Aptiv Stock

Good day, and welcome to the Aptiv Q3 2026 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Betsy Frank, Vice President, Investor Relations. Please go ahead.

Thank you, Jennifer. Good morning, and thank you for joining Aptiv's Third Quarter 2026 Earnings Conference Call. The press release and 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 year-over-year comparisons are based on Q3 2025 pro forma new Aptiv results, excluding the former EDS segment. The reconciliations between GAAP and non-GAAP measures are included at the back of the slide presentation and the earnings press release. Unless stated otherwise, all references to growth rates are on an adjusted 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 are Kevin Clark, Chair and Chief Executive Officer; and Varun Laroyia, Executive Vice President and Chief Financial Officer.

With that, I'll turn the call over to Kevin.

Thank you, Betsy, and thank you all for joining us this morning. Starting on Slide 3. We delivered solid third quarter financial results, including revenue growth of 2%, which was consistent with the second quarter an EBITDA margin of 18%, in line with our expectations. We repurchased more than $230 million of stock in the quarter, bringing our year-to-date total to more than $550 million and we remain active in the fourth quarter and plan to repurchase at least $650 million by year-end, returning 100% of our free cash flow to shareholders during 2026.

Shifting to future business. We secured roughly $4 billion of new business awards in the third quarter, bringing our year-to-date total to more than $13 billion, which reflects progress in the following strategic areas. In China, we grew bookings by 30%, of which more than 20% are tied to export programs. In Intelligent Systems, we more than doubled European bookings, addressing the customer mix challenges we're facing in that region that are weighing on our growth. And we booked $3.8 billion of nonauto awards more than double the year ago period as we've established our presence in new end markets, including drones and robotics.

The momentum we built in nonautomotive markets has led to a significant revenue base that we're now leveraging to create incremental growth opportunities. We're on track to generate more than $3 billion in 2026 revenues including $2 billion in A&D, telecom and datacom and diversified industrials. As our revenues in these markets has scaled, so have the opportunities to further leverage the breadth of our product portfolio and the depth of our capabilities. This is best exemplified by the award we received in July from a leading drone manufacturer that we discussed on our last earnings call. And the 2 robotics awards we secured over the past 2 quarters as well as the increased amount of business we're being awarded in the energy storage and AI data center markets. I'll talk more about our individual awards this quarter on the next 2 slides.

But looking ahead, we have a large funnel of fourth quarter bookings opportunities and are on track to reach our $20 billion target. That said, award cycles may lengthen as we finalize negotiations on commercial recoveries and the pass-through of price increases which we expect to increase meaningfully in 2027. Now let's review our segments through the lens of the automotive and nonautomotive end market we serve.

Starting with the automotive market on Slide 4, we continue to expand and diversify our OE customer base, creating a more resilient revenue stream. Notable program launches in the quarter included our Next-Gen L2 ADAS smart camera for a lead Chinese OEM exports to the European market. The solution combines a Chinese SoC, Wind River Kaiwu RTOS, a vision stack from StradVision and active software features, all brought together through Aptiv's global ADAS integration, validation and safety capabilities to deliver a cost-effective ADAS solution that meets stringent 2026 European NCAP 5 star safety standards. This solution demonstrates the power of our open, flexible and modular ADAS architecture and our ability to deploy technology from China in global markets. This is just the first of other planned launches with this OEM for export into the European market.

High-speed cable solutions for the flagship SUV and truck program of a North American OEM and a Korean OEM's next-generation EV platform, multiple advanced radar programs across Korean and major Japanese OEMs, reflecting our continued growth and technology adoption across global vehicle programs. A zonal controller with up integrated functionality for multiple premium electric vehicle brands at a leading Chinese OEM and high-voltage interconnect solutions deployed across multiple leading OEMs and 5 chip EV platforms.

We also secured several important new business awards in the quarter, including 2 strategic ADAS awards with a China-based global EV market leader for deployment across its next-generation intelligent driving platforms in 2027. First, an L2 ADAS system, incorporating a localized technology stack and components and second, a next-gen radar solution, enabling L2++ functionality secured on an accelerated development time line. These awards highlight Aptiv's flexibility in delivering innovative high-performance technologies tailored to regional needs and evolving customer strategies.

A conquest award for high-performance cable management products, highlighting continued adoption across leading Japanese OEM platforms, another award for our modular connector portfolio for a leading European OEM next-generation modular vehicle architecture. And lastly, 2 integrated cockpit controller awards for Chinese OEM export programs, further strengthening our competitive position as these customers expand globally.

Moving to Slide 5 to discuss our product -- progress in nonautomotive markets, where new business awards further strengthen our confidence in the growth potential of these markets. We continue to deepen our network of strategic partnerships during the third quarter, including an expanded partnership with NVIDIA, which brings together NVIDIA's edge platform and active sensing, compute software and systems integration capabilities to accelerate the deployment of production-ready physical AI and intelligent edge systems and a partner with Samsung, leveraging our Wind River cloud platform solution to support the advancement of AI-RAN in Korea.

During the quarter, we also executed mobile new program launches across our portfolio, a high and low voltage interconnect products for a leading commercial vehicle manufacturer. Collectively, these launches reinforce the applicability of our portfolio across vehicle architectures. Lastly, we launched our first RADAR program for a major commercial vehicle OEM in North America.

A few notable new business awards in the third quarter included an award in China for humanoid robots incorporating high-performance compute and interconnect technologies, high-performing interconnected connectivity solutions for data center and battery energy storage applications, reinforcing our portfolio supports next-gen AI infrastructure an award in the medical device industry, providing high-performance cable assemblies for critical patient care applications where reliability performance are paramount. And lastly, a key software award was a leading telecom equipment provider supporting a range of critical network infrastructure applications.

Turning to Slide 6. I want to take a minute to talk about the setup for 2027 before Varun walks you through the numbers. Starting with the challenges, which we believe present risk to third-party vehicle production forecast, First, the industry is experiencing significant input cost inflation. For memory chips, the favorable pricing we secured for our customers in 2026 will not repeat in 2027. We're well ahead of this headwind in 2026 due to our robust supply chain strategy.

We began investing in buffer stock inventory in early '25 for select customers who are interested in the added insurance. And over the same period, we've met regularly with these customers to fight our expectations for supply constraints and material inflation, including on semiconductors and memory chips. As you'd expect, these customers are now more strategically positioned to mitigate any supply constraints, which are starting to affect OEM production schedules. On top of this broader commodity inflation and tariffs continue to increase input costs.

Second, regarding assumptions for vehicle production. We believe ongoing supply chain constraints will continue to lead to intermittent production disruption. Affordability pressures from the combination of higher MSRPs and lease rates could weigh on consumer demand and could translate to lower vehicle production. And the conflict in the Middle East and Ukraine as well as evolving global trade and tariff policies across Europe, the U.S., Mexico and China, could further increase input costs and exacerbate current supply-demand imbalances.

Our outlook for 2027 is also influenced by current revenue headwinds driven by 2 luxury German OEMs that will continue through the fourth quarter of next year and largely abate in 2028, which Varun will touch on shortly. So as we position our business, we're taking a more cautious posture. But these challenges have also presented several opportunities.

Our resilient global supply chain, which we execute on a regional basis, includes dual sourcing and validation of product alternatives and is backed by a digital twin that covers 95% of all the parts we procure, mapped down at least 4 supply tiers and covers 99% of the semiconductors we purchased, mapped down at least 5 supply tiers. And to the extent our customers face increased cost pressure, the resiliency of our supply chain enhances the value of our advanced technology solutions, which are high-performing, open architected, scalable and cost-effective.

As a proof point, last week, we received a customer award that draws on all of our strengths, resulting in significant incremental ADAS content, replacing competitors' high-cost vision, parking and surround view monitoring systems with a fully integrated Aptiv ADAS platform, built our smart camera with latest generation DDR5 memory for supply resilience that incorporates the vision solution from our partner StradVision and Aptiv's full L2+ ADAS, parking and in-cabin software in hardware tech stack.

The challenging environment is creating incremental opportunities for our high-performance, cost-effective dilutions, although the impact on revenue will be more pronounced in 2028. Outside of the automotive market, we're finding significant opportunity energy storage, data center, robotics and aerospace and defense markets by leveraging our world-class supply chain capabilities as well as our portfolio of computing perception systems and high-speed interconnects. Varun will share more on how all this is shaping our 2027 financial outlook.

So with that, I'll hand it over to Varun.

Thanks, Kevin, and good morning, everyone. Starting on Slide 7 with our third quarter financial results. We delivered revenues of $3.2 billion, which grew at an adjusted rate of 2%, consistent with the prior quarter. The results include 11% growth in non-auto and a 1% decline in automotive. Looking at revenue growth by region. North America grew 5% driven by strength in both our Intelligence Systems and Engineered Components segments.

In Europe, revenue was down 5% and driven by a decline in the Intelligent Systems business, where revenue was impacted by weakness with 2 luxury German OEMs, which we expect to persist through the end of 2027. This was partially offset by growth in the Engineered Components segment. And in Asia Pacific, revenue increased 5%, including a 13% growth in Asia ex China, mainly driven by growth in India and 1% growth in China driven by continued momentum in Intelligent Systems, which grew for the second consecutive quarter.

Adjusted EBITDA totaled $567 million, and adjusted EBITDA margin decreased 140 basis points due to product mix, including lower software revenues and the timing of engineering credits. Favorable commodities partially offset by favorable FX and investment in both segments directed towards organic growth initiatives. Earnings per share was $1.42, a decrease of $0.06, reflecting lower operating income, offset by the benefit of share repurchases and lower tax expense.

Free cash flow for the quarter was $194 million, which brings our year-to-date pro forma free cash flow to $44 million. I'll talk more in a moment about full year expectations though our pacing through Q3 is consistent with our outlook for the full year, given the separation costs incurred in the first half of the year related to the spin of our Electrical Distribution Systems business, inventory investments to ensure supply chain resiliency and seasonality.

Moving to Slide 8 to cover segment level financials. In Intelligence Systems, revenue of $1.4 billion was down 3%, mainly driven by Europe and partially offset by growth in North America and Asia Pacific. Sensors and compute revenues were lower by 2%, owing to softness in automotive. Software and Services declined 11%, in line with our forecast that we updated last quarter. Automotive revenues were down 4% driven by program roll-offs and lower exports to China with 2 German luxury OEMs and excluding these would have resulted in growth of 5% for the segment.

Nonautomotive revenues grew 3%, reflecting 15% growth in Sensors and compute, partially offset by weakness in software and services. Intelligent Systems adjusted EBITDA margin contracted by 240 basis points, driven primarily by the lower revenues and higher margin software and services and the timing of engineering credits partially offset by performance initiatives.

Moving to Engineered Components. Revenue of $1.8 billion grew 6% versus the prior year with growth across North America, Europe and Asia Pacific. Automotive revenues grew 2%, while non-auto markets grew 16%, mainly driven by growth in diversified industrials. Adjusted EBITDA margin decreased 100 basis points, reflecting commodity headwinds, partially offset by flow-through on higher volume.

Turning to Slide 9 for our 2026 financial guidance. As a reminder, our guidance is based on pro forma numbers, which are available on the Investor Relations website under the quarterly financial section. And for the full year, we are maintaining our income statement guidance from last quarter with the key metrics unchanged at the midpoint and the revenue range narrowed. On free cash flow, we are narrowing the range for the full year and lowering the midpoint by $25 million to $650 million. The initial $450 million drag on free cash flow associated with spin-related costs and supply chain resiliency is now $500 million with separation costs slightly lower than planned and inventory investments higher going to inflation.

For the fourth quarter, we forecast revenue of $3.2 billion at the midpoint, representing adjusted growth of 3%. The sequential step-up in revenue growth of 1% reflects production recovery at a North American OEM and higher commercial vehicle revenues offset by lower vehicle production. And I would also note that software and services revenues are forecast to be lower year-on-year in line with the third quarter decline owing to the timing of enterprise awards. We expect adjusted EBITDA of $612 million and margin of 19.4% at the midpoint. The sequential gap up in margin is driven by customer recoveries engineering performance benefits, including credits and manufacturing performance. For earnings per share, our guidance implies $1.45 at the midpoint.

I'd like to conclude by sharing our initial thoughts on the 2027 financial outlook. As Kevin shared, we are planning for changes to vehicle production. Third-party forecast as of September are calling for flat vehicle production globally. In our framework for production assumptions, we've anchored the top end of our range to this flat scenario which we think is optimistic given our expectations for supply constraints and significant input cost inflation related to semiconductors, including memory chips, broader commodity inflation and overall affordability pressures.

Our results will be impacted by 2 further items. First, pricing and recoveries were higher semiconductor prices will create a revenue benefit. Currently, we are estimating approximately $700 million in inflation related to semiconductor prices, primarily memory. The second impact relates to our Intelligent Systems business, which will continue to be impacted by weakness with the 2 German luxury OEMs going to net program roll-offs that concluded the end of 2027. and lower production assumptions for exports to China. Beyond these items, our resumptions for revenue growth incorporate an incremental element of conservatism, which we believe is appropriate at this stage.

Regarding bottom line impact, the recoveries will be neutral to EBITDA but create margin dilution given the lack of margin on higher prices being passed through. We will provide more details when we issue formal guidance next quarter. Outside of the points I mentioned, we expect it will be a flat to slightly positive year, driven by the combined impact of revenues ex recoveries, continued growth in nonautomotive markets, investments supporting organic growth and performance initiatives.

With that, I will turn the call back to Kevin for his closing remarks.

Thanks, Varun. I'll wrap up on Slide 11. I want to close by underscoring that regardless of the near-term challenges, we continue to see significant long-term opportunity in our business, supported by our differentiated portfolio of advanced technologies. We're confident that the strategy we've built serving the automotive market positions us well as the industry adapts and evolves. We're also confident in our opportunity beyond automotive, where we continue to make organic investments across both business segments to accelerate our penetration, building on the momentum we've already established.

The opportunities in the auto and industrial markets underpins our expectations that our revenue growth reaccelerates in 2028. This confidence, combined with what we believe is a disconnect between the intrinsic value of our stock and its current trading value is leading us to prioritize share repurchases in our capital allocation strategy. which means we plan to return 100% of our free cash flow to shareholders through at least the end of 2027, consistent with what we're doing in 2026.

As we focus on unlocking shareholder value, we're evaluating the composition of our business and product portfolio, and we will provide an update in the first quarter 2027. In summary, we're focused on shareholder value creation through strong operating execution, disciplined capital allocation and portfolio optimization.

Operator, let's now open the line for questions.

[Operator Instructions] We'll take our first question from Dan Levy with Barclays.

I wanted to start first with the growth outlook. And if you back out, obviously, the $700 million, it implies growth is roughly flat. Maybe you can just help for '27. Maybe you could just help us understand some of the moving pieces. I know you said that's being weighed down by the reduced export business from Europe to China, what are the offsets that you're seeing there in terms of maybe some of your non-auto business doing well and perhaps other pieces of the backlog or bookings that may be launching. So just some puts and takes within the growth to help us understand what's otherwise sort of a flat growth outlook ex the recoveries?

Certainly, Dan. It's Varun Laroyia here. Thanks for the question. Listen, with regards to 2027, this is a preliminary outlook. And I do want to state, given the points that Kevin and I raised with regards to the base case being at the top end of our range. we think is optimistic, specifically given supply constraints, input cost inflation, broader commodity inflation, affordability pressures, right? So that's kind of point number one.

But as we think about the overall mix of our businesses, listen, we remain confident in our growth outlook for nonautomotive that, as you've seen now for the past several quarters is performing well. We expect that to continue, and that's backed up also by the bookings that we've seen which have essentially doubled up on a year-over-year basis. So we feel good about that.

The automotive business, which accounts for 3/4 of our revenues at this point of time, that essentially is the challenge with regards to what the vehicle production outlook is for the points that I just mentioned. As we think about areas where we are making progress, North America and also Asia Pacific, China, Intelligent Systems in China now for the second quarter has delivered a second consecutive quarter of growth, given a weak domestic environment and our bookings on export platforms continue to increase.

The final point I'll share from a growth algorithm is essentially our European business and Intelligent Systems specifically where we've talked about the fact that we've been impacted by net new programs. This includes the roll-offs and then also the 2 German luxury OEMs which have exports from the EU into Europe being impacted. We expect that to persist through the end of 2027 before returning to growth in '28.

Yes. Maybe, Dan, it's Kevin. I'll just add to Varun's comments, that's what [indiscernible]. Listen, high level -- as we look at the market today, it's certainly dynamic, and Varun talked about the base line off of IHS then downside of vehicle production down 2%. In addition to that, we're concerned with respect to supply chain constraints that we're going to see some intermittent supply chain disruption, actually an increase in supply chain disruption, and that will have an impact both on vehicle production revenue growth as well as just overall operating efficiency. So that's something that we're watching very, very closely.

Now we're in a very good position to manage through that. However, we don't have the same visibility across the supply base and the OEM base to fully understand how well their position. Varun mentioned the headwind from the European OEM. That headwind will continue through the end of 2027. So I would say those are the overall kind of negatives that look at positives.

Look, bookings are strong. The mix of bookings with -- as Varun touched on China local OEMs, both for export out of China into Europe and elsewhere, specific programs we're working on now with European OEMs with respect to some of the China-based solutions or technologies that they plan on implementing in the European and other global markets. Those are significant opportunities. And again, the strength we're getting out of nonautomotive is very strong. Underneath all of that, though, we just overlaid an incremental level of conservatism above and beyond the range of down to -- flat to down 2% from a vehicle production standpoint just to ensure that we captured anything that we could reasonably envision occurring in a market as dynamic as this market.

So I think there is an element of a reconciling item that I would just characterize as a fairly significant level of conservatism as it relates to our outlook, just given the environment.

We'll take our next question from Joe Spak with UBS.

Just -- first question, I just want to start back on the $700 million of recoveries that you're talking about for '27. And I understand it's preliminary, but like how set is that number in terms of the conversations you've been having with your customers? And you made it seem like that's equal to your cost headwind because I think you said the margin impact is just sort of dilution. So I want to make sure you don't think there's going to be any leakage, so to speak, from the commodities? Or is some of that leakage embedded in that other 30 basis points impact you talked about from commodities and FX.

Yes. I would answer it this way, Joe, it's Kevin. Listen, just given the order of magnitude of the inflation one; two, we've been having discussions with our customers for the last, I would say, 6 to 9 months with respect to sizing the potential risk or issue. And the negotiations we're having with respect to, obviously, we can't absorb this cost. And if our own customers want parts they need to sign up for the increased prices related to semiconductors. So that's certainly our posture with our customers. That's the position that we're taking and our commercial organization is executing on that plan.

Okay. Second question, Varun. Just if you look at the preliminary '27, it looks like EBITDA is fairly flat year-over-year. You're talking about 100% of free cash flow being returned next year. Any guidance or commentary on CapEx plans, should that be pretty flat? And what about working capital? Because I can imagine that being a little bit more of a headwind given the higher cost inventory and maybe some timing issues with the receivables and the recoveries. But any color there would be helpful so we can calibrate the potential free cash flow return.

Yes, Joe, I think that's a great question. Given the recoveries aspect of it, as Kevin mentioned, good conversations taking place with our customers. And it's not just the point about recovering the cost inflation but also the net working capital impact. I will not be giving a cash number here, but what I will share with you are a few elements within the framework. So for example, when you think about 2026, and the EDS spend-related separation costs, we do not expect those to reoccur in 2027 in this preliminary view at this point of time.

With that being said, with the inflation moving up, that essentially is what we are working through with our customers without getting their support and commitments, we cannot ship parts. So we need those commitments coming through, including from a funding perspective. Beyond that, as you can imagine, we are taking a fine wire brush working through CapEx plans and other elements to ensure wherever we can be more judicious about noncontracted capital expenditures. We are working through that piece, including working with our supplier communities and looking at structures whereby we could mitigate some of that net working capital impact.

I would say, Joe, maybe again, getting back to the comment -- the question that was asked earlier. Listen, operationally, we have plans to address any of these words of headwinds whether it's inflation, whether it's investment in inventory, which you're right, given the inflation that would be a natural outcome. However, we have offset in CapEx and expense in payables, in other areas of inventory that we're -- we have in place to drive that investment down. And then on top of that, although our plans and our intentions are our customers compensate us for all of these investments.

I mentioned we've incorporated an incremental level of conservatism into our outlook as it relates to 2027 to contemplate things that we don't have perfect line of sight to us sitting here in early November at this point in time.

We'll go next to Andrew Percoco with Morgan Stanley.

I just want to stick to 2027 here for one more second. When we think about the revenue preliminary revenue outlook. I just want to make sure I understand the moving pieces here. It sounds like you're assuming you're taking essentially market growth and assuming growth under market. Is that a fair way to kind of interpret the preliminary revenue guidance for 2027, and that's essentially offset by non-auto growth. I just want to make sure I understand kind of the consortium and the moving piece baked into the revenue guidance specifically for 2027 as it relates to the auto business.

Andrew, yes, it's Varun Laroyia. Yes, if you think about kind of the range, we start off with the base assumption that's how -- that these are the September third-party forecasters starting with that, that's at the top end of our range. And then below that is essentially where we are ranging it given the various elements from a macro perspective, but also supply constraints among other things. So that is correct.

Okay. That's helpful. And then maybe if you could just talk a little bit about the incremental margin that you're assuming before some of the recoveries, obviously, pretty strong relative to what you've seen this year. So can you just maybe talk through what some of the assumptions are there in terms of what's the driver of the improvement in the incremental margins as we go into 2027?

