Please stand by. We're about to begin. Good day and welcome to the Aptiv Q2 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 second 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 are included at the back of the slide presentation and the earnings press release. Unless otherwise stated, all references to growth rates are on a year-over-year basis. 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 Chief Executive Officer, and Varun LaRoya, Executive Vice President and Chief Financial Officer. Kevin will provide a strategic update on the business, and Varen 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. Thanks, Betsy. Thanks, everyone

for joining us. In a solid quarter, both operationally and financially, our strong business foundation, coupled with strength in the underlying markets we serve, enabled us to produce record second quarter results. Our unique capabilities from the sensor to the cloud provide our customers with flexibility and scalability, while further strengthening our competitive mode. Our product portfolio is aligned to the accelerating trends of electrification and digitalization bookings. We build a resilient business model that has enabled us to operate efficiently, even in this dynamic environment. We leverage our in the most important geographic markets around the world. And we're constantly working to increase the efficiency of our operations and further optimize our cost drop quickly to changes, shareholder value, systems remains on track, and we look forward to sharing more information on our progress at the upcoming Investor Day. Moving to our results, our second quarter revenue growth of 2% reflects strength across multiple areas of our business, and the benefit of stronger than expected operating income totals $628 million, reflecting flow through on volume growth and more than offsetting significant headwinds related to foreign exchange and commodity prices. And when combined with $1.4 billion of new business awards, strong bookings, shortly, but a few of the highlights totaled $1.8 billion. The awards in our engineered components group reached $2.4 billion, ranging across our full portfolio of interconnect, high-speed cable assemblies, bus bars, and cable management products for an update on our advanced safety and user experience segment, where revenues declined low single digits in the quarter, the result of mid-single-digit revenue growth in active safety in Wind River, offset by the ongoing roll-off of legacy user experience programs we've referenced previously, and a recent slowdown in production schedules on select ZEQR and NEO programs in China. We expect these to remain headwinds for the next few months. We executed multiple strategic program launches across each of our product lines, ADAS system spanning multiple brands for a leading European OEM, enhancing the performance of their current ADAS solution and enabling them to meet the latest regulatory requirements, an in-cabin sensing solution across multiple brands with a leading European OEM, our first in-cabin sensing program with this customer, opening the door to other opportunities. As bookings, we continue to see momentum with our flexible and scalable Gen 6 ADAS platform as evidenced by two major awards. In user experience, we were awarded a next-generation digital cockpit program for a German luxury LEM, which incorporates Wind River Studio for over-the-air updates and lifecycle management, providing enhanced connectivity. At the same time, we expanded Wind River's Edge AI ecosystem, including ZDATA, Noda AI, SEMA.AI, which will help advance the deployment. We launched several strategic programs and secure notable protein OEM platform, enabling expanded charging access across multiple regions for a leading Chinese OEMs commercial vehicle program, and an up-integrated high-voltage electrical center for a large Korean OEM for next-generation electrical and electronic architectures. Moving to new business bookings, these awards underscore a role in advanced signal, power, and data distribution. high-speed cable assembly awards to enable next-generation features, including L2++ hands-free driving for local Chinese OEMs such as BYD, GLE, and Changma. Intercable Automotive's first bus bar award for a new autonomous vehicle program with a leading U.S.-based EV European OEM, and an award for our Rapid Power Reserve, providing highly reliable redundant power for a variety of critical functions for Sirius with Huawei systems. Single-digit revenue growth on a recent launch of a refreshed vehicle platform from a U.S.-based global EV manufacturer. We also launched a high-voltage battery wiring program for a leading Korean OEM that will be used across multiple electric vehicle programs for the Asia-Pacific market. Local Chinese OEMs, including Leak Motors' new flagship SUV, This is for a next-gen platform and a significant low-voltage 100 p.m. battery electric vehicle platform financial guidance. Our first half results benefited from stronger-than-forecasted vehicle production, likely reflecting some pull-forward of demand. And we capitalized on this market backdrop with strong manufacturing, engineering, and supply chain performance. Evolving trade and regulatory policies could weaken. Remains relentlessly focused on navigating the dynamic environment, serving our customers, and delivering strong financial results that enhance shareholder value. I'll now turn the call over to Varen to go through our second quarter results and third quarter.

