Good day, and welcome to the Aptiv's Q4 2023 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jane Wu, Vice President of Investor Relations and Corporate Development. Please go ahead, ma'am.

Thank you, Jenny. Good morning, and thank you for joining Aptiv's fourth quarter 2023 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 will address the continuing operations of Aptiv. The reconciliations between GAAP and non-GAAP measures for our fourth quarter and full year 2023 results as well as our 2024 outlook are included at the back of the slide presentation and 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 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 for Q&A. With that, I'd like to turn the call over to Kevin Clark.

Thank you, Jane, and thanks everyone for joining us this morning. Let's begin on Slide 3. Aptiv ended the year on a solid note with fourth quarter results broadly in-line with our expectations, demonstrating our ability to execute in a less predictable market. Touching on a few highlights, new business bookings reached $7.7 billion, the result of continued demand for our portfolio of industry-leading advanced technologies; revenue was $4.9 billion, with growth over market impacted by the UAW strike and customer mix, which Joe will go through in more detail later; operating income totaled $600 million, reflecting a 90 basis point margin increase; the strong flow-through on volumes and operating performance more than offset headwinds from FX, commodities, and the UAW strike; we repurchased $300 million of stock during the quarter, given our share price and cash position. In summary, our team is doing an exceptional job executing in a fast-changing environment, identifying opportunities to provide solutions to our customers, while at the same time, working to mitigate headwinds from ongoing cost pressures. Turning to Slide 4, we delivered on our commitments and achieved record results in 2023, despite having to navigate through unexpected developments. New business bookings were a record $34 billion, reflecting continued strong demand for our products. As vehicles become higher contented and more software defined, customers are increasingly seeing the value of Aptiv as an important technology partner, particularly across our smart vehicle architecture, active safety and high voltage electrification portfolio, where we lead the industry in delivering high-performance, flexible and cost-effective solutions. Aptiv is also positioned to benefit from the transition to the software-defined future across several other industries, with opportunities accelerating in the telecom, aerospace and defense, and industrial markets. Revenue increased 12% to over $20 billion in 2023, a new record level, principally…

Thanks, Kevin, and good morning, everyone. Starting with a recap of the quarter on Slide 10. Revenues were $4.9 billion, in-line with our expectations, including the impact of the UAW strike in October. Adjusted growth in the quarter was 2% over the prior year, representing negative growth over market of 5% in the quarter. As Kevin noted, and I will discuss in more detail, the growth over market primarily resulted from the impact of the UAW strike and North American OEM production mix, as well as customer mix in China and slower high voltage growth. Adjusted EBITDA and operating income of $772 million and $600 million, respectively, in-line with our expectations. Operating income margins expanded 90 basis points versus prior year, reflecting strong flow-through on incremental volumes, the benefit of customer recoveries of direct material increases and strong operating performance, including the benefit of cost saving actions taken in the second half of 2023, offsetting the impact of the strike, which totaled approximately $50 million in the quarter, and foreign exchange was a 20-basis point headwind in the quarter. EPS was $1.40, an increase of 10%, driven by higher operating income, partially offset by interest and tax expense. Operating cash flow totaled $624 million, and capital expenditures were approximately $200 million for the quarter. During the fourth quarter, we repurchased $300 million of stock, bringing full year repurchases to approximately $400 million. Looking at revenue in more detail on Slide 11. As noted, revenue in the fourth quarter was $4.9 billion, reflecting sales growth of $188 million, a favorable $62 million contribution from net price downs and commodities and foreign exchange tailwinds of approximately $29 million. From a regional perspective, North American revenues were down 7% or 11% below market, driven in part by the UAW strike impact, which totaled…

Thanks, Joe. I'll wrap up on Slide 20 before opening the line up for questions. As the management team reflects on 2023, we expect the pace of innovation to continue to accelerate and drive ongoing transformation across industries. Aptiv is perfectly positioned to benefit from this change, having identified the safe, green and connected megatrends over a decade ago. We have purpose built our portfolio to provide flexible, high-performance and cost-effective solutions that address our customers greatest challenges, all on a global scale. At the same time, we remain committed to flawless execution and operational excellence, enabling us to unlock incremental profitability and deliver value to our shareholders. In closing, I am proud of what the Aptiv team accomplished during 2023, and I'm excited about what we will deliver in the years ahead. Operator, let's now open the line for questions.

Thank you. [Operator Instructions] And our first question is going to come from Joseph Spak from UBS. Please go ahead.

