Good day and welcome to the Aptiv Q2 2024 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.

Thank you, Jess. Good morning and thank you for joining Aptiv's second quarter 2024 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 reconciliation between GAAP and non-GAAP measures for our second quarter results as well as our 2024 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 Chairman and CEO; and Joe Massaro, Vice Chair and Chief Financial Officer. Kevin will provide a strategic update on the business, and Joe will cover the financial results in more detail before we open the call to Q&A. With that, I'd like to turn the call over to Kevin Clark.

Thanks, Jane and thanks, everyone, for joining us this morning. Let's begin on Slide 3. Looking at the second quarter, we delivered record earnings and EPS, reflecting solid execution across the company as well as lower supply chain disruption costs, completion of the restructuring of the Motional joint venture, and lower share count. The strong earnings 180 basis points of operating margin expansion and 26% EPS growth was in spite of significant revenue headwinds from select customers, which Joe will provide more detail on later. These headwinds were partially offset by strong ADAS revenue growth in North America and Europe as well as double-digit revenue growth with the Chinese local OEMs. Our cash flow performance continued to be strong, positioning us to repurchase over $400 million of stock during the quarter. Building on that momentum, this morning, we announced a new $5 billion share repurchase authorization, which includes an accelerated share repurchase plan. reflecting our view that our stock is undervalued and does not reflect our significant market opportunities. Joe and I will provide more detail on the announcement later in the presentation. And lastly, we released our annual sustainability report, which provides an update on Aptiv's commitment to not only achieving our sustainability goals, but assisting our customers in achieving their goals as well. Moving to Slide 4. During the second quarter, we booked $4.3 billion in new business awards, bringing the year-to-date total to over $17 billion, putting us on track to achieve our full year target of $35 billion. Advanced Safety & User Experience bookings in the quarter totaled $900 million, driven by continued strong momentum in ADAS as well as awards across Wind River's product portfolio in the A&D, telco, industrial, and automotive markets. bringing year-to-date bookings to nearly $3.5 billion. Signal & Power Solutions new…

Thanks, Kevin, and good morning, everyone. Starting with the second quarter on Slide 11. Aptiv delivered strong operating performance in the quarter, reflecting execution of our performance initiatives as well as our continued focus on costs, resulting in operating margin improvement of 180 basis points over the prior year. Revenue was $5.1 billion, down 2% or 1% below underlying global vehicle production which was down 1% in the quarter. Revenue growth was primarily impacted by lower production volumes at select customers, including a European OEM with a large truck and SUV presence in North America, a global EV-only OEM and two multinational OEMs in China that are experiencing significantly lower production volumes. These customers represented the majority of the revenue shortfall in the second quarter and as I will discuss shortly, we are lowering our full year revenue outlook. Despite the top line pressure, adjusted EBITDA and operating income were both quarterly records at $788 million and $606 million, respectively. EBITDA margins expanded 220 basis points over prior year as our performance and cost actions helped reduce the decremental impact of lower revenues. FX and commodities were a $17 million headwind in the quarter. Earnings per share in the quarter was $1.58, an increase of 26% from the prior year, including the benefit of higher earnings, completion of the Motional JV transaction, a $0.12 benefit in the quarter as well as benefit of a lower share count, partially offset by higher taxes. Operating cash flow was strong, totaling $643 million, capital expenditures were $226 million and share repurchases totaled $434 million. Moving to Slide 12. Revenue of $5.1 billion was down 2%. As mentioned, revenue was negatively impacted by vehicle production headwinds in select customers primarily impacting our electrical distribution and user experience product lines, including customer schedule reductions in…