Yes. Listen, so let me start and then Kevin, you can certainly add if you have any additional comments. So putting aside the point of dilution from recoveries related to material inflation, our overall incremental margin algorithm of the '26 to '27 points on revenue growth ex recoveries, that remains, right? So starting off with that, given the broader inflation on commodities, oil, copper, gold, silver and obviously the impact into resin, that's some of the FX and commodities and other commodity inflation that we're seeing, which essentially we plan to offset through performance initiatives.

But that's really how you should think of it. The overall growth algorithm for incremental revenue has not changed, but we're just highlighting the fact that there will be a margin dilution effect associated with the recoveries that we anticipate coming through the top line.

We'll go next to Mark Delaney with Goldman Sachs.

I wanted to better understand what's happening China. And with bookings on China exports at over 20% of the mix year-to-date, can you help us better understand what that means for revenue for China exports next year compared to what I think was about 10% this year? And maybe more importantly, if you could also touch on the margins on that business, are you -- that you're winning? Are there different margins associated with the recent bookings?

Yes. No, Mark, it's Kevin. So it's a good question. The China team has done a great job as it relates to commercial pursuits quite frankly, across both business segments portfolio. A lot of our discussion recently has obviously been with respect to the Intelligence Systems segment and their impact as it relates to exports out of China and the platforms they're on. This year, I believe it's roughly 10% of our revenues are on export platforms. from China into Europe and elsewhere, again, within the Intelligence Systems segment next year based on bookings that increases to mid-teens.

So we've made significant progress. There are more commercial opportunities that they'll execute on the balance of the year that will likely increase that particular mix of business. And then we're working with 3 of the China local OEMs on their current activities as it relates to manufacturing in Europe and South America that will provide incremental benefit as well.

As it relates to margin profile, it's roughly in line with our overall margin profile that is dependent on using China-based materials inputs, including China-based SoCs. To the extent one of our customers is interested in a Western-based SoC. Obviously, that's a more expensive solution for that particular customer. But to date, as I mentioned in my example, we've had a lot of success, especially in Europe and Southeast Asia, leveraging the China-based cost structure and design capabilities to meet the needs of Europe and other markets.

My other question was about the program loss that you mentioned with the 2 German luxury OEMs. Maybe how many can size that headwind quantitatively? And then just the reason for that occurring? Is this a situation where Aptiv didn't win the follow-on business and maybe needs to adjust its strategy in the future? Or is this more about those German OEMs just having some challenges internationally, I think you're thinking about China and maybe those vehicle models just aren't being continued in the future.

Yes, it's -- there's an element of both, quite frankly. So it's 2 luxury German OEMs. It's a significant part of our I would say in Europe, we are overweight German OEM revenue mix. About 1/3 of the headwind in 2027 comes from just softer schedules, principally on export platforms. So I think you probably can guess who they are based on historical dependence upon the China market for the premium brands as a place of business. So that's about 1/3 of it.

The bounce is a mix of legacy program that we won some replacement business. We alluded to it in our last quarter earnings call. that replacement business initially was going to be run across another vehicle brand. So the runoff of that particular program would be partially offset by the launch that actually started last quarter on one of the luxury brands, but did not end up launching on the second vehicle platform.

And we alluded to it in the last quarter earnings call, that had an impact as well. So that would account for roughly a little over 1/3 of the balance. And I think the total value is kind of a couple of hundred million dollars, $250 million to $300 million of headwind.

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

First, starting with the expected $700 million in inflation recovery in 2027, I think in the past, you've quantified your memory by at around $175 million. So $700 million would potentially be 4x that. Can you just maybe just clarify what's in that $700 million? Is that -- it's really sort of like a 4x inflation? Or are there other pieces that are going into it?

Yes. It includes -- it's mostly memory, Emmanuel, it's mostly memory the conductor some semiconductor as well that's in that number. That's where those 2 areas are the areas where we're seeing the significant inflation. I think depending on node price increases on a year-over-year basis are significant. It varies a bit by what technology, quite frankly, not what technology that you're actually using. Some are actually the year-over-year price increases are actually higher, some lower than that, 4x that you're talking about.

Got it. And then you -- Kevin, you concluded your remarks with saying we're evaluating the composition of our business and product portfolio, and we will provide an update in the first quarter of 2027. Can you just talk to that a little bit more. Obviously, the update is in the first quarter of 2027, but what's -- what are you looking at?

We're looking at our portfolio of businesses, our portfolio of products with the backdrop in context of current market challenges and market opportunities, our outlook for revenue growth and margin profile and the competitive position that those businesses are in. I would say, what you would expect, Emmanuel, because it's just a deep dive in on a very detailed valuation just given the current environment.

We'll go next to Itay Michaeli with TD Cowen.

Maybe a first question on the 2027 outlook. Can you share what you're assuming for China export versus domestic next year. Now this year, it's been a significant drag on overall outgrowth relative to LVP. Maybe just help us with what you're kind of preliminarily assuming for next year on those fronts?

Yes. Our preliminary estimate is down slightly, Itay, which I think is the expectation of most people given some of what we're hearing out of Europe. China market flat is kind of our baseline outlook. We have the downside with the China market or China vehicle production actually declining. Listen, I think there is a scenario that is out there that exports don't decline. They just move to different markets. So African continent and elsewhere.

But for now, our overall view has been fairly muted vehicle production across, quite frankly, every region at the top end that Varun walked through. And then as I said, down 2% in the more conservative scenario.

That's helpful. And as a quick follow-up. Maybe just talk more about the human or robot award, I think you mentioned with the Chinese OEM. I'm curious whether that opens up additional awards for humanoid for you.

Yes. So yes, it does. So we're active in the robotics space across all regions, obviously, including China. In China, they're very much China-based solutions in Europe and North America. They're very much Western solution from an input standpoint. We talked about where we bring value perception systems high-speed cable assemblies, advanced compute. Those are the principal areas that we're focused on. We see significant opportunity there.

I think as we've talked about in the past, we think a more likely high-volume use cases with AMRs versus humanoid at this point in time. Our view is that's a more challenging technical challenge. We are working with a few of the humanoid developers, both in the U.S. as well as in Europe and in China, but most of our robotics focused in and around EMRs.

We'll go next to James Picariello with BNP Paribas.

Just to first revisit Emmanuel's question regarding the 2027 revenue bridge. Is the $700 million in recoveries purely a year-over-year figure? Or is it relative to the base of $175 million in memory recoveries for 2025, which I believe is incurring a low double-digit percent increase this year, so is the year-over-year recovery $500 million or $700 million?

Yes, it's $700 million. So the year-over-year is $700 million. 2026, just -- and I don't know if it was a part of your question, as I mentioned in my prepared comments, Jim, we -- the team did a very good job in terms of in mid-2025 locking up both supply as well as price on memory. So 2026, as we've talked about in the past, impact on Aptiv as well as our customers was actually relatively minimal from an inflation standpoint, given the nature of the contracts we've had, as we had 26 into 2027, given what seems to be the continued tightness in the memory market, obviously, prices have increased, again, depending upon the technology and the particular supplier of memory.

Got it. That's clear. And then can you just share any 2026 guidance color by segment in terms of how you're thinking about core growth and EBITDA profitability for the fourth quarter here for Engineered Performance and Intelligent Systems?

Yes, James, it's Varun Laroyia here. Listen, overall, we feel good about the guide we've given from an enterprise perspective for the fourth quarter. So that's going to put that detail there. From a revenue perspective, I'll share with you, as I mentioned in some of my prepared comments, it's production recovery in North American OEM that was impacted by a supplier fire a year ago.

Our commercial vehicle revenues are robust. And as Kevin mentioned also earlier, in his prepared comments, we've been winning some good business with next-gen high-voltage and low-voltage programs. So that's going to continue to come through strongly. It is offset by lower vehicle production more generally. I think that's out there in the market in any case and then obviously, the software and services piece also that I called out.

Within the 2 businesses, Engineered Components business will -- is expected to grow in line to maybe slightly higher than what they have been tracking to. And then our engineered -- our Intelligent Systems business, more specifically continues to be impacted by the net program roll-offs that we talked about, but also the exports going from Europe into China. As I mentioned, excluding some of those declines, that segment would have grown. So that continues to impact the Intelligent Systems business.

With regards to margin, as you would have seen, Q3 was still a net price decline for us. And as I mentioned, it's customer recoveries, engineering performance benefits, but also engineering credits that typically occur in the fourth quarter and then some incremental manufacturing and performance initiatives which is going to drive the margin. And that obviously is across both segments.

Yes. So maybe just -- so Q4 revenue growth increasing. Part of that is a year-over-year comp benefit. So revenue growth is increasing. When you look at EBITDA margin and operating margins, as is typical, Q4 is typically our strongest quarter just given timing of engineering rebuilds and customer credits, items like that. So that should translate into the highest EBITDA and operating income margin profile for the quarter. current outlook and as both segments growing from an overall growth standpoint.

And as is typical, the fourth quarter tends to be a stronger margin profile for both businesses. especially the Intelligent Systems business in Q2. Just given the nature of engineering credits and recoveries there.

We'll go next to Tom Narayan with RBC.

The first one on a follow-up to Mark's question. Kevin, I think you said of Chinese revenues you guys have around export platforms and intelligent systems. And next year, you'd get to mid-teens and they are making significant progress. Just curious how you're able to do this. Other Tier 1s we talk to, say, it's up to the Chinese OEMs to determine what gets exported and what's used for domestic. Is this something specific to Intelligent Systems where you can impact the Chinese OEM decisions?

Well, I think what's important -- I think what's important, Tom, is that your engineering organizations, your commercial organizations are deeply embedded with those OEMs that they understand what their product plans are, what specific programs will have will be for export, which as you can imagine, they need to be homologated differently, right? They need to meet different standards. So there's an element of a different system, different features, different, maybe some calibration of technologies. So if you have a strategic relationship with the OEM or you're fostering one, you will get visibility to what their product plans are and then you need to be competitive, right?

So it isn't a matter of 1 day a vehicle as a domestic platform and then the next day it's being exported, right? Just the homologation requirements, the regulation of quite frankly, every country requires a certain amount of unique items or unique standards that you need to meet, therefore, it needs to be contemplated or planned for in advance.

Got it. No, that makes sense. And then as a follow-up to I think Itay's question on the '27 China production forecast, your own forecast. It looks the EU finally has some teeth with some policy changes on Chinese exports. I think I heard you say you expect exports flat from China. And then flat to down on total China production. I know S&P has exports down in '27, but then domestic sales up with overall China production. Just curious if -- are you guys just being conservative here? Or is this what you're kind of -- what you're seeing and you expect?

Yes. Listen, I think there's a little bit of -- so at a high level, our general view is exports will be down in China. The domestic market will be flat to up slightly. That's our -- there's some of that one could argue is -- and that's our base, that baseline assumption that Varun talked about, the starting point. So that is our baseline assumption. We have a second scenario that we referred to where vehicle production is done 2%. That's comparable for the China market. I think there's a question of how does that -- how much do those export volumes or the potential site and export volumes impact that down 2%.

So I would say, at this point in time, we're not that precise. We would also say, though, there discussions with our Chinese OEM and the Chinese governments exports may be down in Europe, but I think their base plans today are they will make up those declining exports in those markets with exports elsewhere. So we'll see how that plays out. As it relates to vehicle production, we try to give investors a range. The baseline is off of IHS so that from a comparability standpoint, it's easy to what we're seeing to what others are saying.

Overlay on top of that was an incremental level of conservatism as it relates to revenue, earnings and cash flow that we overlaid on top of that contemplating some of the challenges that could arise in the market. And then our second scenario is vehicle production down 2%, which, again, we overlaid an additional element of conservatism as relates to revenue, earnings and cash flow again, to contemplate all of the challenges and uncertainty that's currently going on in -- so that's how we've bracketed the 2. And as I mentioned, we've included an incremental amount of conservatism to make sure that we could capture everything that we could reasonably contemplate from an outcome in 2027 or an environment in 2027.

Got it. Thanks for providing the '27 guidance.

That will conclude today's question-and-answer session. I will now turn the call back over to Mr. Kevin Clark for any additional or closing remarks.

Thank you, everyone, for your time this morning. We look forward to following up with you following this earnings call. So take care, and have a nice day.

The call is now complete, and thank you for joining.

All right. Great. Thanks, everyone, for being here. Welcome to the 2026 JPMorgan Auto Conference, and welcome to the new [ 2 Stanley Park ] Building.

We hope you enjoy the view, the food and maybe even learn something over the next couple of days. So very pleased to start the conference with Kevin Clark, Aptiv CEO and Chair. Thanks, Kevin, for being here.

Thanks for having us. It's a pleasure.

Great. So maybe I'll just start off with a high-level question. Now that the spin-off is completed, you have a full quarter of new Aptiv behind you. What are 2 or 3 things you want investors to understand about Aptiv today? And a few years out, how do you want them to define it?

Sure. So thanks, everybody, for joining us this morning. As you take a step back and you look at Aptiv and how we're positioned and how we think about the business and how we describe it is we have advanced hardware solutions that includes sensors, advanced compute, interconnect sort of solutions, a software tech stack.

Those solutions enable effectively things to think -- sense, think act and then we say optimize.

And that matches our product portfolio. It's what we enable and have enabled in the automotive space for a very long period of time. And it's increasingly what we're working to enable across other industries as well in spaces like the aerospace and defense sort of sectors and other markets, broader industrial markets.

So unique set of assets and opportunity to take those assets across multiple markets and enable our customers to do what they're looking to do.

Great. So maybe we'll just go to like the recent results and some of the commentary there. You did take down the second half or the full year guide by $300 million at the midpoint, split roughly $150 million on the customer schedule changes, $100 million on the launch and ramp delays and then $50 million of just enterprise software timing.

Could you walk us through which of those 3 you have the least visibility on? And how much additional conservatism have you layered in beyond what the schedules themselves imply?

So maybe I'll start with a little bit of context on each one of those. And as Rajat walked through the numbers, that's what [ Darren ] walked investors through on our earnings call.

The first piece relates to just ongoing weakness in the China market. China retail sales first quarter, second quarter, and I think even from reports earlier either today or yesterday, retail sales are down 20%.

So it's a weak -- it is a weak market. We have -- we saw weakness in schedules on platforms with local China OEMs where we have a considerable amount of business.

We also saw a reduction in the schedules on programs that we've been launching starting last year into this year. So the slope of those launch curves are actually down.

So that's a big piece, China. The second piece is actually exports from European OEMs into China, more specifically in and around the German luxury OEMs. We saw in July, significant takedown in schedules relative to back half of the year on some of their platforms, they're manufacturing in Europe and exporting into China, just given the weakness in the overall market there.

The second piece relates to the European market. There are -- there is a program that we're launching now for a large European OEM, where that launch was delayed by a quarter effectively.

So push out of the launch what impacted us in the quarter. And there was an expectation that we had that as a part of the award of the program and the launch of the program, we were actually going to pick up incremental car lines that -- in brands that, that particular OEM manufacturers which we unfortunately did not have that opportunity.

And then the last thing, that OEM decided to stay with the existing system that they had. That's what happened there. The last piece relates really to software and services and enterprise software, we sell cloud platform software to enterprise customers. It's just a lumpier business.

And as we look at the funnel, we saw some shifting there in the quarter. So those were the big drivers. When you talk about visibility, China is clearly the most dynamic market. I'd say we have visibility, but it is volatile, where in North America and Europe, where we tend to get EDIs get locked in typically 30 days prior to production.

In China, it's a shorter period of time, maybe it's 2 weeks. And just given the dynamics in the market, we saw more fluctuation near term than what we normally even would see in the China market.

Do you think like those forecasts, I mean, is there a way to size or how much conservatism is in those numbers right now in the fresh guidance? Just what's changed in the forecasting process?

Yes. So given the dynamics in China and what we've seen from a schedule standpoint, obviously, we've overlaid incremental conservatism there.

As it relates to what we're seeing in Europe and what we're seeing with select OEMs that operate in North America, we've put additional conservatism in related to actions that they could be taking that we don't see in schedules at this point in time. So I think we have a very reasonable dose of conservatism built into the revised outlook.

Understood. And maybe just spending a second on the forward curve into '27. You have the 4% to 7% revenue CAGR framework.

Clearly, the industry has been a little choppy, unpredictable. And you're starting at the lower end here in '26, but exiting 4Q at a pretty healthy clip based on the guidance in the mid-single digits at the midpoint.

Are you able to provide any early puts and takes for '27? You obviously have a couple of key launches in Europe, you have BYD. Should investors expect a continued acceleration? How is the forward visibility looking like?

So I'll give -- I'm not going to give 2027 guidance. I'll give maybe a bit of a framework on puts and takes. What are we watching very closely? We're watching the China market, right?

China market down significantly, certainly more than anyone had expected coming into the year. it's difficult to envision a scenario where the China market has 2 years where retail sales are declining somewhere between 15% and 20%, depending upon which third-party resource that you talk to.

That translates into vehicle production in China declining somewhere between 5% and 6%. A portion of that weak retail market has been offset with exports out of China.

So when you look at the China OEMs, to give you some context, 3 years ago, they were exporting roughly 2 million vehicles out of China to Europe and elsewhere. This year, they'll export north of 6 million units. So that's become a bigger piece of the production base.

If you look at what they've done in the last couple of months in the aggregate exports out of China, the run rate is closer to an 8 million to 10 million unit sort of run rate. So I think there's a question of how long does that continue or does the EU enable that.

So that's something that we're watching very closely. We're talking to our customers as well as to EU officials and the member states. So that's something that we need to watch in terms of that overall dynamic.

And our view is a lot of that will play out in the coming quarters. We'll get visibility of that. We're worried a bit about Europe. We're worried about a couple of the European OEMs in terms of how they're positioned from a cost structure standpoint.

All of you are familiar with the industry we operate in and can insert the names, I'm sure, in terms of those that have talked about production reductions over the longer term.

So we'll see how that plays out. On the flip side, we've had very strong bookings in the last few years. We have a number of programs that are launching.

So we're very excited about that. Great bookings last year, very strong bookings year-to-date this year in high-growth areas. We're making -- I would say, we're more positive about the progress we're making in adjacent markets in around aerospace and defense, in and around broader diversified industrials and around energy storage and robotics and drones.

So that's an area that we see a positive momentum. So we're working through all that, and we'll come back with updated guidance. I'd say the most important thing is really the vehicle production and what the outlook is for 2027.

Anything on North America that you want to touch on?

Yes. North American market has been solid. It's been solid for us. Our expectations is that it's a -- sitting here today, if you look at IHS, outlook for North America production, I think, is up a point or so next year, up more than that this year, but we see continued relatively strong demand.

Got it. Maybe just one more question on this topic, and we can revisit it later if we have time. Just on the export dynamic from China, 8 million to 10 million units run rate.

Can you help us understand like what's -- how much exposure you have there today to those exports and relative to what's in the bookings mix and how that will ultimately translate into your export exposure in a couple of years or so?

Yes. So we've made -- again, maybe a little more context than you need. If you go back a few years ago, roughly 50% of our revenues with multinational, 5% with China local OEMs. We've been very focused on getting closer to production -- overall production mix. We've made a lot of progress there.

So sitting today, 2/3 of our revenues in China are with the local China OEMs. Most of that with the top 5. We've been intentionally very focused on top 5 to 10 OEMs. With respect to where most of our content sits, most of it sits with domestic platforms, local OEM platforms that are exported out of China or maybe I should start with total revenues, total export platform revenues as a percent of our total China revenues is about 10% of what we do.

I think today, if you look at production mix, what's produced, what's exported, it's closer to 20% to 25% of production is today exported.

Now we can discuss whether that's a bit inflated given the market dynamic right now, but that's where we sit. Bookings over the last couple of years have been very strong as it relates to export platforms, especially the last 18 months. We've seen a 30% increase from a growth rate standpoint in those bookings, and they're with players like BYD, like Geely, like Chery, those that are very focused on export markets. So well positioned, but it's going to take a little bit of time for that to flow into revenue.

Got it. And as those like -- if we end up seeing more, I would say, more mandates from the EU to add these Chinese OEMs to localize production.

Obviously, it's going to impact the European OEMs share in the region. But how does that net impact look for Aptiv? -- can you participate a lot in those localized production?

So listen, near term, we have a mix issue on platforms. And a lot of that was focused on being with the right OEMs versus how do we have a balance between export mix and local mix. That's getting addressed. We've been working with players like BYD, like Chery, like others, actually across our 2 businesses in terms of how do we help them from a supply chain standpoint, how do we help them from a manufacturing standpoint as they look at South America or launch in South America as they're launching production in Europe. It's an opportunity for us, right, given capabilities in China and relationships, given capabilities and understanding of the regulatory requirements, the supply chain, the NCAP standards and other items as you think about other markets.

So it presents an incremental opportunity. We feel like we're well positioned. I would say the top 5 China OEMs are very serious about expanding outside of China from a manufacturing standpoint.

Europe hasn't resolved the whole requirement with respect to localized content that you're referring to. Our view is that gets resolved in the third or fourth quarter. It seems member states as well as the EU governing body are more aligned than what they've been in terms of what needs to happen and how it needs to get addressed. So that should present an opportunity for us.

Understood. Moving to some of the ADAS and software discussion. On one topic that I have been spending a lot of time on the last few months. Enterprise software revenue slipped a bit out of this year on some timing.