Thanks. Good morning, everyone. I guess, just to start, appreciate the commentary on the long-term growth over market target. Back of the envelope, it would seem like the reduced growth would lower your longer-term margin goals by maybe 20 bps, 30 bps. Is that sort of reasonable? And can you sort of address any other factors that may impact the long-term margin goals?

Yeah, Joe. It's Joe. I'll start, and then Kevin can jump in. Obviously, we'll see that come down a bit as high voltage slows. We try to lay -- in Slide 18 of the deck, we try to lay out the progress we've made in '23 and '24, which we feel is quite strong. I think if we had to look out -- and this goes back to that Investor Day discussion around 2025 margins, I think if we looked at that today, we had about a 14% total margin for Aptiv in 2025. We'd say we've got about, call it, 100 basis point to 150 basis point headwind to that at the moment. Some of it coming off, obviously, from the lower growth over market, some of it's going to be the higher peso. We're seeing just the peso changes of last year, the strengthening has effectively gotten into the cost base at this point. And as I mentioned in my prepared comments, we're also seeing, particularly for 2025, some additional operating and labor costs in Mexico. So, at this point, I would say those margin targets are probably pushed out a year round numbers, and we'll obviously be working on that over the course of this year and sort of updating as appropriate. I don't know, Kevin, if I...

No, listen, I think you captured. I think, to the point Joe made, we'd say the bigger headwind quite frankly is labor inflation, especially in places like Mexico, relative to growth rate from high voltage electrification. Just to remind everybody, although it looks like adoption has slowed, growth rate is still on a relative basis, extremely high. So, just want to remind everybody that we are believers on the ongoing trend of the penetration of electrification in the automotive space.

Okay. Thank you for that. And then just on the buyback, I think it's a positive step for capital allocation. But you still have $1.6 billion of cash on hand. Your free cash flow guidance is like $1.2 billion. I think you've said minimum cash is $600 million to $700 million. So, the $750 million, I think is probably within the framework of what you expect to -- how you expect to sort of use cash generation. But how should we think about the total cash on hand especially? I understand you want to leave a little bit of firepower for maybe some acquisitions, but still seems like there's a good amount of cash on the balance sheet that could be put to work.

Yeah, maybe I'll start. Listen, Joe, your observation is a good one. Listen, our primary focus is on continuing to invest in the business for profitable growth. We'll underscore that. We feel like we have a very strong competitive position. We feel like there are opportunities to further widen the competitive moat. So, those are opportunities that we will continue to evaluate. But to the extent those opportunities don't present themselves, we'll certainly look at returning incremental cash to shareholders. So, we'll strike that balance. But it's important that we have some level of flexibility to react when opportunities present themselves.

Okay. Thank you.

And our next question is going to come from Rod Lache with Wolfe Research. Please go ahead. I'm so sorry, this is going to be Chris McNally with Evercore.

Thanks so much, team. Two questions. The first, Joe, I appreciate the help on the cadence, first half, second half. So, if it sounds something like the outgrowth, 4% first half, maybe 10% in the second half. Could you help us walk through the Chinese mix? I think everyone understands North America and the strike. But when we say domestic Chinese, it sort of means multiple different things. And I guess what people are trying to figure out is why that may improve over the course of the year. Is it specific Aptiv things, or is it just a production schedule, the way it plays out for your customer base?

Yeah, it's obviously driven off of production schedules from the customer base, which would include launches. So, we do see higher launch activity and schedules picking up from the multinationals towards the second half of the year. In addition to that, and I think from what we're seeing, and I think it's generally consistent at this point with what you see from IHS is some of the local OEM growth, the 30%-plus you saw in the back half of the year, in '23, they started to lap some of that. So, from a growth -- again, the sort of relative growth rate that drives the growth over market calculations, some of that starts to come back in a little bit, just given the significant growth in the back half of 2023. And obviously, we tend to concentrate and call it the top 10 or 12 Chinese OEMs from a local perspective. So, we have their schedules, but also, Chris, looking to some extent at what the forecasting services are saying about that production level as well.