Thank you, Joe. I'll make some final remarks on Slide 20, before opening the lineup for questions. We executed well in the second quarter, despite the revenue headwinds with record earnings and strong cash flow. And we're well positioned to continue our solid operating performance through the remainder of the year. We believe our revised financial outlook is prudent, reflecting the lower OEM production schedules, plus an overlay of incremental management conservatism that Joe mentioned. And we're confident that our strong operating performance will translate into increased operating margins as reflected in our updated outlook. As the automotive industry navigates the near-term headwinds, we remain confident that the trends towards greater levels of electrification, connectivity and digitization will continue. And Aptiv's portfolio is well positioned to help our customers both transition to and benefit from a more electrified, connected and software-defined world, which we're confident will result in strong earnings and cash flow growth that will translate into significant value creation for our shareholders. Our conviction around the medium-to-long-term trend and our strong operating performance, has positioned us to take advantage of the market dislocation in our stock price, and allows us to increase our capital return to shareholders. Our management team remains focused on flawless execution and creating shareholder value, and we will continue to drive the business forwards, focused on developing our portfolio of advanced technologies, strong operating execution, returning cash to shareholders and maximizing the value of our portfolio of businesses. Operator, let's now open the line, up for questions.

Thank you. [Operator Instructions] We'll now move first to Joe Spak with UBS. Your line is open. Please go ahead.

Thanks. Good morning everyone. Kevin, just to start on the buyback, clearly, a strong signal from you and the management team, I know you as a leadership team, have been very focused on shareholder value. So can you just talk a little bit more about, how you came to this decision to sort of lever up versus maybe some other options? And then on the debt, you've historically also been pretty conservative. So is this just confidence in the next few years' cash flow to sort of bring this down? Or are there other some potential ways to maybe get some cash out of the business by like looking at some slower growth assets or something like that?

Yes. Thanks, Joe. Well, listen, I think I'd start with our general review from a management standpoint is we remain conservative. Our outlook for the business is, and quite frankly, has been very strong over the last couple of years. Clearly, as it relates to the transition from COVID to supply chain disruption and some of the cost and inefficiencies that we had to absorb and had to work through over a period of time. That took a little time, and we've gotten through it. The reality is we've gotten through that and is reflected in our results last quarter from an operating performance standpoint quarter from an operating performance standpoint this and then as we look at the balance of the year, we have really strong, strong confidence in our ability to continue to execute and deliver margin expansion. Now setting that aside, we look at the opportunities that are in front of us where whether it's electrification, which clearly has slowed a bit whether it's areas in and around active safety or user experience or our Engineered Components portfolio, we're very optimistic. We have significant opportunities in front of us in the automotive and nonautomotive space. And relative to those opportunities relative to how we're executing and the operating performance that we're delivering our share price is clearly - it's clearly undervalued. And as we look at trade-offs, various investments, it's the most attractive investment that we have in front of us. And given the performance of our business and our view, outlook for the future, we feel as though we can do this while at the same time, continuing to invest in the business. And as it relates to other opportunities to increase value, that's something that we - as we always do, we'll continue to look at, we'll continue to evaluate. And to the extent we need to adjust our portfolio to certain market trends or market dynamics. Those are things we'll consider.

Joe, it's Joe. Just to follow up from a delever perspective, not assuming any cash from sort of one-off sources. We've built a plan here that allow us to delever over the course of 2025 and maintain the same view on financial policy that we've had before.

Okay. Thank you. And just the second question on China. Obviously, sort of - this has been an area of a lot of focus for investors, not just for Aptiv, but the entire industry. And you have the growth under market now of 4% for the year. Doesn't seem like the dynamics of some of those foreign players are changing anytime soon. I know you showed some decent metrics with some of the domestic players. But I think in the past, you've said your backlog is moving to a 50-50. But if you look, the domestics are already 60%, maybe 65% share in some of the more recent months. So I know you don't recast your pass bookings, but like how much of that should investors think is at risk? Because clearly, some - it would seem that some business that has been awarded is just not going to materialize in the volumes.

Yes, Joe, it's Joe. Let me start. I mean our revenues are over 50% at this point, local Chinese OEM and growing quickly. We're clearly growing into that market share shift. Bookings are 60-plus percent and have been for the last couple of years on the Chinese locals. So it's something - I don't have the exact bookings headwind number for you, but it's clearly something we're watching closely. It is something the team has been on for a while now. This isn't something we just started doing in the last couple of quarters. At one point, that business, as you know, was 70% global, 30% local. So we continue to see good transition. I think the challenge at the moment is just how quickly couple of these multinationals are actually dropping off more than a concern about how well we're growing with the locals. And it's something we're working with those customers on and obviously watching closely.