We have five guidance on slide nine. Aptiv delivered record financial results reflecting strong execution programs. revenues were a record $5.2 billion, so our revenue-performing income, both record levels on ended shares, were $149 million. Turning to the next slide, and looking more closely year-on-year in the retrofired program, down 1%, slightly better than vehicle production in the region, driven by growth in commercial vehicles. And in China, revenue declined 1%, which reflects the unfavorable impact of customer mix in the ASUX segment. Moving to our segment performance in slide 11. And again, I'll refer to revenue growth on an adjusted basis. Starting with ASUX, revenue of approximately $1.5 billion was down 3%, primarily driven by the two factors Kevin mentioned previously. Partially offsetting these with margin expansion, a 150 basis point headwind from FX and commodities was more than offset by our ongoing performance and cost savings initiatives. and the lapping of a customer-receivable issue in the second quarter of last year that was resolved in the third quarter. The associated settlement from a year ago will present a temporary headwind to margin next quarter. For ECG, revenue of $1.7 billion increased 5% and was driven by growth in Europe and continued traction with local China OEMs, which grew by more than 30%. ECG-adjusted operating income declined 4%, while margin contracted by 160 billion. The stronger volumes was more than offset by the impact of unfavorable FX, commodities, and labor inflation. In the EDS business, revenue of $2.2 billion increased 5%. Volume growth in North America and Asia-Pacific, while commercial vehicle revenue grew by 17%. EDS grew by 18% with 70 basis points of margin expansion and execution on footprint optimization, which more than offset a 90 basis point margin headwind related to FX. Now let's review our balance sheet on the next slide. Generated $510 million of operating cash flow in the second quarter, with the change versus prior year owing to investments in working capital on a last 12 months basis remains very strong. on our Q1 earnings call, $3 million of net leverage at two times, our balance sheet continues to provide us with flexibility to execute on our strategy. Turning now to our guidance, which we have updated for the full year, revenue growth expectations on slide 13. We continue to forecast active weighted global vehicle production to be down 3% for the full year, equating to approximately 92.5 million units. Relative to our original 2025 outlook, this reflects stronger volumes in China, offset by slightly weaker volumes in North America. Based on our vehicle production assumptions, we expect adjusted revenue growth at the midpoint of our guidance to be up 4% in North America, driven by content growth with key customers, as well as growth in commercial vehicles. Down 1% in Europe, slightly better than vehicle production in the region. and down 2% in China, which largely reflects our revenue mix between the local OEMs and multinational JVs. Global vehicle production to be down 2%, and adjusted revenue growth in North America to be up in the region, and China down 4%, driven by customer mix across the second half of the year, will be higher than the first half. Looking more broadly at the full year, we remain cautious that markets could weaken in the second half, combined with revised effects and commodities assumptions, this bridges the delta in our second-half expectations relative to our original guidance provided in February, which we believe is prudent for economic uncertainty. Our current guidance reflects our exposure to tariffs based on trade policy as it currently stands and does not include the impact of tariffs that have not yet been implemented, including the copper tariffs that were announced overnight. As we have previously discussed, our direct exposure to tariffs is minimal. High compliance with U.S. level of non-U.S. And the call back to Kevin.

Slide 15 before we address any questions. We exceeded expectations in the second quarter, delivering record revenue, operating income, and continue our strong operating performance through the balance of the year. Our continued strong execution, despite the macro uncertainty, is a function of our resilient business model and our proactive efforts around our product portfolio and cost. You see robust demand for our portfolio of industry-leading products across our full sensor-to-cloud technology stack, which is uniquely positioned to benefit from the continued transition towards a more electrified, automated, and digitalized future across multiple end markets. Operator, let's now open the line for questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We request that you limit your questions to one initial with one follow-up so that we may take as many questions as possible. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. Our first question comes from Itai McKellie

at TD Cowan. Great. Thank you. Good morning, everyone. Just first question. Good morning. Just a first question on the degree of visibility you have at the moment for Q4 production. The guidance, I think, implies a healthy decline year-over-year, but a pretty strong outgrowth on your part. I'm just kind of curious how far visibility do you have right now in terms of the schedules themselves?