The underlying run rate seems like it's still unchanged, and you're moving into more larger deals. Could you give us a sense of what visibility looks like in that pipeline? And when software gets back -- when do you think software gets back to the mid-teens growth that you've targeted? And just generally, how lumpy we should expect the quarter to be?

Can -- on the enterprise side, it can be lumpy. The embedded solutions, that's a market that tends to grow at 5% to 10%.

And I'm including automotive and nonautomotive. Our software business has a very big position in the A&D space as an example that's higher growth. And that's selling RTOS solutions, Linux solutions as well as hypervisor solutions for mission-critical applications.

On the enterprise side, it's really taking what the business has historically done in the telecommunications space, which deals with effectively distributed server networks and enables overlay software that enables greater connectivity, greater management of those systems.

So in addition to telco, retail networks, areas like that where you have multiple points or edges and you need to distribute software and collect data and consolidate that data at an enterprise level is principally where we play. It's a big opportunity. It's a newer opportunity.

As you said, it tends to be a lumpier sort of larger contracting cycle. So that's something that we'll try to give as much visibility to investors as we possibly can. We operate off a funnel, as you can imagine, in terms of who are the customers, what are the opportunities. And as time plays out, obviously, we get more visibility and greater understanding to the timing.

Understood. And moving to like the automotive, just the ADAS software side, you said bulk of the 2026 Gen 6 ADAS bookings carry both your hardware and software and that several OEMs who attempt to like broad-based in-house software have come back to suppliers. Could you shed some light on where that trend is strongest by either region or any customer categories?

Yes. I'm not sure I could break it down by region. I should start with -- listen, our strategy in our business is how do we enable our customers to do what they want and what they need.

So we very much have an open architected approach. We build platforms. So we try to sell full system solutions. They're designed to be more cost effective, but they're also designed to be flexible. Some customers don't want a full system solution. They want a part of a solution.

The byproduct of developing full system solutions is, in our view, each part or each component, whether it's hardware or software, tends to be optimized. So we're very focused on performance and cost. Customers are under pressure.

We understand that. We want to give them cost-effective sort of solutions. We have customers who buy the full platform solution from the advanced compute to the sensor suite to our full software stack, including the RTOS or middleware.

And that's the case in China. It's the case in Europe. It's the case [indiscernible]. We have others who buy parts, and it may be the bulk of our hardware and software suite, but there's a part of the software stack that they want to do. Maybe there are certain features that they want integrated into the -- in their solution.

And we have customers that we do that for. We have other customers who -- they have invested in developing internal capabilities, and they're looking at an optimized sensor suite. So it may be the camera solution, the radar solution, could be the sensor fusion as a part of that. So that's what we try to bring.

As it relates to OEMs that make decisions and reverse course, I think it's natural given content growth in the car, especially as it relates to software that our customers have an interest in controlling more of that. I think that's natural. I think it's a natural.

And given the size of that space, there's an opportunity for them to do that. Some have done that reasonably successfully. Some have had a very difficult time doing it. And you've read about them in the newspaper. Again, we're here to enable.

Our view is just given the size of our business across regions, across OEMs, across platforms that intuitively, we should be delivering more higher performing, more cost-effective solutions than anyone developing things internally.

Sometimes our OEM customers, though make decisions that are different from what we -- and again, we're there to enable them in their decision-making, whatever decision they made. And if they stub their toe, we're here to support them in whatever way we can.

And I would say, typically ask that question across virtually all the OEMs that we're delivering solutions to in our Intelligent Systems business, we're selling more software today than we did a year ago or 2 years ago.

Part of that is more software is going into the car. Part of that is our customers are looking for ways to enhance an existing system without having to go through the old model in our industry, which was rip and replace. And that's what we're trying to drive and what we're trying to enable.

And within that stack, are there like 1 or 2 areas where the OEMs are looking to control more? Is it more on the perception planning side? Is it more on the middleware side? Is there -- does that change the economics for you if they're focused on one particular area?

It really varies. I don't see a lot who are, for example, focused on developing -- they have to have their own middleware when we think about what middleware actually enables and the strategic requirement from an OEM standpoint.

I think you see some OEMs now as you look at large language models, as you look at AI, are there certain things that they could be doing or should be doing as it relates to those sorts of new developments. So I would say that would tend to be whether it's internal or it's with external partners, as you think about applications like using end-to-end or developing end-to-end ADAS systems using AI and large language models.

Some are doing that. Some are doing that with partners. We're developing our own end-to-end solution that our view is will be more cost effective. I think when you look at that market today, it's maybe 10% of the total ADAS market as an example. It's a very costly portion of the overall market.

So for us right now, in terms of near-term monetization, it's less of a priority, but it's important to have the capability. It's important also for us to work with those OEMs so that we validate our perception system, whether it's vision or it's radar, our camera systems, our sensor fusion because you think of those sorts of systems, there -- given cost, they're 2 to 3x the number of perception devices, cameras, radars, things like that.

So it's an incremental content opportunity for us. And it's a mix of hardware as well as software.

Understood. That's clear. Maybe I'll just pause for a second there to see if anyone in the audience has any questions. I think there's one there. We just use the mic.

So just on the M&A front and what you're kind of seeing or not seeing, how does the landscape look some deals to perhaps grow the non-auto side.

And I think you made it pretty clear on the last call that, obviously, capital allocation will go to buy back the stock if you don't see anything. But just curious on kind of how you're thinking about that and what the landscape looks like.

Yes. Listen, as people know, historically, we've been active M&A-wise. Listen, there's a recognition of where our multiple sits today and our view of the fact that our stock is significantly undervalued.

Our focus is on repurchasing stock. As we communicated on our earnings call, effectively 100% of free cash flow, a little less will be used to repurchase stock this year. We made a commitment on a go-forward basis to at least deploy 50% of free cash flow to repurchasing stock.

So I would say that's the biggest priority from a capital -- just the M&A funnel by virtue of how we've operated historically, we have visibility to a lot that's out there. And that's -- but our priority at this point in time doesn't sit in the M&A area.

Great. Any other questions? Maybe just a last point on the ADAS side. Can you talk us through your relationship with NVIDIA? We get this question a lot. Are they a partner? Are they a competitor? I mean they're doing their own thing around the architectures and the software side of things. Just curious like how that relationship -- where do you see that?

Yes. Can I -- I want to go back and just respond also just to the question, if I can. I promise I'll answer the question.

Listen, we do have a small funnel of very small transactions. If you read our Q, we announced we acquired a company in the interconnect space, which is our priority, has been our priority from an M&A standpoint.

Purchase price was roughly GBP 20 million. So it augmented our product portfolio. I would call that less M&A. It's basically -- you could argue from an organic standpoint, it's just accelerating the build-out of our product portfolio.

So I think you could see us very small -- see us continue to do very small deals like that. So NVIDIA, we partner with NVIDIA across multiple markets on the industrial side.

So we have a great relationship there. We're working with them on the automotive side as well. Again, our -- I guess you can -- in certain aspects, you could consider them other areas we compete, but there are also areas where they enable -- we enable plus.

And we want to enable our customers to do through an NVIDIA solution, if that's through a wave sort of solution, those are places that we have relationships and players that we're working with.

Understood. Moving to the non-auto side, just following up on that question. You have these robotics partnerships that you've announced.

One of them is converted to a commercial award. And in drones, you have booked your first award worth $500 million of lifetime revenue. Can you walk us through how the $300 million annualized revenue ambition builds from here? What's the content per unit and just volume assumptions that are underneath those targets?

Yes. So -- we -- on our earnings call, we talked about 2 recent commercial awards, one on the robotics side, one on the drone side and a view that based on our commercial awards to date, based on those areas where we're close to commercial awards and outlook that a few years out from where we sit today, we should have roughly $300 million in those 2. What we're selling in those markets is basically a slight augmentation of our existing product portfolio.

So it's high-speed cable assemblies and interconnects -- it's perception systems, so camera or radar solutions is advanced compute.

And that's consistent in the robotics space and the drone space. Application is different. The technology is somewhat different, but that is the area that we're selling. Our focus on the drone side is on attritable drones. So average price of a attritable drone is, call it, $50,000, maybe $60,000.

Content per unit is about $5,000, so significant content. And that's in the areas that we play. Content per unit in the robotics space is actually very similar. Robotics space, we're focused on AMRs principally. We're doing work in our close to commercial agreements with a couple of the players in the humanoid space.

We think that's an opportunity. We just think from a volume standpoint, that's further out in terms of developing some of the technology required to make those really useful tools.

On the drone side, that's an area where when you think about ADAS, autonomy, when you think about perception systems compute, when you think about our natural skill set in terms of industrializing solution and driving down costs of bills of material, is what we do every day in our traditional market. And then on top of it, we run a -- we have a global supply chain with global visibility that's regionally executed. Given the customers in that particular space, certainty of supply, where products come from, a fairly nascent industry where focus to date has been more on development of the technology and producing the product versus how do you optimize and industrialize.

We bring a lot of incremental value in addition to the underlying technology. We're working with several players in that space. So I'd say the biggest near-term revenue opportunity, given there isn't a big population of players will be there. I'm confident of that.

The opportunities are both Europe and U.S.-based. And again, it's a mix of our perception systems and our advanced compute.

Got it. And just one more on non-auto, just energy storage and data center, $50 million today. You've described it as ramping up much faster than automotive, obviously, a smaller base over the next 3 years.

Could you walk us through where you win against some of the incumbents in the space? How should we think about the capital intensity of ramping that up?

In those particular spaces, so on the energy storage side, we've had relationships with a large U.S. OEM that's global from -- and is one of the leading EV manufacturers on the energy storage area for quite some time. So -- and that has been, by and large, taking our interconnect product portfolio, high-voltage interconnect product portfolio, and that's the content that we add.

So the place that we sit is really on power, right? It's where our strongest capabilities are.

So we have those learnings. Over the last year, we've been very focused on how do we take our capabilities and how do we explore opportunities outside of what our OEMs are -- automotive OEMs are doing with respect to some of their more recent initiatives.

So we're working with them, but how do we go beyond and how are we dealing with the infrastructure players, the data center players, others. And we've gained, again, a lot of traction. It's by and large with our existing product portfolio, some modifications.

So it's not investment in machinery and equipment. It's not investment in additional capacity. It's really investment in slightly different go-to-market experience and capabilities, some marketing activities.

So it's a fairly low capital way of diversifying our revenues in markets that are higher margin, driving incremental revenue and incremental growth opportunities.

Got it. Maybe we have a minute left. Just wanted to follow up on the portfolio question earlier. I felt like the commentary in your deck this time was a little more deliberate in terms of potential portfolio pruning opportunities. I'm curious if there's been a change in thinking there? And like how should we think about how the portfolio evolves?

Yes. I don't think -- it wasn't intended to be a change in thinking. Listen, we've done over the last roughly decade, we've done 2 spins, I think, 3 divestitures.

So we're actively always trying to evaluate where the market is, where we sit and where growth opportunities are. And just I would call it a reminder in light of where market dynamics are that that's something that we continue to do, that we continue to do and continue to focus on, hey, where are the areas that we can work to drive value creation. We're having challenges right now as it relates to market and market mix.

We view it as a big opportunity to buy back stock, which is the question about capital allocation. That's where our focus is, certainly in the near term and then commitments in terms of our view over the medium term.

And we'll continue to look at the portfolio and how do we continue to strengthen in automotive outside of automotive based on the asset base that we have. And to the extent we can do some very small bolt-on acquisitions to bring into the mix to accelerate or build out our product areas and areas where we have existing business, those are things that we'll...

Great. That's all the time we have. So thanks, Kevin.

Thanks.

Thanks, everyone, for listening.

Good day and welcome to the Aptiv Q2 2026 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, Shelly. Good morning, and thank you for joining Aptiv's Second Quarter 2026 Earnings Conference Call. The press release and 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 reflect the continuing operations of Aptiv as of June 30, and reflecting the treatment of our EDS segment as a discontinued operation for the second quarter of 2025.

The reconciliations between GAAP and non-GAAP measures are included at the back of the slide presentation and the earnings press release. Unless stated otherwise, all references to growth rates are on a pro forma adjusted 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 are Kevin Clark, Chair and Chief Executive Officer; and Varun Laroyia, Executive Vice President and Chief Financial Officer.

With that, I'll turn the call over to Kevin.

Thank you, Betsy, and thanks, everyone, for joining us this morning. Starting on Slide 3. During the second quarter, we generated 2% revenue growth and 10 basis points of EBITDA margin expansion. And we continue to demonstrate progress diversifying our business, evidenced by double-digit nonauto revenue growth in the quarter and new business awards in attractive, high-growth markets that present expansion opportunities for Aptiv. And while we're increasingly optimistic about the long-term opportunities presented in these areas, in the near term, we continue to contend with challenges in our traditional automotive market, which are leading us to lower our 2026 guidance, including prolonged sales weakness in the domestic China market, which is causing local OEMs through second half production on vehicle platforms for the domestic market and also leading to a further reduction in schedules from luxury European OEMs for vehicles exported to the China market. Varun is going to walk you through how these dynamics and other factors are impacting our guidance for the remainder of the year and what specifically has changed since we last spoke to you.

And I'll spend a bit more time discussing the actions we're taking including how we're working to evolve our business mix in and outside of the automotive market to mitigate the challenges we're experiencing today. And now that the separation of EDS is complete, we'll continue to evaluate additional opportunities to maximize value for shareholders over the long term. Now let's begin by reviewing our second quarter progress against our strategic priorities. During the second quarter, we continued the momentum we'd established, leveraging our product portfolio and operating capabilities across diverse end markets, including product innovations, where we secured our first Gen 8 Radar award, an important component of our ADAS platform. Penetration into new end markets where the products we've developed for automotive have applications in other markets reflected in the award from robust AI, which I'll talk more about later and expansion of our software partnership ecosystem with leading edge AI players, including most recently with NVIDIA. This list represents a small portion of the $5 billion of new business awards during the second quarter, bringing our year-to-date total to $10 billion, putting us on track for our $20 billion full year target.

We also continue to increase the resiliency of our business model by leveraging our digital twin and enter tracking capabilities to provide our automotive and adjacent market customers with a step change in supply chain visibility and reaching long-term supply agreements as part of our supply chain resiliency efforts. These are both great examples of the actions we've taken to enhance the robustness of our operating model that are enabling us to keep our customers connected in this dynamic environment and is one of the reasons we were recently recognized as Supplier of the Year by Ford in the supply chain category.

On capital allocation, we repurchased $250 million of our shares in the second quarter, bringing our year-to-date total to $325 million with an intention to repurchase a similar amount in the second half of the year and bring the full year total to over $600 million. And over the next few years, we're committed to returning approximately half of our free cash flow to shareholders through share repurchases, while simultaneously pursuing smaller bolt-on M&A transactions to diversify the business and better position us for the long term.

Turning to review our business segments through the lens of the automotive and nonautomotive end markets we serve. Starting with the automotive market highlights during the quarter. We made some meaningful progress expanding our business with leading OEMs in Asia Pacific, and driving growth in new business bookings across next-generation technology areas, including our full stack Gen 6 ADAS system and in-cabin solutions like driver and cabin monitoring. Notable program launches in the quarter included within the Intelligent Systems segment, a full tech stack ADAS award across additional vehicle lines of a large European OEM, demonstrating the flexibility and scalability of our solutions and continued strength of our technology partnership. And the launch of our next-generation digital cockpit for a luxury European OEM in incorporating software-enabled functionality via over-the-air updates and life cycle management capabilities.

And within the Engineered Components segment, the integration of our high-voltage interconnects on a European OEMs next-gen high-powered 800-volt architecture program. We also continue to innovate across our product portfolio, evidenced by the introduction of our advanced occupancy classification system which is the industry's first occupant detection system that utilizes AI ML-based computer vision software and is powered entirely by an in-cabin camera, streamlining vehicle systems architecture as well as lowering cost. We also secured several important new business awards in the quarter. Within Intelligent Systems, these included Gen 8 Radar Award by Volvo Cars for its next-gen software-defined vehicle platform, where we will enable robust perception across increasingly complex environments and driving scenarios as well as an award from a large North American OEM's next-generation software-defined vehicle architecture, a critical milestone in the transition to more centralized vehicle architectures. And within Engineered Components, these include high-voltage bus bars across the North America and China markets for battery pack and charging applications, demonstrating continued penetration of both existing and new OEM customers on their next-generation EV platforms and the continued expansion of our business with the leading China local OEMs across our key product lines, including high-speed cable assemblies and high-voltage inlets across platforms for both the domestic and the overseas markets.

Moving to Slide 6 to discuss our progress in nonautomotive markets, which reflects the applicability of our technologies across a diverse set of end markets and the strong operating execution by our team. Starting with program launches during the quarter. In Engineered Components, we launched a new program providing high-performance interconnects for a utility scale energy storage provider that leverages the same technology we're already delivering in automotive. And in Intelligent Systems, we launched our integrated cockpit controller for one of the industry-leading commercial vehicle OEMs.

In terms of product development in the second quarter, this included expanding our high-performance interconnect product lines for complex aerospace and defense platforms where space efficient high-density solutions are critical for customers. and collaborating on an optimized power solutions for 800-volt DC architectures with a leading developer of power electronics for next-generation infrastructures, including data centers, a market where we experienced strong commercial momentum and see very meaningful growth opportunities over the next few years that will further accelerate with the transition to 800-volt architectures.

And lastly, achieving a key software milestone in cybersecurity rating for enterprise Linux operating system, which will expand our potential opportunity in the government and the defense markets. A few notable business awards in the second quarter included robust AI selection of our intelligent perception solutions in compute, including AI and ML-based sensor fusion powered by our innovative PULSE Center, for its Gen 3 Carter robot, which I'll talk more about on the next slide. And in Engineered Components, an award for our high-performance cable management and protection solutions for large-scale solar energy and battery storage projects in the U.S. market. Lastly, we continue to expand our commercial presence in non-auto markets through our partnership ecosystem. First, with NVIDIA, where we extended our partnership to provide active production-grade software to edge AI customers using NVIDIA compute, second with Kyndryl, which is an important extension of our enterprise partner ecosystem where Kyndryl will deploy our Wind River software as part of its mission-critical solutions portfolio. Together, they enable customers to more easily deploy and operate mission-critical systems while accelerating adoption through joint go-to-market initiatives and integrated offerings.

Turning to Slide 7. I want to spend a few minutes providing an overview of our progress, capturing opportunities in new end markets, which we're confident will meaningfully diversify our nonautomotive revenue mix over the next few years. The robotics and drone markets are higher growth, higher-margin sectors where opportunities materialized much faster than we previously anticipated, driven by the same demand for autonomous solutions than in transforming automotive over the past decade. Since initially outlining our addressable market opportunity and growth targets for nonautomotive markets, we've achieved the following: in robotics, we secured partnerships with 3 leading robotics manufacturers and one of those partnerships has advanced to a meaningful commercial agreement, and we expect to be making additional commercial announcements during the balance of the year.

In drones, in July, we secured our first commercial award from a leading drone manufacturer with total lifetime revenues of over $500 million over a 5-year program. This award will be included in our third quarter bookings numbers. We're actively engaged in discussions with several drone manufacturers that we expect to translate into commercial agreements during the balance of the year. The content per device opportunity in the robotics and drone markets are significant, and our initial awards represent a large portion of that total content opportunity. And both of these markets present time-to-market advantages versus our experience in automotive.

In summary, we're increasingly confident in the broad relevance of our product portfolio across multiple end markets, which will significantly change our business mix. We have a high degree of confidence in achieving annual revenues from the robotics and drone markets of about $300 million over the next few years. We believe we're also uniquely positioned to benefit from growth opportunities in the space, energy storage and data center markets, which we'll talk more about in the future.

I'll now turn the call over to Varun to go through our financial results and guidance in more detail.

Thanks, Kevin, and good morning, everyone. Starting on Slide 8 with our second quarter financial results. We delivered revenues of $3.3 billion, which grew at an adjusted rate of 2% and were just shy of the midpoint of our guidance. Looking at revenue growth by region, North America grew 10%, driven by strength across both segments. In Europe, revenue was down 8%, primarily reflecting volume pressures with select luxury OEMs, predominantly in Intelligent Systems. And in Asia Pacific, revenue increased 6%, including 5% growth in China, driven by improved mix with local OEMs, partially offset by a slowdown in production for the domestic market.

Adjusted EBITDA totaled $613 million, and adjusted EBITDA margin increased 10 basis points. This came in ahead of our guidance due to the timing of recoveries and operating performance. FX and commodities amounted to a 30 basis point headwind to margin, in line with our expectations. Earnings per share was $1.63, an increase of $0.12 from the new active pro forma results in Q2 2025, reflecting higher operating income the benefit of share repurchases and interest other income, partially offset by higher tax expense. Free cash flow for the quarter was an outflow of $33 million and included approximately $70 million in cash separation costs associated with the Versigent's spinoff, which we highlighted last quarter.

Moving to Slide 9 and starting with highlights on the consolidated business. We generated strong results in strategically important nonautomotive revenues with 12% growth. while absorbing some customer mix headwinds in our automotive business in the second quarter, where revenues declined 1%. Adjusted EBITDA margin increased 10 basis points driven by flow-through on revenue growth, strong performance across material and manufacturing and benefit in timing of certain recoveries more than offsetting the impact of stranded costs following the Versigent's spin, which we are aggressively working to eliminate. Turning to Intelligent Systems.