Yes, if I can add, Joe, I think important in the China market with the local OEMs the period between award and actual launch tends to be nine to 12 months. So ability to gain traction and deliver revenue growth and it's reflected in the growth numbers that Joe talked about with China local OEMs, it's rapid. I would say the challenge that we have in China right now is really from a multinational standpoint is unique to two customers. And this past quarter, we saw a significant reduction in their volumes, in their schedules. And a part of the judgment that Joe was referring to or Joe referred to from a schedule standpoint is that continues during the balance of this year. So as Joe said, changing our mix has been a priority for the last three years. We have made traction. We'll continue to make traction. And we think we're addressing the challenge there and the market changes.

Thank you, guys.

Thanks Joe.

We'll move next to John Murphy with Bank of America. Your line is open. Please go ahead.

Good morning, guys. Kevin, just maybe - and Joe, maybe just kind of in sort of a strategy and philosophical follow-up to sort of this cap reallocation as you think about the step-up in buybacks, you're kind of alluding to the shares being very undervalued, which I certainly agree with, at a good ROI, which I also agree with. But it does suggest that you may be shifting capital away from R&D, product development and growth going forward. Is that the suggestion here that there's kind of a potential, a little bit of a slowdown here in some product development. I mean you guys are often way out - way ahead of the curve often SBA and stuff like that is really advanced stuff that taking time to come to fruition that you might be able to sort of structurally slow down your R&D and product development? And then lean back on some of the ICE and other core products and generate more cash and we might be looking at an even better return of value to shareholders over time. Just curious how this balances out sort of back into the core business?

Yes. So I agree with your first comment, stock price, share price is significantly undervalued with respect to priorities. Listen, it's important we position ourselves for the trends in our industry and the challenges that our customers are dealing with. Obviously, some of those have slowed a bit as we look at some of that - some of those slowdowns we have scaled back investment in certain areas - in areas like high-voltage electric electrification, some aspects of that; in areas like smart vehicle architecture, we've scaled back. We haven't completely stopped but slowed and that's freed up additional engineering dollars. At the same time, John, our engineering factory, both in the ASUX segment and the SPS segment is really executing extremely well, a number of the efficiency initiatives that we've put in place from an operational standpoint as well as the rotation of our footprint to best cost countries has certainly generated benefits. And from an outlook standpoint, we'll reduce engineering spend year-over-year by $75 million to $100 million this year, so a significant level of productivity.

Got it. And then just a follow-up. I mean you mentioned HellermannTyton was about $2 billion in revenue right now. I think you acquired it in 2015. It was about $500 million roughly give or take back then. So that's a 15% CAGR. So that's been not a double or triple, I argue maybe a home run. Are there other acquisitions that could create even greater extension in adjacencies for your core business that might make sense that you guys are looking at right now? I mean, because that - I mean that's a great example of an add-on.

Well, I'm not sure I fully understand your question. So when we bought HellermannTyton, it was just under $1 billion of revenue. So it's effectively doubled over the time frame. From an M&A standpoint, been an absolute home run. It's a great business. It's global. Margins have expanded significantly. We've seen similar sort of growth rates over an extended period of time in the Winchester business from an engineered component standpoint. And the reality is when you look at our connection systems business, over the decade plus I've been here, John, those revenues have increased roughly fourfold. Now some of that is acquisition related. Some of that's organic. Clearly, they're strategically important businesses. As you know, they have high margin profiles, which make them very attractive. And those are areas that we're really focused on investing in taking those businesses and those products if they're in the automotive market into the nonautomotive markets, and for those that are in the nonautomotive markets, if it makes sense, leveraging our automotive business so that we kind of cross-pollinate product portfolio. So it's certainly a big area of focus for us.

Okay. Thank you very much.

We'll move next to Itay Michaeli with Citi. Your line is open. Please go ahead.

Great. Thank you. Good morning, everyone. Just first question, just given the volatility in top line this year and of course, the resilient margin. Just curious how we should be thinking kind of more broadly in the medium term around the company's organic growth or growth of market as well as just the incremental margin path from here? And then just secondly, on the bookings, I know it can be very lumpy quarter into quarter, but just curious how Q2 compared with internal expectations. I think in the past, you may have suggested there was maybe upside to the $35 billion for the full year. Curious if that still is a potential for the year? Thank you.