Yeah, maybe I'll add, Chris, a couple of items, just -- part of it is just the evolution of our business, if your question is specific to China, right? So, when you look at, as an example, 2023 bookings in China, roughly 60% of those were with local OEMs. Our focus is on players like Geely, like BYD, like Changan, like some of the leaders. We are careful with respect to overall exposure, and we want to make sure that we're with players that could grow in China and then highly focused on those that we feel are well positioned to export and are interested in exporting, just given the nature of what we're able to bring. When you look at 2023 revenues, we were roughly 40% domestic OEMs, just under 60% from a multinational standpoint. That moves to 50% in 2024 and continues to kind of increase up north of 60%, 70% over the coming years. So that mix, at least from a current list of winner standpoint, improves.

Yeah, that's perfect. That was my follow up. I mean, do you think sort of exiting '25 into '26, no, you don't have to get very specific with the timeline, that you start to become pretty agnostic, meaning that the targeted plan that you laid out, you should be pretty well adjusted, assuming the mix kind of normalizes as we get to '25, '26, but that domestic turnover happens around the '25 to '26, where we won't be talking about this mix issue as much?

Yeah, I think we were in a unique situation in 2023 where we saw a significant swing. Joe made the point. I think he's absolutely right. We as a team think we're absolutely right, that you're going to see that more balanced on a go-forward basis in terms of year-over-year change. What we're trying to do is just make sure we're balanced across multiple customers, but ensuring they're the right customers. And there are, for example, some of the global JVs that are better positioned than others. And there are certainly some very strong local Chinese OEMs who are doing extremely well in the China market but have come to us with a real focus on how do we assist them, how do we enhance our capabilities to take product outside of China into principally Europe at this point in time.

That's great. And just as the last thing, because I know it'll come up. Joe, I think the 2025 was 14% to 14.5% margin, 100 bps to 150 bps off that. Can we just kind of take that as the new '25 as roughly 13% and then, like you said, push the year out to '26? I just know that will come up the rest of the call.

Yeah, I think round numbers, that's pretty good, Chris. If you wanted, I'd probably be closer somewhere between 12.5% and 13%.

Perfect. Thanks so much.

And our next question is going to come from Rod Lache from Wolfe Research.

Good morning, everybody. Just, first of all, to clarify some of the discussion off of Chris' question. Obviously, we've seen some ongoing share shift away from the western OEMs over the past couple of years, and it sounds like the reason why you don't expect that to reoccur in 2024 is because of the big uptick in backlog that you have from BYD, Changan and some of the other Chinese OEMs. Is that essentially it?

I think there's a couple -- I'm not sure I understand that, Rod. I think there's a couple of things. I think overall you had some 30%-plus growth quarters by those local Chinese OEMs, right? We do think that. And again, from what we're seeing in a scheduled perspective, and when we look at that, there's a couple of forecasting services that sort of look at that market, that starts to level off a bit, right? They catch up to some of their high comps. At the same time, launch activity with the multinationals who admittedly have had, I think, some platform challenges over the last couple of years in China, do have new launches coming up, and those launches were on those platforms, and we expect to see that sort of take their overall production up, our content up, which is how we're sort of looking at it, starting to balance out. And then you obviously have the mixed shift inherited within our business that Kevin took you through.

Okay.

So, Rod, at a high level, we expect share to continue to shift to the local OEMs. I think what Joe and I were talking about is the magnitude of the shift over a relatively short period of time. We expect that not to be the same in 2024 as it was in 2023.

Right. Okay. Understood. On high voltage, it looks like you're implicitly assuming a similar level of EV growth in 2024 versus what you saw in 2023. As you've observed, there's been some slowing late in the year in 2023. Maybe you can elaborate on the models or factors that you consider that lead you to conclude that the growth is pretty similar for EVs. And can you maybe also give us any color on the assumptions that you make behind those high voltage bookings? Do you have a penetration assumption? Or is there some color you can provide that helps you underwrite that level of revenue associated with the bookings?

Yeah. So, obviously, much like the rest -- the other parts of our business, we're looking at customer schedules, which include customer launches. And you're right, we're right around that 20% growth rate for '24, which was consistent with '23. There are some new program launches. Again, that business is 80% China, Europe, right? So, clearly seeing some weakening in North America. We've seen schedules come down. I think that's well understood at this point. But the combination of sort of some new product launches and where we see customer schedules and then really that sort of the concentration we have in that business around China and Europe. I think penetration rates, we've always been lower on a relative basis at this point, where we have not looked out to sort of 2030, to update what we talked about in February, possibly that's lower than 30%. I think we were sort of well behind everyone else. But I think over the next few years, you're moving in within that sort of, call it, that 10% to 15% range, is what our numbers would extrapolate out to.

Okay. All right, thank you.