Revenue of $1.5 billion was flat versus the prior year, which reflects strength in the non-auto which was driven by software and services, and this was offset by automotive revenues, which were impacted by weakness with certain European OEMs and a lower production at a North American OEM, impacted by a supplier fire. Intelligent Systems adjusted EBITDA margin declined 120 basis points, primarily driven by investments in non-auto markets and the impact of stranded costs.

Moving to Engineered Components. Revenue of $1.8 billion grew 3% versus the prior year, driven by double-digit growth in non-auto markets and more specifically, in diversified industrials and aerospace and defense, while automotive revenues were essentially flat. Adjusted EBITDA margin increased 100 basis points and reflects flow-through on volume growth, favorable timing of the previously mentioned recoveries and performance initiatives, partially offset by stranded costs.

Turning to our full year 2026 financial guidance on Slide 10. As a reminder, historical new active pro forma financials are on the Investor Relations website under the quarterly financial section, and those correspond to our guidance that creates Q1 as new Aptiv pro forma. Starting with the full year, we now expect revenue in the range of $12.6 billion to $12.8 billion, which implies adjusted growth of 2% at the midpoint. I'll discuss the changes here in detail on the next slide. We expect adjusted EBITDA in the range of $2.31 billion to $2.37 billion, and an EBITDA margin of 18.4% at the midpoint, reflecting the impact of lower revenue growth, which is partially offset by performance. We now expect adjusted earnings per share in the range of $5.60 to $5.80. With the midpoint of $5.70, reflecting lower operating earnings, partially offset by a slightly lower effective tax rate and a lower share count. This also includes the projected impact of an additional $300 million in share repurchases through the remainder of the year, as Kevin mentioned.

Lastly, free cash flow is expected to be in the range of $625 million to $725 million, reflecting the reduction in EBITDA. As a reminder, this includes the onetime cash separation costs associated with the Versigent's spin-off, which have already been largely incurred year-to-date and continued investments in supply chain resiliency for semiconductors. For the third quarter specifically, we expect adjusted revenue growth of 1% at the midpoint, adjusted EBITDA and EBITDA margin of $560 million and 17.7% at the midpoint, and earnings per share of $1.30 at the midpoint.

Turning back to our full year guidance to discuss the key changes to revenue in further detail. We are reducing full year revenue guidance at the midpoint by $300 million, which reflects the following: first, approximately $150 million related to changes in customer production schedules. These schedule revisions are primarily related to weakness in the domestic China market with both local China OEMs and European OEMs that export to China. Second, related to delays in program launches and ramps, specifically delayed ramp in production volumes on certain programs in China and the launch with a European OEM, where the launch is delayed by the OEM, and we did not benefit from the expansion to additional car lines as we originally anticipated.

And finally, approximately $50 million related to the timing of enterprise sales in software and services. While these items have impacted both business segments, the Intelligent Systems business is disproportionately impacted by the above factors. Now translating this to the implied ramp in year-over-year revenue growth in the first half to the second half that we outlined last quarter. As a result of what just described, the following have changed. First, the 150 basis points improvement in growth from lapping of previously identified headwinds, specifically the lower production with a major North American customer due to a supplier fire and program cancellations with local China OEMs is unchanged. Second, launches and ramps are now expected to contribute 200 basis points to revenue growth in the second half of the year. This is lower by 100 basis points than initially anticipated, reflecting the programs I previously described.

And beyond that, the outlook for vehicle production in the second half has turned from a tailwind to a headwind. This is further amplified by our customer and program mix due to the scheduled changes I outlined earlier, which cumulatively now a 150 basis point headwind to revenue growth in the second half. I want to wrap up with some closing comments on these revisions. First, the China domestic market, which has and continues to be a more volatile region, has clearly deteriorated relative to when we last updated you. And second, we were not conservative enough in certain assumptions, particularly around launches and ramps. To that end, we have incorporated an additional element of conservatism in the second half of this year.

I will close by noting that we continue to see long-term opportunity across a diverse set of end markets and across regions where we are delivering solid progress as evidenced by our revenues, bookings and commercial awards.

With that, I will turn the call back to Kevin for his closing remarks.

Thanks, Varun. I'll wrap up on Slide 12. In summary, we remain confident in the significant long-term opportunity resulting from secular trends that are demanding solutions that can sense think, act and optimize and the customer needs they introduce for high performance and cost optimized solutions. However, we also acknowledge the more near-term challenges to our business, driven by ongoing volatility in the domestic China market and the related impact on our broader automotive customer mix. To be clear, our customer mix in China has improved and dramatically moved towards the local OEMs. However, this improvement has not been enough to offset the rapid shift of local OEMs business toward export platforms as well as the reduction of European vehicle exports into the China market.

Holistically, we continue to focus on improving the revenue mix of our business both inside and outside of automotive. We also remain laser focused on execution, delivering margin expansion, earnings growth and strong free cash flow generation across a variety of different macro backdrops, and we're keenly aware that these efforts need to translate into increased shareholder value. Based on the significant value opportunity we see in our stock, combined with the strength of our cash flow generation and balance sheet, we intend to remain active buyers of our shares, utilizing approximately 50% of our expected free cash flow on a more regular basis over the next few years to repurchase our shares. And in 2026, our repurchases will be materially above this level. We're also committed to continually evaluating our business portfolio in light of changes in the macro environment to maximize shareholder value. We're confident that we'll continue to deliver value for our customers, drive profitable growth and create sustainable long-term value for our shareholders.

Operator, let's now open the line for questions.

[Operator Instructions] We'll now go to your first question. It will come from the line of Itay Michaeli with TD Cowen.

Great. I know it's a little bit early to talk about 2027. I'm just curious kind of how some of the changes you're seeing in the second half of the year kind of inform you in terms of just the prior 4% to 7% growth rate and work into 2027 and beyond? And kind of how we should think about that given some of these changes here in the second half?

Yes, sure. Thanks, Itay. Listen, our long-term view of what the business is capable of remains intact. Clearly, drivers of growth are constantly changing, especially in environment that is dynamic as this environment is, when you look at the automotive sector, IHS has brought down the growth outlook for future vehicle production. Clearly, material cost inflation is increasing in light of various macroeconomic factors However, having said that, within the automotive sector for the second straight year, we're running with very strong bookings across both of our businesses with the leading automotive OEMs inside and outside of China.

On the non-auto side, opportunities are materializing much faster than we had initially expected. And that's across both of our business segments. And we've had a tremendous amount of success leveraging our automotive portfolio into these new markets. So that's an area that we're very optimistic but the environment certainly is dynamic. I won't get in specifically into 2027 at this point in time. As we move later into the year, that's something that will certainly provide incremental information about and updates on.

Great. That's helpful, Kevin. And as a quick follow-up, good to hear a little bit more conservatism in the second half guidance. I think revenue guide still implies a pretty healthy uptick versus Q3. Maybe just talk about some of the drivers and puts and takes and degree of visibility kind of into that Q4 ramp.

Itay, it's Varun out here. Listen, yes, in terms of when you think about the year-over-year second half and also Q4 in particular, essentially, it's a couple of points, right? The first is the year-over-year uptick in the production with the North America customer, which had a fire at their supplier a year ago. So that unwinds from a comp perspective. The second is growth in our software and services business. As I mentioned, the $50 million reduction in software enterprise bookings is from a timing perspective. So we expect Q3 to be softer but again returned to high single double-digit levels in the fourth quarter and then just growth in our Engineered Components business.

Your next question will come from the line of Mark Delaney with Goldman Sachs.

Kevin, you mentioned that even though Aptiv has been making good progress with its bookings for the Chinese domestic OEMs. Not enough of those were on the export vehicles. Maybe you could talk a bit more on that. I mean I would have thought Aptiv was very well positioned for exports given the global nature of Aptiv and your strength in other regions. So maybe talk a little bit more on what's happening and what Aptiv is going to do on that front going forward?

Yes. So Mark, that's a great question and a very fair one. So we are very well positioned. I would say over the last couple of years, the real focus was on how do we get stronger mix with the leading local OEMs. When you take a look at our revenues today in China on export platforms, it's about 10% of total revenues. So the mix is more heavily weighted for the domestic platforms. As you look at our bookings over the last 2 years, that percentage has significantly increased. So the benefit of our product portfolio and our capabilities outside of the China market are certainly coming into play. But right now, our revenues don't match the bookings mix over the last 2 years. And that's something we're working on, and that's something, quite frankly, we've been making progress on over the last the last year or so.

Okay. I also wanted to ask about the nonautomotive opportunities and nice to see the solid growth the last couple of quarters there. You mentioned specific progress in drones and robotics. I think you said that business could approach $300 million of revenue in the next few years. What does that mean in terms of profitability? I don't -- not auto can be higher margin, but maybe there's also a number of investments you're making. So if you could speak a bit more on what you're seeing there and how to think about the profit implications.

Yes. So from a run rate standpoint, margin profile, as you can imagine, is much higher than ones in automotive. We're investing in nonautomotive capabilities today from a product and go-to-market standpoint that we talked about. There's minimal capital investment because we're using existing facilities, existing machinery and equipment. So from a capital standpoint, that's less of an upfront cost and initial drag, but it is -- both markets are much higher margin profiles than what we experience in the automotive industry.

Next question will come from the line of Emmanuel Rosner with Wolfe Research.

Great. One quick question the change in guidance. It seems like -- so I understand some of the revenue drivers, but it seems that the EBITDA line, maybe the implied incremental would be pretty high, like maybe 40%, which seems maybe a little bit above the normal. So can you maybe just talk about the change in the EBITDA guidance?

Yes. Emmanuel, it's Varun Laroyia out here. Listen, the specific one really is the software timing that I mentioned. So that really has to do with the product mix. So that's the one which kind of leads to the second half, the $50 million reduction that I'm talking about, that really is what impacts that.

Okay. So this is very, very high decremental. And so therefore, on average, the total is around that 40%.

Yes, it's -- I think, typically, the mix would be -- the decremental will be less than that. I think just given the size of the software revenue reduction was roughly $50 million in the back half. The flow-through on that tends to be higher, and therefore, the overall decremental in that particular period is higher.

Understood. And then I understand the software revenue changes timing. Can you maybe just give a little bit more color around what's going on the ground and just sort of like how do you think about growth in the software on a go-forward basis?

Yes. So growth in software. So we've been growing kind of low double digits over the high single-digit -- high single, low double digits over the last several quarters in the software business. Our software businesses is kind of too old. You break it down, Embedded Solutions, which I would say, tend to be less lumpy and then enterprise solutions that go into markets like telco and industrial markets, which tend to be larger in terms of their overall size Emmanuel. And at times, they can shift for various reasons. And when they shift, it has a more pronounced impact on a particular quarter's growth rate.

Okay. But on a go-forward basis, the -- what sort of less growth rate would you expect?

Yes. I think our growth rate will continue in the double-digit sort of growth rate with the target of getting to that mid-teens sort of growth rate. We've been a bit below that over the last few quarters.

Next question will come from the line of Joe Spak with UBS.

Look, I appreciate sort of the coming clean on not being conservative enough and you think you built in more of a cushion going forward. But we've been here before. So maybe you could just sort of walk through how -- or what you're doing to sort of changing your planning process for some of this uncertainty? Because like I know it's schedule changes and ramps, but really, it's all sort of the same, right? It's all one and the same it's volume. So how are you thinking about one, planning the business and to sort of communicating that on a go-forward basis? Like what's changing from here?

Yes. Yes. I think -- no, Joe, that's a fair question. So I think as it relates to as China becomes a bigger part of our overall revenue base is the China local OEMs become a bigger part of our overall mix. as well as I do, China OEMs have a number of different nameplates or a higher mix of nameplates relative to the Western OEMs. Just a more significant haircut from an overall conservatism standpoint. I think that is the major change in terms of our process in terms of how we operate internally and how we forecast externally. So to date, we've had a process where we've discounted those schedules, obviously, have not discounted them enough. I would say the China domestic market is significantly weaker at this point in time than what it's been over a number of years with domestic retail sales down 20%. I think most people in our industry would have expected that the China government would have stepped in to provide some element of support as it relates to the industry. It hasn't yet. And assuming that they would provide some support, obviously, near term was a mistake. So I think it's just an overlay of significantly more conservatism.

Okay. And then maybe just some quick hitters on some of the non-auto things. One, like how quick can sort of the drone business come in to sales. I noticed you said you're collaborating on 800 VDC. Can you just describe that a little more? Is that something you're licensing and building or you creating on solution? And then the optical M&A, is that a tech buy and something you need to commercialize? Or is there a book of business?

Yes. So there's a couple of layers to that. So as it relates to whether it's drone robotics, or energy storage depending on the customer. The path to market is much faster on the robotics and drone awards this year, we'll have revenues in 2027. So I would expect typically roughly 6 months path to revenue.

On the energy storage/datacenter side, most of our product portfolio is in and around power side, transition to 800-volt given our portfolio -- existing portfolio an 800-volt present incremental opportunities. We're working with several players. We'll be talking about more commercial awards. I'm sure over the next couple months today in that space, we have under $50 million in revenues. We expect that to grow at a very rapid rate, Joe, over the next 3 years. And again, most of that is in and around power both to the rack and now with some capabilities in the rack and the M&A acquisition is just building out our portfolio as it relates to products that we can take quite frankly, across multiple markets.

Your next question will come from the line of Colin Langan with Wells Fargo.

We've talked a lot about China being weak. I'm not sure if I'm looking at Slide 8 wrong, but you actually -- it looks like you outperformed in China according to that slide, you're up 5% and the market down 3%, and it was pretty weak in Europe. So is that really the bigger issue or -- because I think you mentioned also in comments about European exports to China weakening. Is that the bigger factor that's causing a headwind here? And is that possibly why we've seen other suppliers haven't cut guidance do you have like higher exposure to some of those players, and that's having a bigger impact?

No. So there's a couple of aspects. So we talked about traction in commercial awards in China with the local OEMs. So we have made significant progress and that is what's reflected in our overall year-over-year growth. Having said that, that year-over-year growth was not as strong as we had initially forecasted and included in our guidance. So yes, it's strong -- we showed strong growth, strong outgrowth, but not where we expected it to be. As it relates to the impact of China, the domestic market, the decline in the domestic market, the reduction in schedules impacted the local OEMs, impacting both our EC business as well as our IS business.

Our IS business was disproportionately impacted by the #2 player in the China market who we were launching several active safety programs with. From a European standpoint, it really is principally the export of vehicles into the China market from 2 luxury European OEMs that we saw a significant reduction in their schedules depending on the OEM late June or July, I think they are the OEMs that have been the most public about their challenges in the China market. So you can identify who those are. So that's where the biggest impact, quite frankly, is.

Got it. And then just to follow up on earlier questions. The margins seem to kind of -- the quarterly cadence here is a little odd. It's like there's a pretty negative decremental sequentially and then a big incremental into Q4, is this all recovery driven? Is there some cost headwinds in Q3?

So there are 3 things. So here's how I would look at it. One is just volume flow through Q2 to Q3. The incremental impact of a piece of that being softer, so higher margins going from Q3, Q4 bounce back in software, higher margin, volume pickup, underlying volume and flow through on that volume. And third, as you know, engineering credits, recoveries, things like that tend to be stronger in the fourth quarter than they are in other quarters. So -- so that's the walk. There is an element of Q3 margin that's impacted by Varun mentioned in his comments, timing on recovery. So normally, that would have shown up in Q3. So Q3 is a little bit, let's call it, artificially lower than what we would have expected that has some general impact. But my comments about the walk as it relates to volume, software recoveries, that's the biggest piece.

Your next question will come from the line of James Picariello with BNP Paribas.

Kevin, can you share some thoughts behind the portfolio changes you had indicated at the tail end of your prepared remarks?

Listen, I don't have any specific comments I would make at this point in time. Clearly, we're operating in a very dynamic market, right? And that's across regions and across technologies. And as we always do, we're evaluating that mix of products, that portfolio and how we optimize and drive shareholder value. So I would just leave it at that.

Yes. Understood. And then just can you share segment level color on the updated guide here for the full year? What's embedded for each segment's non-auto growth in the outlook?

Yes. I think non-auto growth for both for the full year are relatively strong third quarter in the Intelligence Systems segment. It will be weaker, given that software adjustment that I talked about. But we see a strong bounce back in the fourth quarter. Nonautomotive revenue growth across both of the businesses has been very strong and in line with our 8% to 10% sort of framework that we've provided previously.

And then just like revenue, core growth in margins by segment or just directionally would be great.

Yes. Just to be sure, are you asking that for the full year or...

Yes, yes, full year.

Yes. Listen, in terms of both businesses, based on the latest update that we've mentioned, as I mentioned, the revision in guidance is largely impacting the Intelligent Systems business, right? And we kind of gave you the puts and takes associated with that. So from an intelligence systems perspective, we would expect the business at this point of time to be approximately flat on a year-over-year basis on a revenue basis with Engineered Components growing in the low to mid-single digits. So that's point number one.

And then with regards to margins, margins essentially what we've kind of talked about previously, solid margins coming through both businesses. with EBITDA margins in Intelligent Systems, called the mid-teens level. And then with regards to -- on a full year basis. And then on our Engineered Components business, in the, call it, low 20s, call it about -- roughly about 22 points of margin for the full year.

Your next question will come from the line of Tom Narayan with RBC.

Just one more question on these 3 buckets of it change. If that's okay. So it looks like -- yes, look, the scheduled change, you have I think the European OEMs in the Chinese market the delayed programs and the timing one coming back in Q4. The timing one is fairly obvious. But just curious on the other 2, I guess, do you have any level of confidence that those other 2 buckets, you clearly gave those buckets this imply for a reason. Potentially coming back in 2027, is this what's reliant on the Chinese government coming back with stimulus? Or are some of those like you know you're getting back? And then I have a follow-up.

And Tom, you talk -- you're speaking to all buckets? Or are you speaking to the reduction in H2 customer schedules?

Just the non -- the timing one we already know it's going back in Q4, but then you had 2 other items, right? Scheduled changing and delayed program. So just curious of those 2 buckets potentially coming back in '27.

Yes. So it's -- there's 2 aspects to the China local market. Aspect one is domestic China market with domestic local OEMs and how that plays out during 2027. It's at least for us, difficult to envision another year where the China local market is down 20% and production schedules are, therefore, adjusted to that point. So it's difficult. It's difficult to envision that, but those are some of the things that we're working through. There's a second piece as it relates to within that. So the bulk of that $150 million that Varun talked about is China local OEMs.

And then there's a part that is effectively European exports into China. I think it's possible that those European exports into China, we don't see a bounce back during 2027 in light of the competitiveness of the China market. As it relates to the program delays and launch ramps. Listen, the local China OEMs. I'm confident that you'll continue to see their launches ramp at a lower slope than what was originally forecasted. There's one program from a BYD that we're confident will be launched, just was shifted and that's an export vehicle program. And then there is the program that Varun talked about that was a European OEM that was a delayed launch from European OEM that had initially, the view was it was going to be rolled across multiple programs. That program is launching as we speak. So that will be a tailwind from a revenue standpoint as we head into 2027.

That's very helpful [indiscernible] that is. And then the nonautomotive question I have, you mentioned this is coming in ahead of expectations. And I know you discussed this at the Investor Day, and these are all very different verticals. But I'm just curious what you're seeing on the competitive side here that you're able to win so much here I would have thought that there'd be incumbents in these verticals? Or is this simply just lack of competitors and like kind of a rising tide lifts all boats, just how have you guys been so successful in capturing these new business wins here?

Yes. So I think -- so I put them into 2 buckets. I would put the drone and robotics buckets where we're playing, our principal focus on the drone and robotics here is in and around autonomy. So robotics, it tends to be AMRs, although we have commercial opportunities with a few of the humanoid players. Our view on significant volume will be more -- is likely to more come from players like -- it tends to be more of a nascent industry. I know there's a lot of talk about the size and growth, but it's a bit more nascent. And it's not only our technology where we bring opportunity. But it's also our capability as it relates to systems, systems engineering, the material supply chain and manufacturing that is differentiated from the typical players in a nascent industry.

On the drone side, that's even more so the case there's significant demand for reasons that you're aware of. There is a requirement of a non-China supply chain, a number of different technologies. That's something that we have visibility to and we can provide our perception systems and compute and ability to take bill of material costs out is unique relative to what their current supply base, which isn't very mature and isn't quite as organized as what we're accustomed to. So I would say it's a mix of bringing our technical capabilities, but there's an equal part of what we do day in and day out. from an automotive standpoint so that there aren't really the traditional competitors, if I could say. It's an area that we're moving very in. We've invested in capabilities as Varun talked about. We're going to continue to invest and actually ramp up our investment in this area because the potential opportunity near term is significant. And as I said, the margin profile pricing here is more value-based than cost base. So the nature of those 2 markets are very good.

On the -- I should now go to, if I can, just to the energy storage/data center. Listen, our sweet spot is power. That's what it is. We've put a very -- a team very focused on those 2 specific markets based on our backgrounds in power distribution. We are working with players who are well known in the automotive space for energy storage, including now Texas-based global OEM as well as the leading China OEM as it relates to leveraging our automotive relationship. And then we're working with several players that I alluded to who support those markets today for incremental opportunities. And today, again, our revenues are relatively small, but the size of the commercial pursuits and bookings we're confident we'll ramp up revenues certainly much faster than what we experienced in the automotive market.

Your next question will come from the line of Rajat Gupta with JPMorgan.