Yes, Itay, let me start with the bookings question. It is lumpy. We're on track for the $35 billion. And again, we just - and if you look at the chart in the deck, right, you'll see the quarter just to move around based on size of awards, and we've had a couple of large awards in sort of given quarters. So nothing more than that normal lumpiness there and remain I think confident in the $35 billion at this point. As it relates to revenue, it wasn't very early, obviously, days to be going into next year. As we think about early planning assumptions, we're certainly targeting mid-single-digit growth, really assuming no help from the market at this point. So flat vehicle production, but a lot to work through, particularly just given the mix in platforms, the mix and powertrains, those types of things, and obviously, China.

If I can augment that. I listen - Joe, I think it's important because Joe articulated this in his prepared comments, really, when you look at - the second quarter, it was four customers that impacted our revenue in a negative way significantly. So that dynamic had a big impact on us for Q2, we believe they'll have consistent impacts in - for the balance of the year but we'll see how that play out. When you look at the broader mix of OEMs, listen, some are up, some are down, but the net is with those four. And I think it's important to keep that in context.

Absolutely. That's very helpful. Thank you.

We'll move next to Adam Jonas with Morgan Stanley. Your line is open. Please go ahead.

Hi. This is William Tackett on for Adam Jonas. I'm curious, maybe expanding on Itay's question to go with how fast the trends are shifting in the industry? Do you reiterate that long-term growth over market assumption of 6% to 8% I guess, even with the new aggressive capital return strategy? Thanks.

Listen, we'll look at customer mix, market dynamics and evaluate. I think, as Joe said, next year, we're looking at kind of mid-single-digit, sort of, growth on flat market. We needed to do more work on that to determine whether that's the longer-term outlook or it translates to what we're seeing more near-term.

Got it. That makes a lot of sense. I guess next question, do you expect to see your OEM customers fit the more advanced L2+ systems on non-software-defined vehicles and non-EV architectures with any material volume? And I guess if so, is this something that's relatively easy for the customers to do? Thanks.

Yes, I think we get asked questions about impact of some of the delays of technology adoption, whether it be the transition to EVs or possible transition to smart vehicle architecture. And what you need to keep in mind is OEMs need to be constantly upgrading and enhancing vehicles to me. Consumer demand regardless of whether they're adopting SCA or they're launching EV platforms. So we would tell you during this calendar year, we've seen incremental, what I'd call, bridge programs that relate to legacy ADAS or user experience solutions that are in the billions of dollars. So significant opportunities to enhance and upgrade existing solutions that we feel like we're very well-positioned for some are with existing customers, some are with new customers. So that progress, those opportunities, the OEMs desire to continue to enhance the technology, put more technology in the car will continue.

Got it. Thank you, guys.

We'll move next to Dan Levy with Barclays. Your line is open. Please go ahead.

Hi. Good morning. Thank you for taking the questions. I wanted to just unpack the margins a bit more. And maybe you can just talk to the trajectory? And how much is inflation, dissipation playing a role here, getting more pricing and really just reversing some of the headwinds that we saw in past years versus other things like engineering or footprint reduction. So I'm just trying to disaggregate sort of the margin strength from here.

Yes. Dan, it's Joe. I mean it's actually pretty balanced. I mean, I'd go back to sort of some of that discussion we had at Investor Day, of just how we thought margins would improve over the next coming years, right? You obviously had the COVID and supply chain disruption costs coming out. Those were $160 million last year with the majority of them in the first half. So we're seeing those come out. That's been helpful. But then to Kevin's prepared remarks, if you look at where engineering as a percent of sales, very much in line with those targets as it comes back down to sort of that 6% to 7% range, so it's fairly balanced really across those initiatives. That pricing commodities continues to be a contributor, but it's not - it's by no means as large as it was a couple of years ago.

And the price recoveries from customers, is that continuing to play a role here?