And our next question is going to come from Itay Michaeli. Please go ahead.

Great. Thank you. Good morning, everyone. Just a first question on the long-term growth over market. I know that the Investor Day last year, there was an expectation of some acceleration beyond 2025. Obviously, a lot changing here in the near term, but the bookings are still strong and growing. So just a question, do you still think there's scope for some GOM acceleration in the second half of the decade?

Itay, it's Kevin. Listen, as it relates to, is there an opportunity for accelerated growth, if you look at the last three years, we've booked roughly the same amount of business as we booked the prior five years to the start of that three-year period. So, the growth opportunity -- revenue growth opportunity is significant. There are certain items, as we look at growth over market, and we use that as a proxy for strength of our competitive position. We're not on every OEM across the globe. And when you look at that calculation, although certainly indicative of strength of growth, it's not perfect. So, would we tell you, should there be a bias based on bookings of stronger growth, accelerating growth? Absolutely. In light of kind of the current environment and discussion about EV penetration rates as an example, can things shift a bit quarter to quarter or maybe a year to a year? It's possible. But as we look at where the environment is today, as we look at where investor expectations are, we think the 6% to 8% growth over market is the right sort of framework for folks to consider, for investors to consider.

That's very helpful. Thanks, Kevin. And just a quick follow up on the ADAS business. I was hoping you could share what you're expecting ADAS growth this year, and also maybe a bit more color on the wins with the Japanese OEMs, whether that provides further opportunities to penetrate with those OEMs.

Yeah. Let me start with the growth rates, and then Kevin can comment on the nature of the win. So, continue to see strong growth in active safety. Would expect 2024 to be north of 20% again, as it was this year. I do think -- listen, one of the things we talked about, just to put it in perspective, there is a large active safety business in North America with a couple of the D3, that was obviously impacted this year by the strike, right? So, it's not immune to things like the strike, but the underlying fundamentals of that business, the take rates and the growth will keep it above 20% again next year.

Yeah. As it relates to the wins with the Japanese OEMs, they were in and around radar. They're global wins. So, for the Japanese OEMs, in Japan, as well as in Europe, China and North America, it's to be transparent. The first time we've been able to penetrate in a meaningful way that customer base with our ADAS solutions. Part of that reflects where we are from an overall technology standpoint versus their traditional supply chain, which you are all familiar with. We're confident that that will present us with incremental opportunities on the ADAS side, on the user experience side, as well as on the vehicle architecture side. So, we're very excited about it.

Terrific. That's all very helpful. Thank you.

And John Murphy from Bank of America, please go ahead.

Good morning, guys. Maybe I might take a sort of different angle on sort of the growth change here. Kevin, you guys have obviously great technology and great product, and almost seem to be far more than one step ahead of the industry. I guess the question is, as we look at the R&D spend, $1.5 billion gross, I think you guys $1.2 billion net when you get your recoveries or sharing with your business partners, is there a question that you may be spending too much on R&D and getting too far out in front of the growth curve here, and maybe that might be an opportunity in the near term to skinny back on R&D and drive better margins and cash flow and then return to shareholders? I mean, once again, the product portfolio is great. It just seems like the industry has an inability to absorb all the good tech you bring to the table.

Yeah. Listen, John, I think that's a good question. It's something that we watch very closely. Our advanced development spending as a percent of total engineering was higher in 2023 than it's been in the past. I'd say the bulk of that, quite frankly, has been working to productize our portfolio, which means significantly more reuse of existing technology on new platforms, which is what the industry needs. It's driving a significant amount of interest from OEMs in areas like electrification, like battery management systems, like ADAS, like software, which we think is going to translate into continued growth in bookings. We talked about the $35 billion is kind of our estimate as we sit here today for 2024. I would say that number could be higher. So, it's important that we continue to invest, and we continue to position ourselves for growth. I would say we've doubled down our focus though on how do we make engineering more efficient, how do we get more out of engineering, and again, how do we drive more reuse, which allows us to be more efficient and develop higher margin solutions and allows us to deliver them to our customers at much lower cost. And I'd say equal focus on cost-effective solution now as there is on innovation.

Okay. Maybe...

But appreciate the question.

Yeah. And just one quick follow up on just the volume outlook. Flat, globally. I know there's variances between regions. What are you seeing in schedules right now? I know you're using some of your internal work and then external forecasts, but is that jiving with the early read on schedules or actually seeing schedules running above or below that in any meaningful way?