Great. I just wanted to start with one clarification on the first quarter restatement. If you look at the press release and take the 6-month EBITDA number, it implies a lower 1Q than what was provided in the 1Q deck and like those financials on the website. I just want to make sure like if that is just an accounting nuance that we need to be aware of write off...

Rajat, it's Varun out here. Listen, that's all CODO associated with the Versigent spin. So what you need to look at is the Q1 pro forma on our Investor Relations portal.

Understood. So that's the right number. Okay. Got it.

Yes.

And just a follow-up just on the bookings mix. Within the intelligence systems year-to-date bookings or just get to second quarter bookings -- are you able to share in more detail in terms of how much is like old stack ADAS including software versus modular. And I'm curious like if that mix has changed at all over the last few months, a lot of manufacturers try to build more internal capability?

Yes, our -- the trend that we're seeing, and I want to make sure I think you were talking about the intelligence systems and tech stack is more of a separation of software and hardware and quite frankly, more software opportunities. And I referenced the full tech stack board from a Gen 6 ADAS standpoint. We're seeing or experience a significant portion of our bookings in 2026 will be ADAS Gen 6 ADAS solutions, the bulk of which will include our hardware and our software. So we're seeing more momentum there.

We're seeing more OEMs come to us as they work on their path to software-defined vehicles asking us to do some of that software development in and around areas like middleware and other portions of their software tech stack. So I know there's a -- we often get asked that question about insourcing from an OEM standpoint. It varies a bit by OEM, but we would tell you our experience has been the overall trend. We've not seen that. And in fact, we've seen several OEMs who have attempted to do broad-based software that has decided to go down a different path and it'd be more reliant on suppliers.

And that was our last question. This will now conclude today's question-and-answer session. I will now turn the call back over to Mr. Kevin Park for any additional or closing remarks.

Thank you, everyone, for joining us today. Have a great day.

This call is now complete, and thank you so much for joining.

Why don't we get started and maybe people will come in after. Yes, I'm happy to kick off the -- actually the first section, mostly autos today on this track with Aptiv, we have Kevin Clark, the CEO; and Varun Laroyia, the CFO.

Following the [ spin ] Versigent, Aptiv is now a much cleaner connector play with active safety and user experience and more focused on really the secular growth areas. And the strong underlying growth profile is really one of the drivers of our overweight rating on the stock. I think we just did our navigator report looking at all the different parts of the vehicle, and there's just really a few parts of the car that are actually growing. It's pretty tough for suppliers, and you guys are focused on some of those key growth areas.

So maybe to kick it off, as I mentioned, you do have the spin. How should investors think about the company with the refocus on the new business divisions? And what do you think is important going forward with that transformation?

Sure. So first, thanks for having us here. We really appreciate it. When we look at our -- the spin, the rationale for the spin and the resulting strategy for, I'll call it, the New Aptiv, to a certain extent, our underlying strategy hasn't really changed, right?

We're very much focused on participating in those trends that are driven by more automation, more electrification, more digitalization. I would say New Aptiv is better positioned from a portfolio standpoint to pursue those opportunities, obviously, in automotive, but outside of automotive because we have positions in areas like A&D, telecom, datacom, diversified industrial. So we have a fairly solid platform, both on the intelligent systems side as well as the engineer component side from which we can leverage and grow.

And as more of product businesses versus the Versigent business tends to be more of a program business, but more as a product business. It uniquely positions us to combine our product portfolio and go to customers in the A&D space, go to customers in the robotics space. Go to customers in the telecom space and build upon our strong position in areas that are higher margin tend to be higher growth and are earlier in the stage of benefiting or being impacted by the trends of automation, electrification, digitalization.

And a couple -- great examples would be in the A&D space. For example, we talk about drones. And there's a lot of activity that we have in and around the drone sector. Our unique portfolio from a software stack standpoint from the real-time operating system on up to actually our future development when you look at our perception systems, whether they be camera vision based or they'd be radar-based, you look at our advanced compute.

You look at our high-speed cable assemblies and our high-speed interconnects. Those are all solutions that have applications in that particular product area. And then you overlay on top of it, what we do every day from an industrialization from a supply chain management standpoint and importantly, taking costs out of bill of materials on a regular basis. It provides us a very unique position to bring real benefits to those sectors, especially those areas where they're earlier stage.

And to remind people, it's 24% is non-auto of the current portfolio post-spin with 10% being commercial truck, being broader industrial.

Yes. So about -- yes, 24%, 25% is nonautomotive. 10 points of that is commercial vehicle. The balance is in the A&D and telecom, datacom space. That nonautomotive sector is growing high single digits. So it's a faster-growing area at this point in time. And as I mentioned, Colin, we feel like we're well positioned to take real advantage of the trend in those markets.

Maybe just getting through some of the more maintenance questions. I mean any color on how the quarter is trending production. I think we've seen S&P cut their forecast. Is that a risk at all?

Yes. I think we should first start with explaining the S&P forecast. We operate off of customer schedules. Long term, we look at sources like S&P or IHS. I think the IHS adjustment was really a macro adjustment as they looked at what's going on in the Middle East, the conflict and the implications that, that could have for supply chains, cost of vehicles and ultimately, demand. So that's the position they took. We're comfortable with our guidance. We're watching the market closely, just given the dynamics again in the Middle East and some of the news that we were talking about just prior to our meeting. So we're watching it closely.

There have been some puts and some takes, quite frankly, from an overall customer mix. So that's something that we'll continue to watch very closely. But sitting here today, we're comfortable with it. I don't know if Varun has anything to add.

When you say puts and takes on customer mix, what are you referring to?

Some customers are slightly stronger production. Some customers are slightly weaker.

But for you, that's sort of a neutral factor you're still watching...

It's something we manage through.

I think the only other final piece, actually, Kevin, that you kind of remind me is from a year ago, where the overall trade policy elements were still being worked out. So from a year ago in the second quarter with the tariffs being announced in the first quarter a year ago, there was some level of conservatism, I'd say, just to kind of see as to how things would settle out. We don't have that conservatism built in as of now. So it's a very realistic set of guidance and numbers that we provided out there. We're pretty open in terms of the framework as to how we deal with the various puts and takes. So no real update at this point in time.

And one of the big questions coming out of last quarter was the guide is sort of 1% growth in the first half, but 6% to 7% in the second half. Can you remind us of what are the big puts to get you there? And are those all still on track, obviously?

Yes. Listen, great point. Essentially we had three key elements in that. The first is just in terms of first half to second half with regards to the underlying global vehicle production, right? And that adds about 100 basis points to the overall uptick from the first half to the second half on a year-over-year basis, right? So that's point number one.

The second one we called out was about 150 basis points of just customer supplier fire, for example, that we've called out in the past, I think that's out there in the public domain, but also the annualization or the anniversarying of three programs in China with two different OEMs, which essentially anniversary by the end of the second quarter, right? So that's 150 basis points. That's basically not debatable because it's just math, right? So the 100 basis points I mentioned, GDP, 150 basis points on the couple of points I mentioned here.

The final one really is about 300 basis points of launches and ramps, right, that's coming through. But to be clear, these aren't -- these are largely kind of launches that have already begun. So it's basically a ramp going into the second half. So we have good insight in terms of how those programs are tracking. And that's, again, across both of our segments, Engineered Components and also Intelligent Systems.

And if we go half over half, I think it's something like $260 million in sales and $160 million in EBITDA. So it's a pretty high conversion. What are the drivers of that?

Again, listen, the first point, in fact, the single biggest point really is flow-through on revenue. If you kind of go post spin, the incremental margin is roughly about 26 to 27 points on the incremental revenue. So that's kind of point number one.

The second point is just strong operating performance because we've been working through as part of the spin, looking at structural cost improvements, right? And it's a playbook that we have worked through for a long, long time in any case. So just working that playbook through.

The final point really is if you think about where the FX and commodities impact was a year ago in the second half to this time around, that begins to flatten out a little bit, okay? So those are kind of the three key points, and that's why we feel comfortable about the first half, second half margin move up also.

I guess moving more thematically, you recently announced that you have a partnership with NVIDIA, which is obviously a pretty important company these days. Maybe if you could talk a little bit about it. I think it -- was it a production-ready Edge AI. So what does that involve? How extensive is your relationship with NVIDIA?

Sure. So we've worked with NVIDIA at Aptiv. I think said 2017 was the first program. It was actually an ADAS controller program for VW. So at Aptiv, we go pretty far back. On the Wind River side, Wind River has had a relationship with NVIDIA as well for a number of years. When you look at the more recent agreement, we're very much aligned in terms of our view on AI at the edge and the opportunity across multiple markets.

We have a strong view on that NVIDIA certainly does. The partnership is really about how do we take our software stack, how do we put it on their silicon and then how do we go across multiple markets and sell that solution? And how do we do it across multiple NVIDIA technologies in a joint commercialization effort. So that's the real focus. We think there's big opportunities, as I mentioned, on Edge AI. We think there's a big opportunity opportunities on the 5G to 6G transition. And then more broadly speaking, just across industrial applications.

And this is Wind River type technology?

This is Aptiv and Wind River. So it's everything from the Middleware, real-time operating system, VxWorks, the Helix Hypervisor to a portion of the Aptiv software stack.

Does it -- is it just a tech partnership at this point? Or is it actually going to drive revenue?

Actually will drive revenue.

What kind of products it's -- like what kind of software it's going on to?

It's everything -- like I said, it's everything from Aptiv Middleware to Wind River VxWorks and Hypervisor to some of our features as it relates to vision and other perception technologies.

Okay. I think you signed your third robotics partnership. Any color on when this starts becoming a real contributor and what kind of investments?

Yes. So the level of interest is extremely high. We have a number of I call them, proof of concept that are also transitioning to commercial opportunities now across the humanoid and AMR space. We're more focused on AMRs transparently than we are in the humanoid space, just given our view on maturity of the technology and the applications.

So we're working with a number of players, confident in the second half of this year, we'll have announcements as it relates to commercial awards in that space. And that should translate to revenue either late this year or beginning early next year.

On the drone side, a significant amount of interest, similar situation in terms of proof of concept. I would say closer to commercial opportunity in those discussions in that particular space, just given the nature of the product. When you think about the perception system, so whether it be vision or radar when you think about compute, when you think about the software stack and you think about our interconnect portfolio, high-speed cable assemblies, all those sorts of things that enable performance and something like that.

A big content per unit opportunity and a high-volume opportunity. I should say the second thing across those two markets that we talked about is a real focus on resiliency of our supply chain. It's fully mapped. We can identify where products are sourced from our suppliers down to in some areas, 7 or 8 levels down. So having clear visibility where products come from, where they're manufactured, where they're sourced from, the ability to industrialize solutions. So high performance and reduce costs. Those are areas of significant interest and just ability to scale in light of the volumes that are being forecasted in those areas. With those manufacturers, whether they be U.S.-based or European-based with dedicated supply chain.

Got it. How about I think probably the most popular question I've been getting is on sort of this shift to 800-volt data centers. How -- maybe can you talk about how does that change your competitive positioning in the data center space? How should you think about it? And what do you think your chances are on sort of winning sort of in data centers?

Yes. So we're very competitive in data centers. I think maybe there's a little bit of confusion there. And I probably created by myself. We're very competitive, but principally on the power side, right, just given our roots when you think about power distribution in a car. I believe we're on 19 of the top 20 800-volt platforms across the globe.

We actually have programs with the leading global vehicle -- battery electric vehicle companies, not only on their vehicle platforms, but on their energy storage platforms. So we're well positioned for that transition. And we're getting a lot of interest from suppliers to the energy storage market or the data center market in and around power distribution for those applications. So it's a big opportunity. It's small revenues now. But we think just given our experience in automotive, given what we've done in terms of energy storage with the two leading electric vehicle manufacturers in the world, we're well positioned and have developed strong skill sets and product portfolio to benefit from that trend. I don't know if there's anything I missed.

How about we talk about the data center side of it? Because I thought the -- because today, I mean, some of the other connector players have pretty dominant positions in the data center and you have pretty limited revenue there. My understanding is the 800-volt opens it up that you could have -- your products are more competitive? Or is that a misunderstanding?

Yes. I think -- well, I think it's two things. There are players that are more competitive on the data distribution side within data centers, so data distribution. We're very capable and competitive on the power side of the business, just moving power. So there's an opportunity at 400-volt given our unique -- given the fact that we feel like we're ahead of the curve on 800-volt given what we've done from a customer mix standpoint, in automotive, that uniquely positions us as there's a transition to 800-volt. But we can play in both.

Any color on the percent of a data center connector market that's the data versus the power...

Yes, I don't have that offhand, but we can follow up with you on it.

Maybe if you could talk about new wins outside of autos, how quickly can those ramp? And I think you mentioned earlier, they're higher margin. Any color on how much...

Listen, so first of all, I think it's fair to say we're perhaps one of the first few within the industry to talk about non-auto, right, and the focus associated with that. So I just want to put that thing out there. It's not starting from kind of ground zero. We've already had a really good strong run rate, both pre-spin and post-spin for both businesses, but arguably more on the New Aptiv RemainCo side, right, with regards to non-auto.

And it's across a whole series of industries, aerospace and defense, commercial space, telecom, datacom, diversified industrials. So given that kind of strong run rate we already have and the increased focus that we've put into that arena, we are seeing that 8 to 10 points top line growth. That's what we had kind of put out for our financial targets through 2028 at Investor Day last November.

And then you obviously saw in the first quarter, we posted 9 points of revenue growth within that non-auto side. I will share within that 24, 25 points of revenue within New Aptiv, as Kevin mentioned, 10 of that 25 is commercial vehicles. And even out there, it's not just kind of the heavy, the HEVs, we also include some of the light commercial vehicles, right? So Class 3, Class 4, essentially think of it for some of the delivery vans across European cities, for example. Those ones we essentially would expect to grow mid-single digits, right?

And so then when you kind of say the rest of the non-auto side, aerospace and defense, strong growth coming through on that front, diversified industrials. And we're kind of happy with the way that side of the business is progressing, both in terms of wins but also just the traction we are getting, this 800-volt piece that you just mentioned is relatively new. But I think that, again, opens up, given our incumbency with the 800-volt architecture, it opens up more opportunities for us, right?

And then from a margin profile perspective, listen, we are making investments while the margin profile is slightly better, but we are making investments to just double down, and this relates to both the product engineering, but also kind of enhancing our go-to-market capabilities. But again, this was something that we called out when we gave guidance for 2026 in any case. That's all embedded within our guide for the full year.

I think maybe some examples, some specifics from an award standpoint, consistent with what we've talked about in the past. We'll talk about Q2 when we announce Q2 earnings. But if you think about it, when I map it out in the commercial aerospace areas. So awards -- on the interconnect side, high-speed cable assembly side, power side across the major rocket manufacturers in North America.

Similarly, awards on -- for low earth orbit applications across the players that are in that space. Similarly, heavier weighted towards the EC product portfolio there. On the software side, real-time operating system awards, so VxWorks, Helix Hypervisor, Aptiv Middleware with one of the major primes for more I'll call traditional aerospace and defense applications, more defense from an application standpoint, battery energy storage awards with the leading EV manufacturer out of China as well as the leading EV manufacturer out of the United States.

So those are the areas that are the most interesting in terms of -- and the most different from our traditional applications in and around automotive.

When we say 8% to 10%, what is the assumption for the market? How much over the underlying market? Because I know some of the truck markets are supposed to recover...

It's an aggregation of the various industries, end markets, right? So I gave you the 10 points of the 25 points is commercial vehicles, and that's kind of mid-single digits. But if you kind of get to an 8% to 10% corridor, that would just kind of naturally imply that some of the other end markets such as aerospace and defense, commercial space, we see growing faster than that range.

It really varies by -- it varies significantly by market. So to Varun's point, on the A&D space market outlooks there are roughly 8% plus sort of overall outlook for growth. When you look at some of the subsets that we were talking about, those are really today, markets that, from a content standpoint, roughly $5 billion of content opportunity for Aptiv growing 30% to 40% from a compounded growth rate standpoint. So very high very high.

There are other markets, diversified industrials, and you look at the robotics applications depending upon where you're playing, if you're in the AMR and humanoid space. It's a higher growth rate. It tends to be in the neighborhood of about 30%. If you're in a traditional industrial space, it tends to be kind of a mid-single-digit sort of overall growth rate. So the growth rate is appealing. The margin profile is even more appealing and the ability for us to take an existing product portfolio, some modifications to the product but relatively minimal investment in go-to-market resources.

So I think marketing and commercial capabilities, but not -- it's not a significant investment and being able to penetrate those markets and having high confidence in our ability to do so, it puts in a really attractive position. And like I said, in addition to that technology capability that is really important, our ability to bring our supply chain, manufacturing, quality, industrialization capabilities is we found it very unique. So we're getting a lot of pull and a lot of demand.

The last piece is just the operating model, right? From an auto perspective, global footprint, the supply chain resiliency in region for region. And as you think about some of these applications, our ability to help them scale up at an auto rate, that frankly is, I'd say, very attractive given our heritage and the ability to be able to deliver that same level of scalability and quality to other end markets.

Switching a bit. Can we talk about the active safety market in China? It seems like China moves super fast, and it's been pretty shocking how they take rate in Level 2+ in China has gone through the roof. We've also seen though an emergence of China tech players in that market. So what is your view of sort of how that market works? And can you remain competitive with those new players emerging in that space?

Yes. It moves -- China market moves very fast. You're absolutely right there. Our China revenues, that will be our fastest-growing market in 2026 calendar year. And part of that is the program launches that Varun had talked about earlier, the ramp-up of those program launches. A big piece of that is ADAS. We've been in China now for 35 years for the China market. Our China team participates in the development of our global ADAS platform. So they're a big piece of our application capabilities or development and application capabilities and a big piece of it is skill set and speed.

So we certainly leverage. We leverage that. We partner with China local OEMs. So our solutions tend to have -- be based on China SoCs. So we have a very strong partnership with a semiconductor company called O-Cera, local-based. We partner from a vision standpoint and with a company called Maxieye, who we actually have an investment in. And as well as Horizon Robotics. So those tend to be our vision partners. We develop systems that are almost 95% sourced with China inputs to meet what we're seeing is increasing demand from our customers in China for more resilient supply chain.

And for a number of those OEMs, we're taking that technology developed in China and the stack developed in China, and we're actually making modifications were required so that they can sell solutions in Europe, for example. So Leapmotor is one. We provide them -- we're their ADAS supplier for the China market. They are focused on growing outside of China. We're launching a program this year with them that actually will have more non-China parts, non-China vision solutions to meet the demands and the regulatory requirements for the European market.

So having that capability to move at speed, having the flexibility, the open architected solution that allows us to plug in different sort of solutions to meet regulatory requirements or customer preferences is really important, and we do that across the globe. So I think if you go to our OEM customers in China, they will say Aptiv operates as a local China OEM. It's not a source for low-cost source senior manufacturing. We've been there for 35 years, supporting the growth of the local market.

I think you mentioned you had sort of three partners in China. Are those more on the supply side? And would you consider other sort of tech partnerships in China?

Yes. We would definitely consider other partnerships in China. It needs to make sense, right? Obviously, stating the obvious. But yes, we would consider other partners as long as they are win-win situations for Aptiv and for the partners.

And maybe talking about connectors, what does the connector market look like in China and globally, are you seeing some of the China connector players show up around the world?

We see some. We're very competitive in China. Very competitive. The mix of China local OEMs programs and revenues is highest in our interconnect business. Roughly 70% of their business today is at market mix or production, very strong positions with the top 5 OEMs in China. China for China applications. Export platforms as well as supporting today supporting players like BYD, like Chery, like Geely in their overseas manufacturing efforts. So we're very well positioned. But like any market, as in advance and grows the supply base, there'll be more competitors out there. We just need to stay in front of them, which is something we've been able to do.

Maybe we can talk about user experience. That's been a pretty big drag on growth. When does that start to inflect? And how core is it to -- you're pretty nimble with your product portfolio? I mean is that too integrated in the rest of the business to divest at some point?

Well, listen, we always look -- we're always looking and reassessing our product portfolio. I think we need to define what user experience is. For us, it's -- we participate in the software stack. We participate in the software stack that is a big piece of which we would say today is more ADAS driven than it is, quite frankly, user experience driven.

So it's all the in-cabin sensing, driver monitoring, cabin monitoring, some of that for safety applications. Some of that for how does the sound system operate? How does the human machine interface operate. So there's overlaps with the use of that particular technology. We've talked in the past, we had a large program in -- that was effectively in runoff, and we're about done with that program in runoff. If you look at the whole in-cabin experience sector, the way we look at it today, we're in growth mode today. There are some areas that are less of a priority for us, the traditional infotainment system, which going way back is how we thought about it. There are small areas that we play there, very small areas, but the development or the integration of an OEM's infotainment system is an area that we've significantly backed off of.

Kevin, I guess, just to kind of add to one piece, right? I mean, Kevin mentioned the blurring of the lines between active safety and user experience, for example, with in-cabin sensing being out there. But that also kind of goes back to the renaming of what was our ASUX segment to Intelligent Systems, right?

And so -- and then within that product lines being sensors and compute and software and services, which we believe better addresses and better positions us for both the auto and the non-auto side, right? If you think of the push and both of our segments are making tremendous progress on both fronts is just to make sure that we don't kind of pigeonhole ourselves within an auto world as such because we believe and as we are seeing, our technologies and our capabilities are vastly applicable to multiple end markets. So that's the other piece to just kind of share that piece. I know we talked about user experience in the past, but just want to give -- get everyone up to speed with that segment.