Yeah, as we've talked about previously, we get schedules out through, based on where we said today, out through the end of the year. Obviously, the closer to where we are today, the stronger the schedule. So I'd say fairly firm EDI schedules, typically ranging from two to four weeks out, then less firm. We move beyond that. At this point in time, we've not seen any significant change in where we were a month ago. I think there's an element of, as we look at what actually will flow through from a production standpoint, given the dynamic market, given the strength that we saw in the second quarter, given our kind of discussions with OEMs, to some extent, manage the supply base through their demand signals. you know we uh you know we took a relatively conservative outlook for that when we initially gave guidance in february in the front so we have the dynamics that's very helpful thanks kevin and

as a follow-up you know the changing u.s emission standards some automakers are expressing an intent to shift their mix to you know larger vehicles and take an opportunity and i'm curious whether that does present any content opportunities for you uh on that presumed mix shift that may happen

next year. You're talking about movement from EVs to ICE vehicles? More like larger vehicles within ICE, more SUVs, larger vehicles given emissions. Yeah. So to be transparent, we've already seen some of that this year. We'll go next to Mark Delaney with Goldman Sachs.

Yes. Good morning. Thank you very much for taking my questions. I had a question on the bookings target of $31 billion. You spoke to award progress in some areas, but also an uncertain macro backdrop. And the bookings target is 2H weighted. So can you help investors better understand the visibility you have into reaching the $31 billion full-year target and any key drivers that you see that would contribute to the increase in bookings in 2H?

Yeah. So there is a cadence for bookings. I would say we have a very strong funnel with significant visibility to bookings. I would say we have a high level of confidence to investors. I would also tell you it's taking a little bit longer to get bookings finalized and documented. Just in light of the environment we're in, the reality is our OEM customers across the globe are spending a lot of time kind of managing through the evolving trade and regulatory landscape, in addition to working with suppliers like ourselves. The question was in the non-automotive areas,

the company's had a goal of diversifying and better addressing some of these other areas, industrial, aerospace, defense. Can you speak a bit more on what you're seeing there and whether or not you were able to grow faster in some of these non-automotive end markets?

Yeah, so growth has low single digits. this quarter in the back half of the year. We'll go next to Dan Levy with Barclays.

Hi, good morning. Thanks for taking the questions. I want to start with a question on the implied growth in the second half, and specifically the implied growth over market. I think in the first half, the growth over market, or your organic growth relative to underlying active markets with something like one to two points, you're guiding to, I believe, for the full year, roughly five points. So there is some acceleration in the back half on that outgrowth. Maybe you could just talk about some of the assumptions in the second half growth. Yeah, I think first,

when you look at growth on a year-over-year basis, you certainly need to focus on Q4 of last year and what we saw relative to when you um when you unpack in the back half where you see um sux that's your over your comp and then actually slowing a little bit in the fourth great and

there's not one specific launch that you know you're dependent on for that this is weighted

to correct no listen we we're we're launching this year we'll launch over 2500 programs again

So it's around capital allocation, and maybe you could just revisit the framework specifically with the EDS spin. Now it sounds like you're pulling that forward. How should we think about capital allocation dynamics in the future post-EDS spin, and especially on the inorganic side, what types of targets you may be seeking?

Sure. So, first, EDS Spin 4, where we'll continue to move that. And starting with the EDS Spin, that's a business that, you know, we're very focused on having very manageable leverage, you know, out of the gate. So there will be an element of leverage on that business and a dividend on some amount of debt. We'll continue to deleverage, you know, during the back half of this year and into 2026, certainly at Romainco, partly as a result of earnings growth, partly as a result of select debt pay down. When we look at priorities from a standpoint... Next to Joe Speck with UBS.

Thanks. Good morning, everyone. um maybe kevin just to start um just a few points of clarification one um when you're saying second quarter pull forward to demand i just want to be sure you're talking about consumer demand of vehicles and you shipping to that or do you think there was actual channel inventory built um like you shipped more than production and then well i'll answer that yeah i i think an element of

of both the schedules we receive from our customers and the number of vehicles our customers produced. So I think it's a mix, obviously. Those two are aligned. I think, Joe, it's on how much of that took place. There's some element of pull.

Fair enough. The second clarification, just on the implied 3Q, 4Q guidance, It looks like revenue is pretty flat, 3Q to 4Q, but a big step up in margins. Is that just sort of the normal seasonality you see in engineering recoveries? Is there anything else that sort of drives that fourth quarter margin higher than the third quarter?

Yeah. From a year-over-year growth rate, it's really important that you look at the prior quarters, right? And to a certain extent, we were impacted slightly differently by business. And if you look at overall vehicle production. And then second question, just on the 85% of your day bookings with the local Chinese OEMs, does that tend to come on quicker than some other bookings you have?