Yeah, it generally jives, although to my comments, it's a build throughout the year. So, my comments around revenue growth and the calendarization very much tied out to what we're seeing in schedule. So, total is connected. I would say this year, unlike the last couple of years, we actually don't see much schedule disconnect between -- we don't see much disconnect between the schedules and the broader forecasting services. We did see some differences related to supply chain and stuff over the past couple of years, but they're pretty much in line. But it is back-end weighted. It's just not us that's back-end weighted. It is the customer production schedules at this point.

Okay, great. Thank you very much, guys.

And our next question is going to come from Mark Delaney from Goldman Sachs. Please go ahead.

Yes, good morning. Thanks very much for taking the question. Incremental EBIT margins implied in guidance for 2024, I think are in the mid-20% range, even adding back for the strike impact that you had in '23. Is the extra margin leverage this year relative to the historical roughly 20% due to capturing the remaining COVID disruption costs? And then maybe you can talk a little bit more around how much visibility you have into pricing and how firm that is for '24 at this stage. I know with OEMs dealing with a lot on their plates, there was a fear from investors they could push more on margins. So, the visibility you have into achieving that higher margin leverage for '24 would be helpful.

Yeah, Mark, it's Joe. Similar to '23, we have those bigger step downs in COVID on a year-over-year basis, supply chain disruption costs. So that is helping keep that incremental flow at the EBIT line a little higher than normal. I think that sort of 18% to 22% range that we usually talk about is still good in normalized times, but it is a little higher, much like it was last year. And then, listen, I think from a pricing perspective, there has been a lot of activity as we've talked about over the past couple of years, as we've worked through direct material inflation and stuff. I think we're as settled as we normally are on it. There is obviously ongoing discussions with customers, but I think we're in a relatively good place and a consistent place with where we've historically been this time of year.

That's helpful, Joe. And the second question was just around shifting EV plans. A number of OEMs have talked about trying to do more with hybrids and plug-in hybrids. Maybe you can remind us what your content opportunity is on a hybrid and plug-in hybrid compared to BEV or ICE vehicles. And how well positioned do you think Aptiv is to potentially capture some of that higher intermediate-term production around hybrids and plug-in hybrids? Thanks.

Yeah, it's Kevin. So, better electric vehicles are about 3x the content opportunity as an internal combustion engine vehicle. Plug-in hybrids are 2x, roughly 2x the content internal combustion engine. When you look at our mix of high voltage bookings and roughly the same from a revenue standpoint, roughly 25% to 30% of that relates to plug-in hybrid vehicles. So, hopefully that gives you a bit of context. So, we feel like we're very well positioned whether OEMs are producing plug-in hybrids or battery electric vehicles.

Thank you.

Our next question is going to come from Dan Levy with Barclays. Please go ahead.

Hi, good morning. Thanks for taking the question. Wanted to just go back to the EBIT bridge and just a point on the economics here. And specifically, I know in the past you had a lot of inflation from chips. We've obviously heard a number of accounts now that on the chip side there's excess inventory. I'm just wondering to what extent you're embedding chip deflation in the guidance? If not, is it at upside? And then maybe you could just comment briefly on the FX piece, because we're under this understanding that your hedge is unwinding and that a reset would drive some peso headwind. So maybe just to comment on the FX than the bridge as well.

Yeah, I'd start with -- I mean, there is -- again we say -- as Kevin mentioned, I've attended most of them, supplier meetings in CES. There was no automotive chip provider at the moment that's talking about price downs. We still have a couple that are talking about increased prices based on wafer cost increases that they're seeing. We'll obviously push back hard on those and deal with them if and when they come in. But we're not seeing anything from a price down perspective, nor would expect it. So, at this point, there's nothing in there from an opportunities perspective in the guide. Listen, as it relates to peso, last year, we were obviously hit well above $100 million by transaction and translation impacts, right, the FX moving significantly. This year, and I mentioned this in my prepared comments, Dan, we've assumed a stronger peso, basically in the underlying forecast, right, which makes our peso denominated cost more expensive. So, if you look at that bridge, it's not showing up on the FX line because it's now forecasted at that level. But you do have about $100 million round numbers going into primarily labor, going into the cost structure, which would appear in that other bucket. And it's really the amount that's rolling through into my 2025 comments.

Great. Thank you...

Hey, peso -- sorry, go ahead.

Go ahead, please.