Yes, that's in that net price comment. That's obviously come down. We've seen the direct material inflation come down. And as a result, we've seen less recoveries. And at this point, the vast majority has been included over the past four-plus quarters has been included in piece price.

Great. Thank you. Second question is just on SBA and your presence with customers. Obviously, I think we're hoping for just some sort of an update on where the SBA discussions are with your customers. You had mentioned over the quarter that there was a $2 billion cancellation. Maybe you could just talk about the line of sight on the remaining $8 billion, I think - coming through market share. Anything you've talked about. And then even if you're getting - if some of these programs are going away, can you just talk about the other content that still have that shows that even if that - you've lost that content, there is still some offset on the high voltage or other pieces of the architecture?

Yes. Let me take a shot at it. So listen, pretty good line of sight as it relates to smart vehicle architecture. To put - to start with just the underlying trend. More and more OEMs are headed in this direction. So I would say the recognition to get to where they want to get from hardware architecture, software architecture to be more software defined. They need to re-architect both the hardware as well as the software. So I would say global recognition that, that needs to be done. Executing that can be difficult. You're seeing that with certain OEMs and that's impacting timing. To put it in perspective, two years ago at this point in time, we had a pipeline for smart vehicle architecture that included four OEMs. Today we have a pipeline for smart vehicle architecture that includes over 20 OEMs across the globe. So the pipeline is actually larger and the number of OEMs headed in this direction is actually larger. To the extent our approach to smart vehicle architecture is, obviously, we've talked about it. We've developed a system solution, but we sell components that go into that system solution. So customers don't have to buy our complete solution. They can buy parts of it, which puts us in a great position to serve either demand from the customer. As it relates to any delays or push off of programs, they have existing platforms that, as I mentioned, they need to be upgraded and enhanced, they can't be static, and that's especially in areas like ADAS or user experience and this year alone, we have in our pipeline, and hey, we won't win all of these. And some of these, quite frankly, we're probably less interested in, but we have opportunities that are over $10 billion. So there is significant opportunity out there for us to help OEMs bridge the gap. And those opportunities are on both ICE as well as EV platforms or electrified platforms. So in areas like active safety or user experience, it's very agnostic as it relates to what the power plant architecture is. So I hope that answers your question.

And maybe you could just anything on the share dynamics or just competitively how you think you're stacking up versus others on SVA?

Yes. Listen, we - again, I - we started down the SVA pass in, what, 2017, 2018. So our solutions are very strong. We're doing some work with select OEMs. We're very selective in terms of the business we pursue. There are, at times, desires for OEMs to have fairly customized solutions. We've productized our system and components that go into smart vehicle architecture. So we're not - we're looking for standardization and technologies that we can bring across multiple OEMs versus develop customized solutions for a given OEM. So I'm not sure share is the right way to look at it at this point in time. But we sit - we're very well positioned just given our portfolio of products and our experience in this area.

Great. Thank you. That's helpful.

We'll move next to Mark Delaney with Goldman Sachs. Your line is open. Please go ahead.

Yes. Good morning. Thanks very much for taking my questions. The company had several launches that were supposed to occur in the second half of 2024 that allowed for an acceleration in growth over market with your now 4% growth over market assumption for 2024 that still does require a meaningful step up relative to what you reported for the first half. So maybe you can help investors better understand your confidence and visibility into those launches occurring and to what extent that's been a piece of the conservatism you mentioned compared to the schedules?

Yes. I would say from a launch standpoint it partly depends on mix. So I'd be careful on first half, second half as it relates to revenue because the reality is, you need to start the launch and there's a ramp up and it takes a period of time for it to come to full revenue. So I would say as you look at 2024 calendar, you prefer to have a heavier weighting in the back half of Q3, which we had, and then the first half of the back half of 2023, I'm sorry. And then the first half of 2024, right? That would be your preference so that you're hitting the revenue inflection point in the back half of 2024. And that's how our launches are timed. We watch this by region, by business unit, by product line. And that's what's reflected in our guidance for the back half of the year from the revenue standpoint and it takes into account what Joe shared from our outlook from a vehicle production standpoint with the overlay of incremental management conservatism.

