved by 140 basis points due to supply chain initiatives. The EDS segment had $2 billion in revenue, a 3% decrease due to lower production schedules in North America and Europe, despite a 14% growth in commercial vehicles. Chinese revenues declined 3%, with growth from local OEMs being offset by cuts from a global EV manufacturer.

The company reported a segment adjusted operating income of $143 million, representing a 7.1% margin and a 60 basis point improvement from the previous year, attributed to manufacturing efficiency efforts and productivity gains. Foreign exchange, particularly the Mexican peso, had a slight positive impact. Looking ahead, the company expects second-quarter revenue between $4.92 billion and $5.12 billion, with an operating income of $575 million and an adjusted EPS of $1.80 at the midpoint. Despite uncertainties surrounding global tariff policies, the company is confident about their full-year guidance, expecting production declines in the second half of the year based on first-quarter results and second-quarter outlook. They plan to update their full-year guidance as more information becomes available.

The company is confident in its ability to deliver strong performance due to its robust business model and focus on operational efficiency. They reported a record first quarter operating cash flow of $273 million and an ending cash balance of $1.1 billion, despite paying down $700 million in debt, ahead of their original plan. With liquidity over $3.4 billion and net leverage at 2.2 times, they are well-positioned for continued strategic initiatives and growth opportunities. They exceeded expectations in the first quarter and are confident in their guidance for the second quarter and initial full-year outlook, while planning to update it as needed based on customer demand.

The paragraph discusses Aptiv's efforts to mitigate tariff impacts and optimize vehicle production scenarios to support earnings and cash flow. It highlights Aptiv's resilient business model and proactive cost measures, positioning the company for success through operational efficiencies and a focus on innovation. This includes driving growth in electrified, software-defined, and connected solutions. The separation of EDS will result in two independent public companies, each able to pursue market opportunities more flexibly and create shareholder value. Joe Spak from UBS questions about Aptiv's second-quarter outlook, particularly regarding tariff impact mitigation. He seeks clarity on what factors Aptiv is monitoring to provide an update for the latter half of the year, such as customer pricing or economic indicators.

In the paragraph, Kevin Clark states that their business is performing well and they have a good grasp on production schedules and tariffs. They are confident in managing tariff impacts, as they can pass on costs to customers if needed. They are monitoring consumer demand and pricing strategies to assess vehicle production for the latter half of the year. The absolute tariff exposure is small and manageable. Joe Spak then touches on the potential strategy of moving high-value production back to the U.S., emphasizing that this is in the early stages and not applicable to their harness business.

Kevin Clark discusses the potential for increasing U.S. manufacturing within certain parts of their portfolio, excluding wire harness production, which doesn't suit U.S. manufacturing. He suggests leveraging existing U.S. manufacturing facilities and automating production to make the process cost-effective, although specific plans for capital investment or the extent of relocation are not determined yet. In response to Dan Levy's question about advanced content bidding launches, Clark notes the activity remains strong, but decision-making and customer awards have been delayed, similar to last year's pattern, with expectations for stronger outcomes later in the year.

The paragraph discusses a business conversation between Dan Levy and Kevin Clark regarding the EDS spin-off and its impact amid macroeconomic uncertainties, particularly with its operations in Mexico. Kevin Clark confirms that the plan to separate the EDS business remains unchanged, focusing on growth, standardization, manufacturing, and cost-efficiency. He emphasizes that the separation will allow EDS to grow more efficiently across automotive and non-automotive sectors. Shreyas Patil then asks about interpreting an expected volume decline implied in their guidance, noting a potential 7% year-over-year decline compared to IHS's 3% projection due to tariffs.

In the paragraph, Kevin Clark and Varun Laroyia discuss the challenges in forecasting vehicle production volumes due to limited visibility and inaccurate third-party forecasts. They explain that their company relies on customer schedules and internal experience rather than external forecasts like IHS, which serves only as a baseline. They outline how their initial assumptions from February guide their annual outlook, emphasizing scenarios from which others can assess performance in varying volume environments. Varun adds that Q1 figures saw a 2% decline, while Q2 guidance aims for a 4% drop, pushing expectations to a 7% decrease in the second half, providing a framework for modeling projections.