Like we've heard from some other suppliers, it could be a pretty short period of time from win to launch, like around a year. And then maybe you could just shed a little bit of light on what's really driving this acceleration, how you're winning. Is it just a refocus on those customers? Are there new products or any major differences in profitability, anything like that?

Yeah, listen, we've been talking about this for quite some time. I wouldn't say it's new focus. It's where we're making progress. I think it's the strength of their European vehicles, our Gen 6 ADAS solution. We have other awards that they're launching out of Europe or South America. There's more to come there. So it's an area we continue to focus on, and we're confident we're able to replace that volume.

Very helpful. Thanks.

We'll go next to Emmanuel Rosner with Wolf Research.

Great. Thank you so much. I wanted to get a few more thoughts from you on the trajectory of AS and UX revenues. They were down 3% in the quarter. You flagged some roll-off of legacy UX programs. but generally and then some unfair mix in China but generally can you lay out the growth narrative you know for this business I think you have launches in the back half how should we think about sort of like a forward growth you know for ASL

it's a great question and you know it's a business that sits in a place where content per vehicle is growing Emmanuel as you know We have a headwind that we've talked about in terms of that legacy user experience program that when you look at our overall growth rate on a quarter-to-quarter basis, year-over-year basis, however you want to look at it, it's worth 200 to 300 basis. And we get to finally laughing at that wind-down ends. This past year, certainly an impact on our overall growth rate. Active safety is that it will grow. Those OEM programs I mentioned.

And then second topic for me, I wanted to ask you about the ECG margins. They decreased in the quarter versus last year, even though organic revenues were actually up a very good clip. Maybe some effects and commodities in there. But I guess more generally, where do you think ECG margins can go?

Listen, this quarter was all effects and commodity prices. So that was the headwind. We're facing significant headwinds principally as it relates, you know, we're hedged down, down to, but that's been a significant headwind for that business, for the margin profile of our, of our EDS business, and then to some extent, lesser extent. I think, Kevin, you can think of Chris McNally with Evercore.

Hey, Kevin. Thanks so much, team. So, I appreciate the conservatism. I think we all know there's a lot that needs to happen, particularly around the Mexico trade deal, which seems next. So, Kevin, that's sort of my first high-level question. You guys are always pretty connected in D.C. And what do you think the industry is? Is it sort of 15% like all the other countries? Or, you know, is there a case that USMCA, you know, compliant vehicles could get something better? You know, just curious, super high level what you think the industry is asking for, or really, in your opinion, should be asking for good policy going forward.

Yeah, I try to avoid political policy. We can share with you our view. USMCA will definitely stay in place. There will be some recalibration of certain aspects of USMCA. The administration is focused on bringing high-paying jobs back to the U.S. America are supportive of that and are working with them to do that. Target, I can't answer, Chris. I'm not smart enough whether there will be a lever where, to the extent vehicles reach some sort of U.S. content but manufactured in Mexico, whether or not they'll be subject to a lower tariff regime or not. I can say for us, I think this is the important thing, and Varen talked about in his prepared comments, For U.S. production, 95% of our product comes from Mexico. 99% of the announcement will not work in Mexico or it's manufactured.

That's great. I appreciate the sensitivity, Kevin. I think it's only interesting because we're now starting to hear public discussions from players like VW on their call talking about almost OEM-specific deals for reshoring. And obviously, you had players like GM, big customers that are already announcing that. So, look, it's going to be an exciting August and September on that front. So we'll stay tuned. The last thing, just as that relates to your guidance, then, is it fair to say that that minus 6% is sort of an industry number where we all are assuming a kind of rough due for based on tariff-related pricing? So is it okay to paraphrase that your minus 6% almost implies no new deal and that, you know, OEMs have to put through price and SAR goes down, so production goes down? Is that a fair case that that's sort of the, you know, the conservativism here is assuming that we have to have price and negative SAR as a result? If something's better than that, then maybe there's a little bit of upside.