Yes, Mark, I'd say it's the launches themselves and we haven't seen any cancellations to Kevin's point. A lot of these have started at lower volumes earlier in the year. So they're impacted maybe by vehicle production total, schedules from customers. But generally, from a launch perspective, remain on track. I'll go back to Kevin's earlier comment, the select customers that we called out, there roughly 70% of the revenue reduction in the back half of the year, right? And then we have the conservatism overlay out sort of top of that. So this really is a very acute situation with those four customers. And we're really there's some schedules moving up and down a bit with other customers. But for us, it's really those four customers that we called out that where we're seeing. They were the vast majority of the shortfall and well over 70% of the full year takedown.

Okay. That's helpful. Thanks. My other question was on Wind River. I believe, you assumed mid-teens growth for Wind River revenue this year. Can you give an update on where that's tracking? And maybe as you think about Wind River longer term, can you talk about the momentum with customers, especially in the automotive space and the prospect for any additional wins? Thanks.

Yes. So second half weighted from an overall growth rate, just given revenues last year were timed stronger in the first half of the year. So when you look at it from a year-over-year standpoint, strong opportunities and launches in Aerospace and Defense and Telecommunications and Industrial and Automotive. Growth opportunities in Automotive, we've had significant success in the China market, just given the nature of the new platform introductions. So it's easier to introduce a solution like the Wind River VxWorks Solutions or Helix Hypervisor on a platform that you are launching a new platform versus an existing platform. So largely on track from an automotive standpoint, we would say the opportunities remain solid. Gaining traction on Wind River Studio developer, especially in the automotive space and I would say that's across regions, just given the challenges that OEM customers are having with software development, the productivity that they're looking for, the fact that for the last few quarters, we've been using studio developer on our new program launches. So that integrates into the engineering organization, organizations of both Sows as well as OEMs, so they're seeing the benefits from a quality and efficiency standpoint. So the growth profile remains intact, and to-date, most of our progress in the automotive space has really been in China.

Thank you.

We'll move next to Shreyas Patil with Wolfe Research. Your line is open. Please go ahead.

Hi. Thanks a lot for taking my question. Wondering if you could just provide more details on some of the cost tailwinds in the quarter, I think you mentioned the elimination of supply chain and COVID costs that might have been maybe $40 million to $50 million but on my math, you were probably achieving something closer to $175 million in net performance and productivity. You mentioned I think engineering was a tailwind as well. And just big picture, you've talked before about incremental margins in the 18% to 22% range. With these cost actions, do you see that trending higher as we look out?

Yes. Listen, I think we're continuing to project less away from long-term sort of margin projections. We've obviously talked about where we thought 2025 looks and I think we're on that at 12.5%. I think we continue to track towards that if you look at where we'll be in the back half of the year. As I mentioned earlier, Shreyas, it's really a balance, right, where we're seeing really strong manufacturing performance, I agree with your COVID supply cost chain numbers coming - the disruption costs coming out, engineering coming back in line and we're seeing really strong performance coming out of the operations of the business as well. So it's really if you go back to sort of how we thought about margin enhancement over - back at Investor Day, we had that $1.7 billion of what we thought was going to be in performance over three years. About $300 million of that was the supply chain disruption coming out. The remainder, we talked about being sort of equal improvements over the course of the three years across manufacturing, logistics, engineering and SG&A and that's really what we're seeing. So it's fairly balanced. There's no big one-off items in there. It's really the business operating well. As we talked we talked about it at the end of last year, took a made a decision on what I'll call overhead costs and took out a significant amount of overhead costs. We about a $50 million number. We're seeing that come in. as well. So it's fairly well balanced. And I think it puts us if you look at where run rate margin or sort of back half H2 EBIT margins will be in sort of those mid-12s, that sets us up, I think, pretty well for the 12.5% we were talking about 2025.

Okay. Great. And just one last one. Following up on Dan's question earlier on SVA. Just trying to think about the trade-off here between the reduction that you would - that you see in SVA architectures terms of wiring content. I know that's a lower margin business for you. But in a situation where you may not be winning as much in specific SBA products, whether it's zonal controllers or CDCs or anything like that. Just how to think about the what are the positives that are still there besides those architectures, whether it's in engineered components or high-voltage connectors, just trying to think about those architectures as we look ahead?