In the article paragraph, Kevin Clark discusses the effects of tariffs on their operations, stating that while they are confident in managing the direct impact of tariffs, they have less control over how tariffs might affect overall vehicle production, particularly over the long term which results in decreased visibility. There is no intention to guide investments but rather to offer data for individual scenario analysis. Shreyas Patil inquires about the current status of the Chinese market, noting rising production and slight revenue increase, to which Clark responds that while they're affected by a decrease in production from a major global EV manufacturer, they are generally witnessing strong market growth, increased adoption of advanced technologies, and continued trends toward electrification. Mark Delaney from Goldman Sachs raises a question regarding their assumption of a 4% drop in auto production for the second quarter.

In the discussion, Kevin Clark explains that their forecast for vehicle production schedules in Q2 is based on customer inputs, which have not shown significant changes due to tariffs. The schedules are consistent with February's expectations, though some slight movements exist between different OEMs and platforms. Mark Delaney then inquires about the strong EBIT margins in Q1, which exceeded expectations. Varun Laroyia attributes this to effective operational performance in areas like material cost management and strategic sourcing, which offset any negative impacts from foreign exchange and commodity costs. The Q2 margin is anticipated to be lower due to these variables.

The paragraph discusses the company's strong Q1 performance, driven by increased volume and effective operational execution, leading to better margins. For Q2, the company expects similar performance, albeit facing challenges from foreign exchange impacts, particularly with the Mexican peso and the weakening U.S. dollar. It highlights efforts to reduce SG&A costs by over 10% in 2024 and plans to cut them further by 5% in 2025, amidst macroeconomic concerns. Kevin Clark emphasizes the company's focus on minimizing overhead and costs, praising Varun's leadership and the team's success in these efforts. The paragraph ends with a transition to questions from Colin Langan of Wells Fargo.

In the conversation, Kevin Clark and Colin Langan discuss the impact of tariffs and USMCA compliance on imported goods. Clark notes that 99% of the $5 billion worth of goods being imported is USMCA compliant, indicating minimal tariff costs. He also mentions that trade exposure, especially between Mexico and the U.S., is minimal, and they are working with OEM customers to shift manufacturing or supply sources as needed. Langan questions the sales guidance, pointing out a potential decrease in the first half and seeking clarification on expected growth in the second half, especially given worsening market conditions. Clark responds that they are not providing specific guidance for the second half due to a lack of visibility to accurately forecast revenue for Q3 and Q4.

The paragraph discusses the company's performance and outlook. Colin Langan from Deutsche Bank asked about updates on performance numbers previously provided. Varun Laroyia responded, noting the team's strong performance in the first quarter and positive trends continuing into the second quarter, particularly in material manufacturing and engineering. He mentioned challenges related to labor economics, especially in markets like Mexico, but highlighted their focus on cost management, including SG&A. While the first half of the year's performance numbers are on track, the outlook for the second half depends on consumer sentiment and production numbers. Overall, the management team is confident in its ability to navigate market challenges.

The paragraph is part of a conversation during a conference call. Kevin Clark and an unidentified analyst discuss the company's performance, focusing on manufacturing, engineering, and SG&A as key performance components. The analyst inquires about the strategy in China, highlighting growth disparities between the general market and Aptiv's performance. Kevin Clark explains that due to customer mix and production decisions, quarterly results can vary, particularly impacted by one significant EV customer. For the year, the company aims for a revenue mix of 70% from Chinese local OEMs and 30% from non-local and multinational OEMs. The call concludes with Kevin Clark expressing appreciation to the participants.

The paragraph indicates the conclusion of Aptiv's Q1 2025 earnings call, thanks participants for joining, and advises that they can now disconnect.

This summary was generated with AI and may contain some inaccuracies.