Yeah, I think it's two things. I think it's a year-over-year comp with Q4 last year from a vehicle production standpoint, and then the presumption is that we have weaker consumer demand, whether that's driven by vehicle pricing or other issues that consume. It affects OEMs and OEMs. Just taking a step back, as we look at the world, our presumption when we gave guidance in February was we were going to be more immediately impacted by tariffs under the presumption they were going to be implemented much sooner. They haven't been. The view is that there was some pull forward of production by our North American customers. I can't give you an exact number. And now we have that same concern we had back in February for the back half of this year. If we're wrong and vehicle production is stronger, will benefit, just like we did in Q1 and Q2. But sitting here today, the most prudent thing to do was to be a bit more, and I don't know if you want to call it conservative, that will depend upon what plays out, that we should assume that there is an impact on vehicle production in the back half given the implementation of changing trade policies.

It makes complete sense.

Next to Colin Langan with Wells Fargo.

Oh, great. Thanks for taking my questions. If I look at the quarter, your mix in China, I think you're about 10% under market. You're similar and a little better in Q1. When does that start to normalize? Especially you flagged some new wins with very short lead time. Does that actually start to narrow pretty meaningfully into the second half? And how should we think about it, maybe even into next year?

Yeah, I think it depends. Listen, Colin, we were making significant progress over the last two years. and we'll continue to make progress. Our target was to beat production in China at the end of this year, roughly at the end of this year. We were on programs that these have a negative impact instead of SPACs having an impact on them. So we're working our way towards that.

Got it. Makes sense. You also mentioned that the guide doesn't include the copper tariffs, which I guess makes sense. But any way to frame that in terms of, I believe most of your contracts have passed through provisions. Is there a risk to numbers from a dollar perspective, or is this more of a margin dilution risk?

No, so this is derivative, so it's non-232, but it's manageable. Based on our analysis, and we don't have all the specifics, but we can – Varen and I can confidently tell you this is something we can manage through from a supply chain standpoint, and to the extent we're not able to offset all of it, it's something that we've been having conversations with our customers regarding, All right, thanks for taking my questions.

We'll go next to Tom Narayan with RBC.

Hey, thanks for taking the question. I know you guys have talked a lot about China. Just one more. So on that order book, 85% to domestics, just curious if we could get a little more detail on that. I know one of the big catalysts was potentially, you know, the fact that these domestic OEMs have to expand or want to expand outside of China, particularly Europe, and that benefits you guys. Just curious as to commentary in that regard, is that a big factor that was driving, you know, the domestics that you were winning, or is it just kind of across the board?

No, Tom, it's a great question. It's across the board. It's across the board. So we've been winning significant business, for example, with BYD over the last, in our ECG business over the last couple years, in our EDS business over the last 12 months with opportunities in ASUX that we're working on now. Now, our focus is in China, vehicle programs, as well as, I'd say, an additional focus on where are those OEMs taking vehicles, you know, support or through production in Europe. There are a few of them that we're spending a lot of time on their European or South American supply chain as they move production in front of those particular vehicle programs, but making progress. So I would say it's a bit of a, we can bring the most value, quite frankly, or we can bring incremental value for those that need support outside of the China market. And my follow-up,

this is kind of more a high-level question, you know, in your prepared comments, there was a lot of big wins it sounded like you know um and I'm just curious as to um you know those wins are they are they mostly like um on the ADAS side are they mostly like okay there is their characteristic of where these wins are more than others you know um I've actually forgotten my question, but I'm just curious as to where, yeah, if you could just comment on where those wins are

specifically. Yeah, so our ADAS awards are in North America, Europe, and China. We would tell you that our OEM customers are under tariff and other. They're very focused on, I would say there's incremental focus and willingness to look at full system solutions that save them money. We talked about the award to Leap Motor, the award from Leap Motor rather, for their European locally

sort of... I've been hearing from a lot of the OEMs is the larger OEMs feel like on ADAS that there's a lot of I want to insource and maybe some of the smaller ones, there's a propensity to outsource more. Just curious, is that what you guys are seeing, you know, like the larger OEMs have an inclination to perhaps want to take kind of piece parts of your ADAS portfolio as opposed to the entire suite, or is that not the case, that they're winning kind of across the board, even with

Yeah, we would tell you now, from OEMs, but that... today's question and answer session. I will now turn the call back to Mr. Kevin Clark for any additional or closing remarks. Thank you, operator, and thanks everybody for spending time with us this morning. We really appreciate your questions. Have a great rest of the day. Thank you. Ladies

and gentlemen, that will conclude the Aptiv Q2 2025 earnings call. We thank you for your participation. You may disconnect at this time and have a great day.