I was just going to say peso assumption, just to remind folks, at Investor Day was 20.50, so you got about 10%-plus strengthening in the peso. Go ahead, Dan, sorry.

Great. Thank you. Just as a follow up, I want to go back to the bookings, and appreciate another strong year of bookings, another outlook. Maybe we could just -- and I think this touches on some of the prior questions, just reconcile the strong bookings with seemingly commentary from the OEMs on just reduced gross spend in a variety of areas. I mean, I think we hear about EVs most notably, but even just some of the challenges or push out in executing software-defined vehicle or active safety. We saw there was a large OEM that pushed out one of their advanced ADAS programs. So, maybe you could reconcile the strong bookings activity with some of the challenges that the automakers have faced just broadly on executing on megatrends.

Yeah. Dan, I'll take it. Listen, it's an interesting question, right? The question we get two years ago was kind of reconcile strong bookings with OEMs, comments regarding insourcing, all their activities. And I think now you hear from OEMs, and we experience directly first-hand all the challenges associated with attempting to do things that either you don't have the history of doing or don't have the capabilities, which quite frankly has presented perfect opportunities for us. And it's the reason why we've invested in the areas that we've invested in. It's reason why we're building kind of full platform solutions that are open, that are scalable, that provide flexibility and importantly lower cost. We fully recognize that, that we need to deliver lower cost options and solutions to our customers all the way from software and hardware development to delivery of a solution, and that's what we're focused on. And I would say that's the reason for the trend in bookings, that you've seen, a value proposition that economically makes sense for our customers as well as it does for Aptiv. And then, you augment that with the question about SoC material inflation, just to underscore Joe's point, we've not heard that from any of our western SoC suppliers. In fact, some are talking about additional constraints beginning in late 2025, going into 2026. So, we have deployed engineering assets in doing a couple of things. One, dual validating or qualifying additional alternatives, so there's more flexibility to move from one chip to another and bringing that to our OEM customers as a part of our overall value proposition. In my comments, I talked about the 12 Chinese SoC suppliers who we're working closely with in making significant traction in the China market, with, we believe, meaningful opportunities outside of China, especially in Europe, providing lower cost at roughly equal performance. And that goes from SoC technologies to radar technologies to peripherals. And by virtue of providing, again, like I said, those leading technologies in a more cost-effective way that again provide flexibility and choice to our customers, that holistic package is attractive, and it helps solve the challenges that you're aware of that they're dealing with.

Great. Thank you.

Your next question is going to come from Tom Narayan from RBC. Please go ahead.

Hey, thanks for taking my question. Maybe one on Motional. I understand that the industry is kind of capitulating on Level 4, but we'd just love to hear kind of your thoughts on this seemingly very promising enterprise, very long term, I understand, but what specifically kind of has changed your thoughts? Is it just the fact that the industry is moving -- the market is moving away from it, and maybe financing using capital markets is difficult, or is there something more fundamental that you're not liking about this Level 4 business?

Yeah, it's Kevin. Listen, we should start with, Motional is on track to deliver the tech roadmap that's been laid out, and should underscore that HMG has been an absolutely outstanding partner. Better than -- as optimistic as we were at the start, even better as a partner from both operational and a strategic standpoint. Commercialization of the technology, i.e., the cost related to delivering the tech principally in and around hardware, really makes it challenging from an adoption standpoint, in the mobility on demand market. And as a result, kind of pushes out ultimately the revenue stream and the earnings stream for the business, and pushes out to a point where relative to other options or opportunities that we have to invest in that will deliver profitable growth, we had to make decisions. And again, a tough decision, but given where we sit today, given the benefit that we've gotten to date, which is real, which is in and around advanced ADAS solutions, and we'll work to continue to work with Motional commercially in and around bringing their technology into our ADAS platform, but when we look at ongoing funding of the technology and when it actually gets adopted in the mobility on demand market, it's just pushed too far out to make financial sense for us, given the other opportunities that we have in front of us.

Got it. And just a quick follow up maybe on some of the other opportunities could include M&A. I know, I think there was a question earlier on capital return. And we've heard this theme with, I think, Tier 1 and Tier 2 suppliers, potentially there could be some M&A in 2024. One obstacle is obviously interest rates. Just curious if you were to pursue this and you've had some really successful M&A in the past, where would they be? And what are some of the kind of -- are there opportunities you find attractive currently?