Yes. Well, the math we used to do, make sure I understand your question as it relates to SVA versus traditional architecture and our product portfolio is effectively if we had a full system, right, $3 would go in and roughly $150 would go out like that was the net. And most of that would be in and around the wire harness, right? That's where you see you see - would the net change. As it relates to incremental opportunities again, our customers don't remain static. So to the extent they are pausing on something delaying or stopping there are certain things that they need to do with that vehicle and vehicle lineup. And that can translate into incremental vehicle architecture or let's call it, a step change in vehicle architecture, not all the way to SVA, where the wire harness is changed. Mass is taking out and it's replaced with things like high-speed cable assemblies and other items like that, that reduce weight and mass improve performance and translate into more content for Aptiv. To the extent they're delaying a particular architecture like a zonal controller or a CBC, they are going to have to enhance and upgrade their ADAS, user experience and other solutions that's what I was referencing in the $10 billion opportunity that I talked about in this particular calendar year. So there are opportunities in and around those spaces that didn't exist previously, right, that weren't there for ourselves. So that's an incremental revenue opportunity as well.

Okay. Thanks.

We will take our final question from Tom Narayan with RBC. Your line is now open. Please go ahead.

Hi. Thanks for taking the question. Only if I could do this as a follow-up, if necessary, but just getting this question. The leverage that you guys are at, I guess, when you do the ASR and kind of what level of cash do you need just for operation? Just love any kind of numbers associated with that.

Yes. Cash. Hi, Tom, it's Joe. Cash from operations is, call it, $600 million to $800 million, we finished the quarter with $1.4 billion of cash. We have another €700 million actually of market like securities. So we're in a good position as we ended the quarter, adjusted debt to EBITDA, call it, right around 2 times net debt obviously lower. So, we're in a really good position. I mean we've really kept that balance sheet in really good shape over the last few years, right? We managed it well through COVID, in my view. We're generating a lot of cash. So we're in a really good position to do this from an ASR and putting on the debt to repurchase the stock, and we've talked to the rating agencies, intent is to maintain investment grade and work over the course of next year to - when we do the final debt offering support the ASR, we're going to include some prepayable debt, but it will allow us, in our view, to get back to effectively where we are today by the end of next year are certainly very early 2026.

Got it. And then a quick follow-up on SVA. I know we talked a lot about that. But one thing we've been hearing from some of the OEMs, mostly on the premium side is what appears to be at least their public statements, their desire to do as much as possible kind of on their own or maybe utilize Tier 1 less. Is it a dynamic where there's a differentiation between maybe premium OEMs wanting to differentiate for their own brand, whereas maybe mass market OEMs, where that's not necessarily the case? Or because you mentioned you have the optionality to sell components, if not the whole system. How do you think the market is turning out in this context? Is it like a mass market versus premium thing? Or is it just kind of scattered? Yes.

Yes. So we would say it's really OEM by OEM. When a comment like that, the question is, want to do more on their own, not quite sure what that means. It might mean kind of design of the particular smart vehicle architecture. That maybe touches on the point where I talked about. We don't view this as particularly differentiating for a unique OEM. Our focus, just given our years of history in and around power and data distribution is just how do you how do you do it effectively, efficiently at lowest cost, how you reduce weight and mass. So, we feel like, obviously, our solution is the best solution if a particular OEM wants to go down the path that you talked about, they certainly can. We're focused on avoiding customized solutions for OEMs. So, that's that business we have pursued or we would pursue. So, I'm not sure - I'm not sure that at the end of the day, it's that differentiating or important for an OEM to own, but if they elect to do it and if we have a product that meets their needs that we can sell profitably, that's certainly something we'll do. If not, it's something we'll do - we won't do, we'll move on to the next OEM. As I mentioned, our pipeline today includes programs with 20 different OEMs versus two years ago four. So there's plenty of opportunity that's out there.

Got it. Thank you.

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

All right. Thank you, everybody, for joining our call today. We really appreciate your time. Thank you.

Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.