How about an update on DRAM? Obviously, the costs have gone through the roof. You seem to have it pretty well managed. I think you had 12 -- starting the year, you had 12 weeks of inventory. You said the cost was about $175 as your pie last year, and you only expect low double increases in that cost. Is that still on track? And has the supply gotten worse? And how should we think about '27?

Listen, the memory sector is constrained with -- without a doubt for 2026, we had end of last year contracted for the full year and locked in prices and commitments from a sourcing standpoint. I would say 2027, we're in a situation where supply for us is virtually guaranteed at this point. Prices will be higher. In order to receive supply, you need to operate at market pricing. So for those OEM customers that are willing to commit with us back to back, we're in a position where we can guarantee them supply and at least a range of overall pricing.

But we'll have what we need to support our customers as long as our customers understand. And I think the industry is at a point where they do just given all the noise around it. That prices are going to be significantly higher in '27 than they were in '26.

So you feel pretty confident you'll be able to...

Yes. We feel very comfortable on supply. We have no I shouldn't say no concern. We're very confident on supply, prices given the constraint in overall capacity are going to increase in 2027, and we're passing that to our customers.

And Colin, I think if you can recall, a year ago, we had made approximately about $200 million of investments on that front, semiconductors, memory and stuff. And so -- and again, for '26 also, we call that piece out as part of our free cash flow generation, right? So there are certain areas that based on our conversations that are out there, we've been continuing to utilize the balance sheet to double down on supply chain resiliency. As Kevin mentioned, '26, we feel good about '27 supply guaranteed, but pricing remains open, but it will be...

Maybe just to wrap it up, maybe last question on M&A. I mean, with the spin, you have a little stronger balance sheet, cash. How should we think about what are your priorities for M&A going forward? Is it mostly trying to find assets on the non-auto side? Or are you open to everything?

Yes. I would say -- I would -- I'd answer your question more broadly on capital allocation. So the New Aptiv is a more cash-generative business, to your point, given the margin profile and the nature of the business. Our focus is really on how do we continue to invest organically in the business, both on the automotive side as well as the nonautomotive side, continue to do that. Where we can accelerate the advancement of capabilities, whether that be broaden the product portfolio or capabilities from an engineering or a go-to-market standpoint, we'll look to acquire.

I would say the focus there from an M&A standpoint, our bolt-on acquisitions, I'd say, principally in the interconnect space. Say, principally outside of automotive, just given the strength of our existing product portfolio on the Intelligence Systems side, more either commercial partnerships or investments in different technology players. And then the balance of the cash to the extent that we have excess cash flow, we'll return it to shareholders, consistent with what we've done in the past.

Got it. All right. Well, I think we'll wrap it up there.

Thanks for having us.

Thank you, Colin.

Appreciate it.

Good day, and welcome to the Aptiv Q1 2026 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, Cynthia. Good morning, and thanks for joining Aptiv's First Quarter 2026 Earnings Conference Call. The press release, slide presentation and updated New Aptiv pro forma financials 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 as of March 31. The reconciliations between GAAP and non-GAAP measures are included at the back of the slide presentation and the earnings press release. Unless stated otherwise, all references to growth rates are on an adjusted 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 Laroyia, Executive Vice President and Chief Financial Officer.

With that, I'd like to turn the call over to Kevin.

Thank you, Betsy, and thanks, everyone, for joining us this morning. Starting on Slide 3. The first quarter concluded with the successful completion of the separation of our Electrical Distribution Systems business into a new independent public company, Versigent, which you'll hear more about following their earnings release and conference call after the market closes later today. The step in our portfolio evolution better positions Aptiv to enhance our advanced software and hardware tech stack, further diversify our end market mix and accelerate our revenue and earnings growth. I'll start by covering our first quarter total Aptiv results.

We continue to flawlessly execute for our customers in an increasingly dynamic environment, further amplified by the conflict in the Middle East, enabled by our operating rigor and the resilience of our business model. We secured $7 billion of new business awards while also delivering solid financial results, including revenue of over $5 billion, an increase of 1% versus the prior year despite a deterioration in underlying vehicle production. Adjusted EBITDA of over $750 million, driven by flow-through on volume growth and strong operating performance, which helped to offset significant year-over-year headwinds from FX and commodities. When combined with lower net interest expense and a lower share count resulted in record earnings per share of $1.71. Varun will review our financial results in more detail later.

Turning to Slide 4. My remaining prepared remarks will be focused exclusively on New Aptiv, a leading provider of advanced software and optimized hardware solutions across multiple end markets that are being shaped by the acceleration of automation, electrification and digitalization. Our deep domain expertise and experience providing OEMs with our technology stack to enable their vehicles to sense, think, act and continually optimize increasingly can be utilized for applications in other end markets, which I'll talk more about in a moment.

Competitively, we're well positioned with content on all market-leading platforms across automotive, commercial aerospace and telecom. And roughly 1/4 of our business is in markets outside of automotive, and we have several strategic priorities underway to further increase our penetration of those markets, and we maintain a diversified regional revenue mix and have significant momentum gaining share with the leading local China OEMs on vehicle platforms sold in China, as well as exported to or manufactured in overseas markets. In addition, we've made significant progress further penetrating the leading OEMs serving the markets in Japan, Korea and India.

Turning to Slide 5 to spend a moment discussing New Aptiv's investment thesis. First, we've built a comprehensive portfolio that collectively powers intelligence at the Edge by enabling devices and systems to sense, think, act and continually optimize. Second, we deliver our unique product portfolio through a robust operating model that leverages our global engineering, supply chain, manufacturing and commercial capabilities, enabling us to provide high-performance, cost-optimized solutions backed by a resilient supply chain on a global scale, ensuring flawless execution in a dynamic environment.

Third, our unique product portfolio and robust operating model are leveraged to create an attractive financial profile that includes more diversified, higher-margin revenues. And lastly, generates a significant amount of free cash flow that can be allocated both organically and inorganically to enhance the earnings power of our business while also returning capital to shareholders.

We made solid progress across each of these pillars in the first quarter. Continued product innovation supporting new and emerging use cases across diverse end markets, including two that were showcased at last week's Beijing Auto Show, the advancement of our next-generation end-to-end AI-powered ADAS platform designed to deliver safer and more enhanced hands-free L2++ autonomy in both highway and urban environments. And in robotics, we partnered to enhance the functionality and performance of both an AI-powered collaborative robot and an autonomous mobile robot for material handling, each of which integrates our award-winning pulse sensor and advanced compute solutions.

We successfully navigated ongoing geopolitical dynamics and the evolving macro environment by leveraging our resilient operating model to manage through changing vehicle production schedules and increasing headwinds associated with rising input costs, including resins and metals, enabling us to deliver strong operating performance in the quarter, more than offsetting ongoing headwinds while continuing to invest in key strategic initiatives.

Our financial results reflected continued momentum advancing our strategic priorities, including high single-digit revenue growth in nonautomotive markets and double-digit revenue growth across our software and services product portfolio as well as margin expansion of 30 basis points, excluding FX and commodities, a measure more reflective of the results of our business given we passed the majority of input cost inflation on to our customers. And lastly, we worked diligently through the Versigent separation to position both companies for success with strong operating models, resilient supply chains and solid balance sheets. However, there's still more for us to do, and I'm confident that we'll continue to make progress further strengthening our value proposition and creating shareholder value.

Moving to Slide 6. Customer awards were strong in the first quarter, totaling $4.6 billion, an increase of approximately 15% from the 2025 quarterly average, and included roughly $900 million of bookings with nonautomotive customers. Both business segments posted solid results with approximately $2.4 billion in awards for Intelligent Systems, and $2.2 billion for Engineered Components. I'll talk more about some of the key customer awards across each segment in a moment, but would also note that we have a large and growing pipeline of commercial opportunities and expect 2026 bookings of more than $20 billion. Let's now review each segment in more detail, starting with Intelligent Systems on Slide 7.

Our tech stack, which first enabled intelligence at the edge for automotive applications is now gaining momentum for applications in other markets such as drones within aerospace and defense, and robotics within diversified industrials. During the quarter, there were a number of new program and product launches of [indiscernible] include the launch of an intelligent interior camera that incorporates our entire software and hardware stack, enabling enhanced interior sensing functionality, including driver monitoring and driver view features for the flagship sedan vehicle platform of a luxury German OEM. And the launch of an integrated high-performance cockpit controller for the high-volume, mid-level variant of an Indian OEM's electric SUV lineup, which follows a successful launch last year of an entry-level model.

We also secured several important new business bookings in the quarter, including active safety award from a large North American OEM that integrates our full tech stack from sensors to compute to software, for incremental large truck and SUV platforms, underscoring the flexibility of our solutions and deep technology partnerships with several customers. And sensors and advanced compute awards for a leading China local OEM for their next-generation EV platform, which support production for both the China [ market ] and export volumes.

We also secured several notable software and service awards, including VxWorks RTOS and a Helix virtualization software award for a leading defense [ prime ], building upon an established long-term partnership with this customer. And the software tool chain award for a large North American OEM that will be used to optimize -- which will be used to build optimized deterministic software for mission-critical and safety-critical embedded systems. This award supports this OEM's software factory initiative to move towards cloud-based development and software-defined solutions.

Lastly, our commercial momentum has also accelerated in the robotics and drone markets. In addition to our partnership with robust AI and [indiscernible] robotics, this quarter, we secured another partnership agreement with [ Comau ], a top 10 industrial robotics company. In addition, we've been executing sub proofs of concept and pilots in both the robotics and drone markets, that we're confident will translate to commercial agreements, and we plan to share further progress on these efforts in the near future.

Moving on to Slide 8 to cover [indiscernible] components. Notable new program launches during the quarter included a broad array of high-speed interconnect launches, including [indiscernible], Ethernet in other flexible and modular assemblies across more than two dozen nameplates and OEMs, ranging from North America to Europe to China, powering next-generation software-defined vehicle architectures. High-voltage electrical centers for two major local China OEMs, which will support production for both the China market and export volumes. Continued proof points of the progress we're making growing in the China market, specifically with the top 10 local OEMs that are growing both domestically and overseas. And terminals across numerous models within the portfolio and across regions for a North American-based global EV automaker.

Moving on to new business awards. We secured a high-voltage [indiscernible] award from a major Korean OEM that combines high performance at a competitive cost, supporting its next-generation multi-power train software-defined vehicle platform. High-speed interconnects and components from multiple aerospace and defense primes, including for lower orbit satellite and subsea applications, and a low-voltage connection system award for an integrated high-power energy storage solution from a North American-based global EV OEM that scales to support grid level performance and resilience. Collectively, these awards reflect the breadth of our solutions, meeting demanding performance and reliability requirements in automotive, which also translate across a range of other end markets.

I'll now turn the call over to Varun to go through our financial results, and our full year and second quarter guidance in more detail.

Thanks, Kevin, and good morning, everyone. Starting with first quarter on Slide 9. Total Aptiv, including our EDS segment delivered solid financial results in the quarter, reflecting robust execution amidst a dynamic market backdrop, where we once again navigated industry-wide and OEM-specific production disruptions and macro-driven input cost inflation.

Revenues of $5.1 billion grew at an adjusted rate of 1%, driven by strength at EDS, while [ new ] Aptiv absorbed certain customer mix headwinds, but importantly, progressed in diversifying revenues with 9% growth in nonautomotive, and 10% growth in software and services. Adjusted EBITDA was $752 million. EBITDA margin declined 90 basis points year-over-year, driven by FX and commodity headwinds of 180 basis points, well above the 120 basis points we had forecasted for the quarter. It should be noted that the year-over-year impact for [ new ] Aptiv was lower.

Earnings per share was $1.71, an increase of $0.02 from the prior year, reflecting the benefit of lower interest expense and low share count, partially offset by a higher tax rate. Free cash flow for the quarter was negative $362 million, and this included approximately $260 million in transaction payments across [ new Aptiv ] and Versigent consistent with our guidance for the year. It should be noted that we anticipate approximately $100 million in separation costs for new Aptiv in Q2. However, we will recoup approximately $80 million of transaction payments which were tax-related later in the year.

Turning to the next slide and looking at first quarter adjusted revenue growth on a regional basis for both Total Aptiv and New Aptiv. For Total Aptiv, revenue growth of 1% on an adjusted basis was driven by growth in North America and Asia Pacific, which was partially offset by a decline in Europe. New Aptiv, as I mentioned earlier, faced some customer mix headwinds in the quarter, most of which are [indiscernible], while generating strong results in strategically important areas.

Looking at revenue growth by region for New Aptiv. In North America, revenue grew 7%, driven by double-digit growth in Intelligent Systems and strength in nonautomotive markets. In Europe, revenue was down 5%, largely reflecting unfavorable customer mix, specifically with one of our largest customers in Intelligent Systems due in part to a slower-than-expected ramp-up of next-gen programs. In Asia Pacific, revenue was down 5%, essentially in line with vehicle production, reflecting continued improvement in our business mix in China with local OEMs and growth with ex-China Asian OEMs.

Moving on to our results on a segment level on Slide 11 and starting with Intelligent Systems. Revenue of $1.4 billion decreased 1% versus the prior year, which reflects two discrete factors. As we have discussed previously, the cancellation of certain programs from local China OEMs in 2025, which will anniversary midyear, and a greater-than-anticipated headwind from lower production at 1 of our largest North American customers owing to supply chain constraints following its supplier fire. Although this should be partially recovered in the second half of the year.

Cumulatively, these two factors amounted to approximately 250 basis points of headwinds to Intelligent Systems revenue growth in the quarter. And these were largely offset by strength in other areas, including double-digit growth in software and services. Intelligent Systems adjusted EBITDA margin declined 90 basis points primarily owing to a 60 basis point headwind related to FX and commodities, as well as incremental investments across product engineering and go-to-market to continue diversifying towards nonautomotive markets. These were partially offset by performance improvements.

Moving to Engineered Components. Revenue of $1.7 billion was flat on an adjusted basis. This reflects 6% growth in nonautomotive, including double-digit growth in diversified industrials markets, offset by a 2% decline in automotive, which reflects some customer mix headwinds in China attributable to broad-based production volume declines there, including with the largest local OEM. Engineered Components adjusted EBITDA margin declined 90 basis points which was entirely the function of a 140 basis point headwind related to commodities and FX. Excluding this impact, margin expansion was driven by performance initiatives.

And lastly, I'll briefly comment on our EDS business, which will move to discontinued operations starting in Q2. Revenue of $2.2 billion increased 3% on an adjusted basis driven by strength in Asia Pacific, both in China via export volumes and in APAC ex China countries. And favorable customer mix in North America, which offset broader production clients globally. EDS adjusted EBITDA margin declined 70 basis points versus the prior year, and this reflects a 260 basis point headwind related to FX and commodities which was largely offset by the timing of certain recoveries and flow-through on volume growth.

Moving to Slide 12 to discuss our balance sheet before I discuss guidance. We ended the quarter with $3.2 billion of cash. This was temporarily inflated as it included $2.1 billion of gross debt raised by our EDS subsidiaries, which was assumed by Versigent on April 1st. In conjunction with the spin-off, year-to-date Aptiv has paid down $2.1 billion of debt, including $300 million in the first quarter, and $1.8 billion in early April. This was funded by a [ $1.65 billion ] dividend on a net basis from Versigent upon the spin-off, and $400 million from cash on hand.

Pro forma for the spin-off mechanics, New Aptiv gross leverage. For the first quarter was 2.3x, and net leverage 1.9x, both of which are consistent with our leverage levels [indiscernible] to the ASR program that was launched in Q3 of 2024. We also deployed $75 million towards share repurchases in the quarter and plan to remain [ Aptiv ] on this front through the remainder of the year. Looking forward, we remain committed to a balanced approach to capital allocation, focusing on bolt-on acquisitions and investments, as well as continued return of excess cash to shareholders.

Moving on to our 2026 financial guidance on the following slide. We are maintaining our full year 2026 financial guidance which is presented on a pro forma basis to exclude our EDS segment in the first quarter. We continue to expect adjusted revenue growth of 4% at the midpoint. And this implies an acceleration through the course of the year which is driven by the following factors, first half to second half.

First, approximately 100 basis points from an improvement in vehicle production. Second, approximately 150 basis points from the abatement of certain headwinds mentioned earlier, which are specific to our business, and include the production impact at one of our customers related to a supplier fire in North America, and select program cancellations in China in 2025. And third, approximately 300 basis points from the anticipated timing of program launches and ramps. We continue to expect adjusted EBITDA and EBITDA margin of $2.4 billion and 18.6% at the midpoint.

I would call out that we are starting to see incremental inflationary pressures on materials as a result of the conflict in the Middle East. And relative to our prior guidance, we now anticipate higher input costs, primarily in commodities, some of which had occurred in the first quarter. However, as in the first quarter and through last year, we expect to continue offsetting these macro headwinds through performance initiatives and where appropriate, customer pass-throughs. We continue to expect adjusted earnings per share in a range of $5.70 to $6.10, which assumes an effective tax rate of 18.5%, and does not incorporate any meaningful incremental benefit from share repurchases. Free cash flow is expected to be $750 million at the midpoint which is inclusive of transaction costs associated with the EDS separation, the majority of which are being incurred in the first half, as well as continued investments in supply chain resiliency for semiconductors.

For the second quarter specifically, we expect adjusted revenue growth of 2% at the midpoint. Adjusted EBITDA and EBITDA margin of $580 million and 17.6% at the midpoint. And lastly, we expect earnings per share of $1.40 at the midpoint. Just as a reminder for everyone, on day 1 of the EDS separation, New Aptiv is burdened by $70 million in annualized stranded costs, which we are working to completely eliminate from our cost structure by the end of 2027. And finally, outflows by reiterating that our robust business model and relentless focus on optimizing performance, we remain confident in our ability to drive strong execution and financial results, as well as enhanced shareholder value.

With that, I will turn the call back to Kevin for his closing remarks.

Thanks, Varun. Before I wrap up on Slide 14, let me provide some additional context on our outlook. We continue to see significant long-term opportunity for our portfolio of products and solutions, while in the shorter term, we do see challenges that our industry will have to contend with.

As Varun alluded to, the macroeconomic environment remains very dynamic, at present and is reflected in our first quarter results and full year guide, we're experiencing a meaningful increase in input costs, broadly related to the ongoing conflict in the Middle East. However, as evidenced by 2025, we have a resilient business model with an ability to mitigate and offset these pressures through performance initiatives and through commercial recoveries.

That being said, should the current situation persists, it could amplify these pressures from a macroeconomic perspective, which are difficult to precisely forecast at this point. And this uncertainty could present a challenge to the value chain across the markets we serve, which is a risk, but it's also an opportunity for Aptiv to demonstrate our value proposition to our customers, providing high-performance, cost-optimized market-relevant system solutions at global scale and with industry-leading service levels.

Now to wrap up, after reporting our final quarter as Total Aptiv, we're positioned to benefit from the sharper focus resulting from the completion of our strategic portfolio evolution. For the New Aptiv, we're now better positioned to accelerate our product development and enhance go-to-market activities to further penetrate multiple high-growth end markets. The high-quality opportunities we're actively engaged in is growing, and our momentum is accelerating. I'm confident these opportunities will result in incremental customer awards and strong financial results, and we'll continue to remain relentlessly focused on delivering value for our shareholders.

Operator, let's now open the line for questions.

[Operator Instructions] We will take our first question from Colin Langan with Wells Fargo.

Any color -- you kind of talked about some of the puts and takes. But the sales and margin guidance are at the midpoint [indiscernible], but we know FX is different. Commodities are different. Any puts and takes in terms of FX now a little bit more of a tailwind? Is commodity now part of your -- a bigger part of your sales and is production now down? Any color on the -- sort of the -- sort of recomposition of guidance given a lot of the changes in the quarter?

Yes. It's Kevin, Colin. So that's a great question. So thanks for asking it. I think I'll start at a high level, and then Varun will walk you through the pieces.

We're in a dynamic environment. I wouldn't say -- you made a comment or ask the question, is FX -- or FX -- is FX and commodities a bigger item for Aptiv -- the New Aptiv? From a commodity standpoint, it certainly isn't. What's going on as you follow the markets is we've had tremendous spikes in commodity prices over the last few months. And we do have products like copper, like silver, even to some extent, gold that impacts -- that is included in our product, and we get impacted by those changes in commodity prices. Clearly what's going on in the Middle East from a price of oil standpoint, impacts [ resins ]. So those input costs, the spikes in those input costs have significantly impacted us in the first quarter, and we believe for the foreseeable future.

Relative to our traditional business, pre spin, I would say those are actually less from an overall buy and exposure standpoint.

Varun, I don't know if you want to walk through?

Yes. I'm just going to paraphrase some of the stuff that Kevin just mentioned. But Colin, first of all, from a commodities perspective, copper, gold, silver, oil-based products such as resin, as Kevin mentioned, yes, we are seeing inflationary pressures. Those are up versus our guidance from 3 months ago. So that is one aspect, which is kind of weighing on overall updated guidance.

Overall, FX remained positive for us on a year-over-year basis. So I just want to share that with you. And then I think your final point was underlying vehicle production assumptions. Yes. So from our perspective, first half to second half, we see activated vehicle production down [indiscernible] in the first half and down [ 1 ] in the second half of the year. So we do expect to see an improvement in underlying vehicle production first half to second half.

Now [indiscernible] imply went for the year-end production. Is that in line with S&P of [ down 2 ]?

Yes. It's roughly in line with [ S&P ].