Yeah. I mean, like we've always said, the pipeline is very full. We maintain it on a regular basis. Certainly, don't see anything from a capital markets perspective that would preclude us from doing transactions. I think the balance sheet is in very good shape. We took a lot of care over the last couple of years to push out the tenor of the debt and such. So, I feel like we're in good shape from that. So, we're certainly not one of the ones that's raised any concerns on that side. I think you'd continue to see us do things like we've done in the past, right? You'd have both for AS&UX and SPS, there are bolt-on opportunities, things that enhance technology, regional presence in AS&UX, there certainly are some opportunities. It would obviously be smaller than Wind River, but continue to invest in our software capabilities. And then there's the adjacent markets, right? We've done a very nice job over the last couple of years -- excuse me, of growing our adjacent market presence, both organically and inorganically. And it's been accretive to growth rates, it's been accretive to margins, and I continue to expect us to do something like that.

Got it. Thanks.

Okay. And our next question is going to come from Emmanuel Rosner. Please go ahead.

Thank you very much. So, I appreciate the update on the new growth over market framework. I was hoping, since it's essentially a refresh of a framework, if you could take a step back and maybe remind us the various components or drivers of the expected growth over market, not necessarily just 2024, just as part of the framework, either in terms of how much growth over market comes from each component or in terms of revenue growth, whatever is easier? And is high voltage the only thing that is essentially lower down versus the previous framework?

Yeah. The walk -- we won't go into more components than we've laid out, Emmanuel. I think the walk sort of indicates within the range, certainly, the largest piece not to come back is the high voltage, right? You could have -- again, and it's a long-term forecasting range, you could have a little bit of movement in customer mix and just how things play out relative to Kevin's comments on the Japanese OEMs and the China mix. I think speaking to Kevin's comments, our growth rate, other than EV, which we talked about coming down to 20% from the 30%, our growth rate has been what we've expected, right? I mean, we've hit our revenue numbers, we've hit our growth rates. Our product lines are growing. There is a denominator element here to what we're seeing take place in the market, particularly in 2023, with the Japanese OEMs up plus 25% round numbers production in North America. So clearly, I've talked about HV slowing down. I think we've been transparent about that. But I just want to be clear, this isn't -- we're missing our growth numbers or we're missing our revenue numbers. This growth over market, a big piece of that is coming from what I'll call the denominator impact. I don't know, Kevin, if you have anything to add.

No, you've covered it.

Okay. And then, one additional clarification on Motional, please. Can you just explain a little bit the mechanics of what you will essentially try to achieve? So, skipping no further funding rounds, is your JV partner okay to fund it? Because I believe there is a need for funding in the fairly near term. So, will that be covered by them at least in the interim? And then, will you be looking at other options on a go-forward basis? You spoke about uncertainty around the timing, but I'm not sure how much of it is already decided. And it's a timing question versus things that still need to be negotiated.

Yeah. No, as I said, we have to work through. Obviously, we have a JV construct. I won't comment for others involved in the joint venture. Aptiv's intention is to no longer participate in funding. And within the constructs of the joint venture agreement, we are looking at opportunities to reduce our holdings of the common stock, and that work is in process now. Just given the nature of transactions like this and the fact that we're working within a joint venture agreement, we felt it was prudent to put the full Motional impact into the guide versus trying to take an educated guess at when something may complete. But obviously working through that now, but the funding decision has been made.

Understood. Thank you.

And this will be our last question, and it is going to come from Adam Jonas from Morgan Stanley.

Hi, thanks for taking the questions. It's been a good call. How much of your CapEx and R&D is being spent to support full BEV architectures?

In terms of total advanced engineering, which is the closest development, which you know, Adam, which is roughly 25% of our total engineering spend, we would say somewhere between 5% and 10% would be BEV related, electrification related, I should say.

All right. Thanks, Kevin. And just again, I know the negotiations are ongoing, but anything to call out in terms of a breakup or walkaway fee, or I'd say at a high level, could investors anticipate the potential among your range of scenarios to have a potential payment to wind up your involvement with Motional?

No, there's no such requirements in the joint venture agreement, and we wouldn't expect to sign up for anything like that.

Okay. Thanks, everybody.

Great. Thanks, Adam. Is that the final question?

And [that concludes] (ph) today's questions and answers, and I'll turn it back over to Kevin Clark. Please go ahead.

Great. Thank you, operator. Thank you, everybody, for your time today. Have a nice rest of the day. Take care.

And this concludes today's call. Thank you for your participation. You may now disconnect.