Got it. And then just secondly, on -- if we look first half to sign up, I look at the midpoint of Q2 and the midpoint of full year guidance, you did explain pretty well the expected improvement in sales growth. There's pretty high conversion as well on margins. I think it's something like a 60% conversion on higher sales half over half. What's driving that? I know there's normally -- is that just normal seasonal recoveries? Or is that kind of skewed a little bit extra because of the commodity recoveries as well?

Yes, I'd say a couple of items. As you know, the mix of our business first half to second half. Traditionally, we experienced higher margin, or higher flow-throughs giving engineering -- timing of engineering recoveries and items like that. There may be a small amount of commercial recovery that's back half loaded, but I think that's fairly balanced, Colin, for the full calendar year.

I think the margin profile of the business ex our traditional EDS business is higher, so flow through on volume growth, just given where our gross margins are now, you should expect that to be actually higher. So I don't have the numbers right in front of me, but I don't think there's anything unique relative to first half -- second half profitability versus first half other than things like engineering recoveries.

We will take our next question from James Picariello with BNB Paribas.

Can you to the Aptiv safety growth in the quarter, and what your expectations are there? And then as well as separately for user experience. And then, yes, I know Colin just hit on this, but just on margin front. What differs this year in that first half, second half split on the year's margin cadence where we saw a more balanced split last year?

I'm sorry, Can you repeat the second half of your question? [indiscernible] understood.

Yes. Just on the margins, as we look at New Aptiv, so last year, the first half, second half split in profitability like just the margin was pretty balanced. First half, second half, and then this year's guidance has a more significant second half step-up on the margin front?

Okay. I'll let Varun walk through that. As it relates to ADAS [indiscernible] growth, listen, as we is reflected in our disclosures in our presentation, we're starting to see conversions between different domains [indiscernible] so when you think about things like in-cabin sensing, is that an ADAS product, or user experience product, when you see domain consolidation and some element of use of fusion chips were the ADAS controller, or the [indiscernible] controller consolidating. It's going to continue to get fuzzier and fuzzier. So that's why we're trying to give a more clear of visibility and transparency to investors as you think about sensors and compute software and services breakdown.

ADAS in Q1 was basically flat, though. Having said that, that's principally driven because of that large North American OEM that had significant supply disruption given the fire at their aluminum supplier. As we look at the back half of the year, we see a significant ramp-up related to that particular customer and ADAS growth. So we'd expect ADAS to be in line with kind of the mid-single-digit, sort of, growth rate.

With respect to user experience, it's consistent with what we've talked about in the past as we introduce new -- as new programs get launched principally in China today. That's an area where we'll see second half more significant growth. It was impacted to some extent in the first quarter just given small delays in [indiscernible] in China well as some soft production with a European OEM in the [indiscernible] sector.

Varun, do you want to talk about...

I will. Yes, yes. James, a good question, and thanks for raising it. So the question was specifically in terms of first half versus second half profitability.

Listen, the 3 items I would highlight. The first, as Kevin mentioned, is just a second half, third quarter, fourth quarter, true-up associated with engineering credits, and that's something that we've seen in the years gone by also. That's kind of point number one. No change from that perspective. The second one I'd call out is just kind of recovery on commodities, and there's something that we've always talked about, there is a timing lag. The recoveries that we have -- the higher commodity prices currently, there is a timing like 3, 4 months is what we've typically talked about. We expect those to kind of come through in the second half as the second one. And the final point I can raise is we are happy with the way our software and services business has grown double digits in Q1. And that's an industry which continues to kind of have seasonality weighted more towards the second half of the year. So the margin profile associated with that product line also, kind of, adds to the overall profitability first half relative to the second half.

Right. No, that's very helpful. I appreciate all that color. And then I [indiscernible] will host this conference call [indiscernible] today. But just on EDS, if you're willing to discuss this business at a high level, a competitor recently announced a major [ Conquest ] wiring award. I would just be interested in, again, any color on that competitor program announcement and any perspective on the broader bookings backdrop as it pertains to [ wiring systems ]?

Sure. Thanks for asking this question. I typically wouldn't comment on an individual OEM program award. And I certainly wouldn't speculate on the relationship between another supplier and an OEM customer. I find it inappropriate and be very transparent [indiscernible]. However, given the nature of the comments made and the inaccurate message that's in the marketplace, I think I have to comment on this particular matter, and in line with kind of standards for the -- that should be upheld by our industry up.

My comments, I want to make sure everyone [indiscernible] have been approved by General Motors leadership. I think that's important for you to know. I'll confirm GM did award a very small portion of the wire harness content on the T1 program to another supplier. This portion represents a simpler portion of the harness. It's a build-to-print portion of the harness. GM actually refers to it as the simple harnesses. We remain the supplier for the most complex portion of the programs where harness content firmly aligned with where our core strengths are. This is where most of the actual water harness content is. The bulk of our EDS business is more complex full-service wire harnesses where we design, we develop, we assemble the harness to bring more value to the OEM. And this is a business we've been strategically focused on.

I think, as all you know. And this is, quite frankly, the area where it's the highest margin, and it's growing the fastest. And it's least exposed to changes in vehicle architecture and the transition to things like zonal controllers. Build-to-print. It's a much smaller portion of the EDS segment. That's, I don't know, 20% of total revenues, maybe 25% of total revenues, much less complex. It's much lower margin. And for that reason, it's not as a strategic area of focus for us.

Now having said that, we want all of an OEM's wire harness business. And General Motors is a very, very important customer to us, and this is an important program. Regarding comments related to our relationship with GM, which for me is the most disturbing, in fact, remains very healthy. And I -- given the comments made, I've personally reconfirmed with GM leadership and I can share with you some comments that were made by GM leadership.

There have been zero service -- these are quotes. "There have been zero service level issues. That is never a problem with EDS. EDS is the gold standard for wire harnesses and EDS is our strategic wire harness supplier. And there'll be incremental full-service wear harness opportunities for the EDS business with GM in the future."

So I hope these [indiscernible] put these rumors and factually incorrect comments to bed. The EDS business is the leader in the wire harness space. It's a great business. And I'm sure Joe and team will make some comments during the earnings call early evening.

We will take our next question from Chris McNally with Evercore.

Thanks so much, team. Kevin, on the call, I thought you sounded the most positive about some of these, sort of, additional areas of growing the active TAM that you've been in a long time. And I think a lot of times, we always discuss, sort of, M&A bolt-on opportunities in industrial. But just looking at the ECG highlights on Slide 8. I mean, the awards now are in naval, space, energy storage. And so my question here is on some of the exciting opportunities that the world is all seeing in AI and data centers, and that some of your competitors have strong business opportunity in.

Could you just talk about what would have to happen organically for you to start to invest? Automotive is one of the harshest environments. Could you get into those businesses over the next year or 2 from an organic greenfield, brownfield perspective because it seems like a pretty big TAM opportunity?

No, Chris, it's a great question, and I should start with -- it's a great question. It's a great opportunity. The team is making significant progress, quite frankly, across each of our businesses. As it relates specific to the Engineered Components business, we've been very active over the last 1.5 years, 2 years leveraging what we have in our Winchester product portfolio, which is principally targeted on nonautomotive business with a very strong position in areas like A&D, like diversified industrials. Developing solutions from that product portfolio with our traditional interconnect solutions and bringing those to nonautomotive customers more as systems. So we've made a lot of progress. That's an area we have been investing in, both from a product standpoint as well as from a go-to-market standpoint.

We've been leveraging our customer relationships in the U.S. as well as in China, where there are strong OEM relationships that span across industries. So leveraging our capabilities and our relationships in those automotive businesses to take solutions into things like aerospace into areas like data centers. We have a very focused initiative as it relates to building out our data center product portfolio, certainly our space product portfolio. So there's been a great deal of focus in that space, and we're gaining real traction.

To meaningfully move it, as we've talked about in the past, that really requires M&A. We have a long funnel of bolt-on M&A opportunities that the team is executing on. That hopefully, during the calendar year 2026, we're looking to close on. And to wrap up, quite frankly, we're very excited and feel like we're very well positioned to pursue these opportunities. But we're very excited about our opportunities within automotive and the trends that are headed there. Near-term, we're wrestling with a few customer mix issues and industry mix use that we think as we move on through the year, you'll see improvements on.

That's great, Kevin. So, I mean, [indiscernible] to paraphrase some of the small bolt-on acquisitions could go a long way to some of the internal initiatives that you've been working for. But with some of these bolt-on acquisitions comes to [ sales force ] and these relationships that then you may have a lot, so 1 plus 1 equal 3.

Exactly. It's not just the product portfolio piece. It's the industry positioning piece and building up sales organization and product organizations that have years of experience in a particular sector that we can leverage across our broader product portfolio. Absolutely.

And then just the last follow-on. I mean I kind of focus on AI and data centers. But like energy storage actually should be very easy given some of the customers now, obviously, with a lot of battery -- excess battery capacity in the U.S., the customer set is almost the same for a good portion of that business. Is that one that could be done a little bit more organically?

Yes. That's one that is being done very organically now. So that's a focused effort with a focused product portfolio with a focused sales team. So there are a significant number of business awards we received. They tend to be smaller relative to large OEM program awards. But we're gaining a significant amount of traction across multiple OEMs. So that is certainly a tailwind.

Listen, as it relates to -- you made a comment about AI, and this is true in the interconnect portfolio, as well as in our software and services portfolio. As AI accelerates, it provides a structural tailwind for both of our businesses, whether that be some of the products that we have in intelligence systems, or in engineered components, as more and more is driven to the edge, AI is driven to the Edge. They need high-speed interconnects, high-speed cable assemblies. We need RTOS solutions, or Linux solutions to enable performance at the Edge, and those are areas that in automotive, we've been enabling for a very long period of time. And that's an area that we're confident we'll continue to get more traction.

We will take our next question from Joe Spak with UBS.

First question is, Varun, you mentioned -- and I appreciate all that, some of the margin drivers half over half. I think I counted like 550 basis points. But your guidance is about 180 basis points half-over-half. So I just want to, maybe, understand if we could sort of talk through some of the offsets and, sort of, what exactly is baked in? Like, is some of that -- some of the commodities and higher input cost, is that sort of what's sort of weighting that back down? Or maybe we just sort of complete that bridge?

Yes. Joe, it's Varun. It's a great question. Yes, you're right. I think in terms of the half-over-half walk on revenue, the 100 bps, as I mentioned, is improvement in the underlying vehicle production half-versus-half. About 150 basis points specific to us with regards to the production impact at one of our customers related to supply fire in North America and then obviously select program cancellations in China in 2025, that will anniversary midyear. And the final one to mention was just the 300 basis points of anticipated timing of program launches and ramps. So that's the 550 basis points that you mentioned.

With regards to the commodity side of things, yes, as I mentioned previously, we are seeing incremental inflationary pressures on input costs over the last 90 days since we initially gave guidance for pro forma New Aptiv to now, there is an uptick of about 60 basis points on the commodities and FX side of it. As I mentioned, basically, it's commodities. FX remains a net positive on a year-over-year basis. And it's -- again, it's the same things with regards to based on where copper is trading.

And while overall exposure levels to copper, pre-spin to post-spin are markedly down. We still have some of those. Some of those are contractual pass-throughs. The remainder of it is commercial negotiations. But then also, we have exposure to gold and silver. And if you see as to where those have been trading, on a year-over-year basis, that's the other aspect of it.

And then finally, our Connection Systems and [indiscernible] business as part of the Engineered Components portfolio, does have a significant level of resin purchases. Clearly, a key input cost into resin is oil. But that's the other aspect that we've seen through -- come through, that we expect to kind of ramp up. So yes. And again...

I may have misunderstood. So that happened was the top line and then we should think about the flow-through on that top line, and then some of the commodity inputs is sort of the offset to when we think about the margins? Sorry.

Yes, yes. That's right.

Okay. Okay. And then Kevin, just maybe to follow up of your last conversation with Chris. The nonauto awards in EC and space, energy storage naval $500 million. I think we're all familiar with auto lead times, but maybe you could give us a sense for these businesses, like how quick do some of these business comes on? What's the sales process like? And when you kind of convert to revenue? And maybe the same thing for IS, if you don't mind, and [indiscernible]

Yes. It's a good question. So the sales cadence, it's in both segments, the sales organization is a separate distinct sales organization. So we have separate teams and separate product teams. So commercial teams, as well as product teams that support the go-to-market. The programs tend to, between award and actual revenue can range as short as a few months to -- as fast -- as short as a few months to -- I think at the far end, you're talking under a year. So call it, 9 months in those sort of typical areas, so much shorter from a long lead standpoint than what we have in our traditional business, automotive or in commercial vehicle.

We will take our next question from Mark Delaney with Goldman Sachs.

The [ company ] spoke already about the pickup in growth from the roughly flat year-over-year organic in 1Q to the 4% outlook for the full year for New Aptiv. A couple of those drivers you spoke about were timing. We [ get 2 new ] product launches and an assumption that auto production is more stable in 2H. I'm hoping you could share more on whether there's any conservatism in those assumptions relative to customer schedules given that new launches can sometimes be delayed, and the potential or macro headwinds to weigh on demand?

Yes. There is an element of conservatism we always place in our outlook. So we will always incorporate some element of what we refer to is hedged. And we rely upon both third-party sources as well, as our customer EDIs or schedules. There are some areas like China where schedules are a bit more fluid and changes are more -- can happen more quickly. That's less the case in places like Europe in North America.

I think as Varun talked about, our outlook right now based on what we're seeing from a schedule standpoint, and then triangulating with IHS with some amount of overlay is the 100 basis point improvement first half to second half from a vehicle production standpoint. There are some specific customer headwinds that we're aware of. I mentioned the North American OEM, who we were impacted more than we originally forecasted in Q1 given a further reduction in their schedules as it relates to addressing the issues with their supplier. We pick up a benefit in the back half of the year as things become -- that gets addressed and they come online.

And then we talked about we've been talking about since last year, the 3 China program cancellations that impacted us in the ADAS area, in the user experience area, we can size those, those annualized at the end of the second quarter. Those two together are worth roughly 150 basis points. And then there's roughly 300 basis points of program launches first half to second half from a growth standpoint. That's the area where we tend to overlay the most conservatism because things can shift. Some of that is in China. We did see some small delays as it related to Q1, but we're starting to see those programs launch now. That's what gives us confidence in the in the back half of this year and the revenue ramp first half to second half.

Very helpful details and color, Kevin. And my other question was another one around the commodity and inflationary environment. Could you be a little bit more specific around to what extent Aptiv has seen incremental headwinds tied to inflation in 2Q that you haven't been able to offset yet?

And then for your full year outlook, you spoke about getting recoveries, but you also mentioned that can come through [ on a lag ]. So I was a little unclear. Do you assume that you're able to recapture all of the recent inflation in your full year outlook? Or does some spill out into next year?

So I think -- and Varun will correct me. I think as it relates to prior guide versus this guide, there's effectively roughly 50 basis points of FX in commodities that is in our -- that's come into our system. It's principally resin and commodity prices. And commodities would be copper -- I mentioned the copper, aluminum, areas like that. We expect to fully offset that, most of that, a significant portion of which would be operational performance initiatives that we have underway that we're able to offset the overall cost of the increased cost of those commodity prices. And there will be some amount some amount that we will push through to our customers. So we're not relying on customer recoveries to achieve our full year outlook.

Those are things that we have a high level of confidence that we can manage through internally and at the same time, go back to our customers in areas where it's more challenging and pursue recoveries. You look at past track record from a recovery standpoint. We've collected 95% to 100% of what we pursued with our OEM customers because we do that operationally, we've performed extremely well. And we do that while we're presenting them with additional cost reduction opportunities to help support the recovery that we're asking for [indiscernible]

We will take our next question from Itay Michaeli with TD Cowen.

Just wanted to focus in on the strong -- strong new business bookings of $5 billion and the $20 billion outlook. Kind of curious happening on the auto side. Like are we finally seeing major sourcing decisions being made next-gen architectures, and perhaps also winning some market share? Just kind of curious sort of what is driving, sort of, the inflection?

Yes, it's a great question. Yes, I would say first quarter relative to last year, we started to see programs that we've been working on for a period of time, free up in decisions made. We're starting to see OEMs look at next-generation ADAS solution, the user experience solutions, vehicle architecture solutions, including what we refer to as smart vehicle architecture. So -- so we're seeing more of those opportunities.

Itay, we have a high level of confidence in the $20 billion of bookings for New Aptiv [indiscernible] 2026, just given our funnel. I think that's, to some extent, dependent upon things stabilizing a little bit as it relates to the situation in the Middle East. We're not deteriorating. Maybe that's a better way to describe it. But we're seeing a significant amount of opportunities in and around the areas that are sweet spot.

Terrific. And a quick follow-up. I think earlier you mentioned, of course, supply chain risks to do the Middle East but also potential opportunities that can come out of that. Hoping you can kind of comment a bit more on that. Like, could you actually end up seeing -- or leverage our supply chain capabilities with OEMs, maybe kind of win more business going forward? Just kind of curious a bit on that comment.

Yes. Listen, we are today, Itay. I would say, over the last 2 years, the job the team has done from a supply chain management standpoint, both from a service level standpoint as well as from a visibility and transparency has created a lot of goodwill and there are a number of OEMs that we're partnering with now in terms of regular supply updates. I mean, we're now at a point where we're informing OEMs of where their particular pinch points are.

As we look at areas like memory, and other areas where there's concern about inflation, availability or constraints, those are areas that we've been focused on for the -- been aware of. Anticipating, focused on for the last couple of years. So we've been bringing them alternatives as it relates to a park standpoint. It's also presented us with opportunities to bring to them solutions that include more [ Aptiv ] content, displacing some of their traditional suppliers. And they're all very focused on it and listening.

When we're able to say we're confident in memory supply for '26 and also '27, given the relationships and agreements we have with our suppliers, and we have actually multiple alternatives that we validated, that's very differentiating with our customers. So it positions us extremely well. And when we take that supply chain capability outside of automotive, to some of the areas like robotics, like drones. That is one of the big selling points we have in terms of supply chain visibility, knowing source down to multiple levels being able to provide multiple solutions depending upon where the application takes place, or is actually used. That's been one of the big areas that's been differentiating, for example, for us in their own space.

We will take our final question from Emmanuel Rosner with Wolfe Research.

I was hoping to ask if you could just -- I would say this year's revenue growth in the context of the longer-term targets. And so you're expecting some level of acceleration over the next couple of years for the [indiscernible] targets. [indiscernible] this year will be around [ 4% ]. Can you just remind us holistically, what are some of the drivers of revenue acceleration as we move past this year and towards the next couple of years of the plan?

Yes. Thanks, Emmanuel. That's a great question and I appreciate you asking it. It's a mix of two things. One, it's improved customer mix. So in our prepared comments Varun and I were talking about progress we're making with the China local OEMs focused on the top 10 OEMs for the China market. One of the fastest-growing areas for us is on export platforms, as well as with several [indiscernible] now. We're very much focused on supporting their initiatives to manufacture overseas. So we're supporting several of them in terms of evaluation and with some of them in terms of actual programs.

We're working with European OEMs as well as Chinese OEMs as it relates to China [indiscernible] for European products. So we've been very engaged there. So that's an area where we expect to see a pickup. As it relates to APAC non-China, that's been a particular focus area. And as we've talked about in the past, that's one of the fastest areas of bookings growth for us, so that's Japan, Korea, and [indiscernible]. So we're seeing a benefit from that.

And then lastly, when you look at the nonautomotive space, we're growing very strong nonautomotive growth, which based on bookings and potential bookings we have in front of us. We're very, very confident. And then when you look at the software space, both in automotive as well as outside of automotive, that's an area where bookings are strong, and we're seeing solid and strong revenue growth that will drive us to the midpoint or higher in that 4% to 7% growth range.

That's very helpful. And then I guess I was hoping to follow up on China. So in the quarter, the New Aptiv China [indiscernible] was down 14%. You've mentioned some of the factors, including still the ongoing impact from cancellation of programs. What is sort of like your estimate of when you believe China would, sort of, like become more neutral and then eventually positive to your growth?

Yes, great growth. So actually positive growth you'll see in Q2, and that's a result of a couple of things, the launch of new programs, and we see the benefit from that. Two, in Q1, we were affected principally in our Engineered Components business by our exposure to the top the top OEM in China in their vehicle production -- reductions. So I would say disproportionately given their year-over-year comp, that normalizes in Q2, and it's not as big of a headwind.

And then lastly, as you get in the back half of the year, we talked about those 3 programs that were canceled in the second quarter of last year from a comparison standpoint. We won't have to be dealing with that. So we're expecting very strong growth in China and for the calendar year 2026.

That will conclude today's question-and-answer session. I will now turn the call back over to Mr. Kevin Clark for any additional or closing remarks.

Great. Thank you, everybody, for your time. We really appreciate you participating in our earnings call. Have a great day.

The call is now complete, and thank you for joining.

All right. Why don't we kick off. Good morning. Thank you, everyone, for joining. I am Dan Levy. I lead U.S. Autos research coverage at Barclays. And very pleased to have with us here at the Barclays Industrial Select Conference, Aptiv. They've been a mainstay at this conference for many years now. Very pleased to have with us Kevin Clark, the company's Chairman and CEO; Varun Laroyia, CFO. So we're going to go through a series of fireside chat style questions. Anyone who has any questions at the end, glad to take them. Before we start that, as we've done in the past, we're going to kickoff with a couple of the audience response questions to this reactive or interactive. Sorry, you don't get to vote. You can react.

So why don't we start, if we can just pull up question number one. Do you own the stock? You both own the stock.

Yes.

You're very overweight. Good, as you should be. Okay. So you have some opportunity here. All right. Why don't we pull up question number two, general bias towards the stock. And you're going to be positive as you should be. Okay, so I want to start with -- just with a big picture question and I think this is more just a question of perspective because for those of us that have looked at the Aptiv Delphi story over many years, really since the IPO in 2011, I think really the story has been just a story of portfolio transition, pieces moving in and out of the portfolio when you have a big transaction that's coming up, your EDS is being spun off into Versigent, the end of the first quarter here. So maybe you can just talk about this next chapter and why this maximizes the value creation that you've had in the past and how this fits in the story of portfolio transition of Aptiv?

Sure. Well, again thanks for having us here. We really appreciate participating in your conference. So to Dan's point, the history of Delphi and Aptiv has been an active process of always aligning the portfolio with market trends and customer needs. So that's something that we, as a management team with our Board focus on a regular basis. And we've gone through a number of transitions, whether it be focused M&A growth in and around areas like interconnects, cable management solutions, in and around software portfolio, in and around power plants. And we've done that for several years. And as we've looked at where the world is today, and we assessed our product portfolio after a long period of time, we made the decision about a year ago or announced about a year ago that we're going to separate our EDS business now, which will be called Versigent post spin, which is about signal power distribution in the car. It's the #1 player in vehicle architecture globally to provide that business with, one, the focus -- the opportunity to really focus on that singular product line to continue to expand and take share in the automotive space across multiple markets as well as to grow in other markets.

And that business is uniquely very much a process business, a supply chain business as much as it is a manufacturing business. So highly complex process, highly complex supply chain. It's really about doing a lot of little things right. What remains with new Aptiv is a business, our Intelligent Systems business, which is software stack, advanced compute, advanced sensor suite. So when you think about where the world is headed in terms of physical AI as an example, whether that's on ADAS solutions or it's in cabin or it's outside of automotive in robots or in drones, it's how do you enable things to sense, think and act. And how do you ensure that they're engineered in a way where they can always be optimized, which is something that we do in our automotive space all the time.

In addition, we have a rather large interconnect business, which is a key part of -- when you think about the device we talked about, whether it's a camera, whether it's a radar, whether it's a LiDAR sort of solution, that interconnect, that high-speed connector, the high-speed cable assembly is a very important part of that whole aspect of something acting. Those are both product companies. So the mentality, the approach is very different. Setting up -- setting those 2 businesses up to grow, to grow in automotive, to grow outside of automotive, which is a big piece of the opportunity in our view. Those 2 businesses are already 25% of revenues are outside of automotive versus the EDS business, which is roughly 10%, strong positions in A&D, in space, in industrial markets and telco and datacom, a great footprint that we can leverage with existing technology as well with investments we're making in new products and new innovations.

So the new Aptiv is really about how do we play in the right areas within automotive, how do we do that in commercial vehicle, and then how do we continue to grow in spaces like aerospace and defense, in commercial space, in telecom and datacom with the software stack as well as the hardware stack. It's a higher growth, much higher-margin business, much more cash generative, which gives us a lot of optionality, whether it's investments or returning cash to shareholders.

Great. Why don't we unpack the growth dynamics of new Aptiv? So for 2026, you guided to 3% for Total Co. That's going to be 2% organic. That's 3 to 4 points ahead of underlying LVP. It's better than what you've done. So maybe just help us understand in the past. I know LVP is weighing down on the magnitude of growth versus your longer-term guidance. But this improvement versus '25, what's at play here? Is it customer mix? Is it certain launches? Help us unpack the growth on these.

Yes. Dan, thank you. And again, I'll just repeat what Kevin said. Thank you for having us here. Tremendous conference and I have had the opportunity to come here for several years. So much appreciated. With regards to our confidence from a growth perspective, 3 key elements to think about. The first one is just the robust level of bookings we've enjoyed over the past several years, right? If you think about over the past 3 years, over the past 5 years, the level of bookings we've had in the $25 billion to $30 billion, right? So that kind of starts in terms of the bookings we already have and the launches associated with those that are coming through. That's number one. The second one is, as you may recall, in 2025, we had like 3 program cancellations in our Intelligent Systems business in China.

And then there are -- there's a large legacy UX program that will also -- has been weighing down. Those 2 elements essentially will abate in 2026. So that will no longer be kind of weighing us down on a full year basis. And the final point I'll kind of highlight is a couple of weeks ago, when we talked about our guide for 2026, we talked about the progress we had made with bookings with China domestic OEMs, for example, almost 80% of our bookings with China domestic OEMs. In addition to that, the team has just been making tremendous progress with non-China APAC OEMs, think Japan, think Korea, think India. And those markets are, one, they're kind of growing fast. And historically, we haven't had the same level of bookings that we've enjoyed. So as you think about our confidence level, it's actually borne from the fact of what we have already done, okay, and what we will be launching here shortly.

The only other thing I'd add, Varun covered most of everything. From an industrial standpoint, we've been booking at roughly $4 billion a year, nonautomotive bookings. So -- and that's in the space that's growing kind of from a revenue standpoint, 8% to 10%. When you look at our software revenues, which on a GAAP basis are roughly $600 million, That's a mid-teens growth rate. So as those become a bigger part of the overall portfolio, and we grow at market with those particular products that drives the revenue growth as well.

Okay. So actually, I want to unpack that, right? So this is going to be a quarter -- roughly 1/4 of your mix post spin. 8% growth in '25, I think especially when you consider the biggest piece of that is commercial vehicle, which had a very challenged end market year is pretty impressive. Maybe help us unpack where this is coming? Is it just across the end markets? Was there something in CV that was unique? Unpack that.

So for us, commercial vehicle, we have a broad -- a very broad swath of commercial vehicle markets. So it's Class 8, it's on road, it's off-road. It's commercial trucks in vans, delivery vans, things like that, so medium-sized commercial vehicle. So -- that class is really delivery vans was a big piece of what drove growth in the commercial vehicle side. On the industrial side, which is over half of that -- that nonauto piece. That was growing at the high end of that 8% to 10% range. So that was the fastest-growing part of our overall revenue from a market standpoint, which we expect to continue. So solid growth within commercial vehicle, especially in those delivery truck areas that we have a particular focus on and then further augmented by the industrial growth, the noncommercial vehicle side of the business.

Okay. And then as far as expanding into these markets, maybe you could just help us paint the picture of what the competitive landscape is. Because I think we know within your automotive business is, you're generally top 2 or top 3 across most of your products. How do you stand versus competitors in some of these other nonautomotive end markets and how are you determining where to play and where not to play?

Yes. So I'd start with we're in these markets already, whether it's through our Wind River footprint and capabilities and have been in, for example, Wind River, the biggest portion of their revenues go into the A&D market. So actually serve places where you think about robotics or drones. We're in the space with our interconnect portfolio from Winchester. So those are markets that we actually -- we actually have line of sight visibility to and we operate in today. I would say it's now a more focused effort of how do we bring the full portfolio. So the interconnect portfolio, the high-speed cable assembly portfolio with the software portfolio of Wind River as well as how do we take our existing legacy product portfolio, marry that to some of those industry-specific technologies and go to market.

And what we what we have in our automotive market is a very strong position in interconnects, a very strong position in sensors and sensor suite, software stack, advanced compute. You need the exact same applications when you think about a robot. It's exactly the same. Automotive industry does a very good job of designing and engineering and manufacturing solutions that ultimately are part of systems and taking out cost. And we have the ability to bring a technology solution at a much more attractive on cost and we can scale to significant levels of production, which obviously is very attractive to players that are in that -- in those markets, especially when they're at the front end of the curve from an overall growth standpoint.

And within some of these applications, right, and you mentioned some of the humanoid robots or even drones, right? There's some very high CPVs that I think were being discussed on the last earnings call. How much of this is -- these are products that are within the Aptiv portfolio already, and it doesn't take much change in the validation to change the application.

No, it's -- the validation process in those particular areas are actually less than what we go through from an automotive standpoint. So obviously, the product needs to function, needs to be at quality, needs to be tested. But actually, that curve is -- the curve is actually not as steep. It's really about some element of decontenting that takes place. And then it's how do we bring the system together so that it can easily replace what's currently being used, and we can do it at lower cost and equal performance and quite frankly, better quality.

Right. Okay. So it's the cost and quality and the ability to bring it to market, that's your play here. Okay. Let's unpack then the software and services revenue, which is $600 million. That's like 5% of new Aptiv. So maybe you could just unpack that, how much of that is from Wind River and what's driving that growth in the coming years?

So the bulk of that is from Wind River. Although when you look at our ADAS platform, our in-cabin experience platform, we've had more and more success and more demand from our traditional automotive OEM customers to have natural upgrades, life cycle management from a software stack standpoint. So it does include that. And when we quote business now we're working real hard to separate that software revenue from that hardware revenue. So that will be a part of the overall growth. And that includes everything from software features to middleware to real-time operating systems. So that's a part of the automotive piece.

The Wind River piece, when you think about it, is a mix of embedded and enterprise solutions. Embedded solutions, which it's a leading provider of RTOS and middleware solutions for the A&D market, which gives us a great position as we talk about things like robotics and drones that we're leveraging, but they've also grown the product portfolio in and around cloud solutions for enterprise. And given what's going on in the enterprise space with players like Red Hat, VMware and others, it's presented us with a real growth opportunity. So those are the -- those are the drivers. Our outlook for this upcoming year is kind of mid-teens sort of growth rate for software. We're confident in that -- we're highly confident in that based on the business that we've already booked and the visibility that we have. And it's obviously a much higher margin profile than the hardware solutions we sell.

Okay. Let's pivot the growth discussion to China. And Varun, one of the points you're making is that you're getting increased mix of bookings with the locals. So last year, China growth was -- it was down slightly. It was -- it underperformed the market. Now that your portfolio or the revenue is aligned with the domestic mix, you're on the -- you're talking about being on the right OEMs, what's your confidence that the growth can turn around this year?

Yes. Let me take that. So outside of the kind of program cancellations that I referenced earlier, we -- based on the bookings and based on the trajectory, despite where the market is expected to be this year for China, we are confident that China revenue will grow, right, across all 3 segments, right, and largely driven by our Intelligent Systems business on a percentage basis, right? So -- and as you double-click into the why, outside of those kind of elements I just mentioned previously, it's the bookings that are coming through. It's playing with the large OEMs that not only will and are growing despite the domestic challenges, they are also the ones that are leading exporters, and we are certainly enjoying good volume on that. So if you were to go back and think about the last couple of years from say the last couple of -- we basically doubled that business to a run rate of about $300 million on export volume, right?

So as you think about some of those aspects and that will continue, we feel good about the China business across all 3 segments, and we just have a terrific team out there. It's in region, for region, they work with local supplies from an environment perspective. We're working through from a performance perspective with regards to footprint consolidation. So there's a whole aspect of how the China business runs. But I do want to just take a moment to actually share a little bit more than just the China. It's a very important market for us, across the APAC region, roughly about 70% of our business in the APAC region. And as I mentioned earlier in the fireside chat, the non-China APAC business is also growing tremendously well.

Historically, with the J3, for example, it's been difficult to break through with them, but we certainly won good business from our radar technology. with a couple of them. More recently, in Korea, we are booking tremendous business not just for APAC, but also for Europe at this point of time, a record year for bookings with that Korean OEM, for example. And then the Indian market, relatively small compared to China has been a strong driver of growth for us also. And if you think about the wins we've recently announced, whether it be with intelligent systems by having a local presence, local engineering, manufacturing, understanding the regulations that are coming through, for example, with ADAS and safety regs out there, our ability to win, which we already have with a large CV OEM, but more to come, we feel good about the APAC business in general, beyond just the China business.

So to that point, I'm pretty sure that you are under-indexed versus those OEMs and that LVP. What's the opportunity to sort of catch up and have that become an appropriate portion of your mix relative to where it is on an industry level?

You referring to China?

No, the non-China piece.

The non-China piece.

The J3, Korean.

So to put in perspective to Varun's point, last year, Asia and non-China, we booked roughly $4 billion of business on a baseline revenue of about $1.5 billion. $1 billion of that or just under $1 billion is in India with the 2 primary OEMs in Japan. That's a significant portion of about 1/3. And then the balance is Korea. And over the last, I don't know, 3 or 4 years, we've been very focused on investing in local engineering capabilities to support growth in those markets with those OEMs. So we think it's a real opportunity. The ADAS awards that we have with Nissan and Honda from a radar standpoint, ultimately, we're confident will translate into more system awards. Similarly with the Korean OEM, who we've had a strong relationship with for a long period of time, but it tended to be with a portion of our perception system portfolio versus our full system solutions. We delivered a full Gen 6 ADAS or awarded a full Gen 6 ADAS solution award, a full in-cabin user experience award. So as we deliver on those, we feel like there's an opportunity to further penetrate.

Okay. And the $300 million of run rate export business that you have from China, your confidence that -- to the extent that Chinese OEMs are a larger portion of the mix in Europe or in some of the other markets that you can keep up with that, meaning even if the core European OEM volume declines, you can sort of keep up with total Europe mix?

We do. We do. And I'll give you a couple of points out there. First of all, the $300 million of run rate is the China domestic OEMs, right? So for example, there's a large North America-based global BEV manufacturer that also exports from China. The numbers that I just shared with you are China domestic OEMs. That's point number one. The second one is, as we know, the export light economy from an auto perspective in China is certainly on a tremendous trajectory. But at the same time, given the global macro, there are demands of them to actually go and put down capital and plants in various other markets also. And so from that perspective, we feel we're in a tremendous position based on the conversations and obviously, we are unable to kind of announce but just tremendously positioned to be able to showcase our global footprint in being able to get them a fast track into other markets also understanding the regs, understanding the overall ecosystem and being able to get them a faster SOP time line, for example, we feel good about that.

So whether it be export led or for that matter as they go and put our plants outside of China, we are tremendously positioned.

Okay. This is helpful. So let's just -- a question on margins. Your guidance this year, both for yourself and Versigent -- new Aptiv and Versigent, there's a healthy amount of net performance in there. And this follows, I think, what we've seen in the last few years where your net performance was really strong, more than offsetting the price downs that we would normally expect to weigh on the business. So maybe you could just unpack the performance and how much more runway there is on driving net performance to get the margins to be as healthy as they are?

Yes, absolutely. This really starts in terms of the incremental sales volume that's coming through. And just to give you a kind of framework on an EBITDA basis, incremental sales volume coming through from a new Aptiv perspective is roughly in the 26% to 27% uptick. And then from a Versigent perspective, about 20% to 22%. So just trying to put that piece. So clearly, from a sales volume growth perspective, that is one item. The second piece I'll share with you is whether it be best cost locations for our engineering talent. The work that we're doing from an active business services, our global back-office activities. The footprint consolidation, footprint rotation, those are multiyear elements in any case. So we do believe those programs will continue to deliver. The final piece I'll share with you, and we don't really talk about it that much. But again, material performance is something that our supply chain team does incredibly well. We certainly talked about it from a memory perspective a couple of weeks ago, but it's what the team has done. And we've been able to support it from our balance sheet to be able to increase inventory to be able to give those commitments to our supplier partners also which helps.

The final point, and this is just a data point, Kevin, Betsy and I were talking about it some time back is we were doing a look back on 2025 and if you go back and think about the level of macro and FX, well, metals, copper and FX hits we took in 2025, it was significantly higher than what we had anticipated. We overcame over 100 basis points of FX and commodities impact, and yet we hit our margin commitments in '25. So just in terms of the ability of the team, our global teams, to be able to be intensely focused on delivering for our customers and operationally executing day in, day out. That's what's going to drive these results.

Great. Let's pull up the last few ARS questions. If we could do ARS question #3. We gave -- we got the growth piece. We got the margin piece. So now we're going to add it up to EPS growth. Question number 3, please? Okay. Through cycle EPS growth for Aptiv will be above peers. Peers, I think we were generally defining as on the automotive side. Although are you benchmarking against the broader industrial set when you're above peers. Okay. So question number four, excess cash. And while this is going on, maybe just a word on the bolt-on M&A strategy, which I think is very critical for new Aptiv?

Yes. Listen, over our history, we've done over 25 M&A transactions. So our real focus is on bolt-on M&A in the interconnect portfolio. So how do we augment that portfolio with additional technologies, principally focused on nonautomotive applications, so focus there. On the intelligence systems, more of a focus on partnerships, minority investments, maybe, maybe some small acquisitions, and that's in and around principally the software stack.

Right. And the way that you look at your multiple as a means to trying to get some of the assets that you want. To what extent does the multiple maybe limit some of the opportunities?

Listen, it's something that we obviously -- it's a lens that we look through, obviously. So as we evaluate M&A opportunities, I'll underscore that bolt-on from a size standpoint and then opportunities that are financially accretive, right? They drive more revenue growth, they're higher margin, more cash flow generative. So the net result is the financial profile of the business is stronger and then obviously come with synergy opportunities.

Right. Okay. Question number five, please? Multiple. I will note, 21x, I think, is like the market multiple today. So we've seen, obviously -- these bands, by the way, you can start the clock, please. These bands actually are consistent across every year. So you can see clearly the market has veared higher. Okay. So there's clearly some opportunity on the multiple. And then just the last one is share price headwind, growth, margin, capital deployment execution, you can start the clock. And I assume, listen, you've got the balance of both growth and margin. What -- how are you splitting that focus?

Well, for us, it needs to be both, right? We need to deliver earnings growth and cash flow generation at the end of the day, that is the focus. We know investors are looking for higher growth from a revenue standpoint and are translating that into earnings growth. So that's where the focus is in 2026 as we talked about when we announced Q4 earnings, there's very, very strong financial leverage in the system for both new Aptiv and Versigent. In new Aptiv, there are some areas that we're investing as it relates to adjacent market expansion, which is a mix of engineering and a mix of go-to-market capabilities to accelerate or deliver on the growth opportunity that we're highly, highly confident is there. So listen, we're very excited about after post spin. We think the opportunity is significant. We think we're very well positioned.

I'm just going to try to squeeze in one more last one. And I know on memory, you sort of framed your exposure on the last call, $175 million, I think that's something like low-single-digit percentage of COGS for new Aptiv. I think you gave us some sense it's low-double-digit percent increase on the COGS this year. But maybe how are you framing for 2027 and beyond once your contracts are up for renewal? And how does the sort of DDR3, 4 versus 5 transition play out?

Yes. Listen, this is something we've been working on for the last several years in terms of making sure that we have multiple alternatives for delivering any particular technology. So I'd say we're very well hedged. We're working with our OEMs in terms of when you think about memory and memory's connection with ADAS solutions and the selection of the SoC, how do we ensure that we have alternatives. We've invested in inventory over the last couple of years so that we're -- we're well positioned. We have longer-term agreements that we have signed, not with all of our memory providers, but with some of them, that gives us more certainty on, one, availability to price. And then three, to the extent prices increase beyond what we have in our baseline assumptions for business opportunities, we'll be going back to our customers with price increases, which -- and that's what we've been doing for the last 4 or 5 years and have done it very successfully. .

Great. We'll leave it there. Kevin, Varun, thank you so much.

Thanks for having us.

Thank you, Dan.

Good day, and welcome to the apt Q4 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 of Investor Relations. Please go ahead.

Thank you, Jeff. Good morning, and thank you for joining Aptiv's Fourth 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 will 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 an adjusted 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.

We will begin today's call with a strategic update from Kevin Clark, Aptiv's Chair and Chief Executive Officer; then Varun Laroyia, Aptiv's Chief Financial Officer, will cover our results and guidance in more detail. We'll then have brief remarks from Joe [indiscernible], Versigen's Chief Executive Officer, before Kevin and Varun take your questions. With that, I'd like to turn the call over to Kevin.

Thanks, Betsy, and thanks, everyone, for joining us this morning. Starting on Slide 3. We capped off 2025 with another solid quarter in which we seamlessly navigated ongoing changes in the macro environment. Our resilient operating model, which leverages our industry-leading engineering innovation, integrated global supply chain and manufacturing footprint and best-in-class commercial capabilities enables us to execute flawlessly in this dynamic environment. As we discussed at our recent Investor Day, we've been successfully leveraging our product portfolio and operating model to penetrate nonautomotive markets where the shared secular trends of automation, electrification and digitalization are aligning customer needs for mission-critical applications across automotive, A&D, telecom, industrials and other markets. And our momentum continued during the fourth quarter across all segments as reflected by our partnership announcements with 2 robotics companies, robust AI and vector robotics, spanning sensing, compute and software in intelligence systems, the launch of our modular connector series developed jointly by our automotive and aerospace teams and engineered components for multiple end market applications, and a new business award for energy storage and management and electrical distribution systems.

Overall, we posted strong bookings in the quarter, validating customer confidence in our operating model across both geographic regions and end markets.

During the quarter, we finalized the leadership team for our Electrical Distribution Systems business which remains on track to spin out as Verstegen on April 1 under the leadership of Joe Liotine, who you'll hear from in a moment. We're confident that Verstegen is well positioned to deliver continued value to their customers and create value for their shareholders.

Turning to our financial highlights. We reported record fourth quarter revenue of $5.2 billion, an increase of 3%, reflecting strength across multiple areas of our business. Adjusted operating income totaled $607 million as flow-through on volume growth and strong operating performance helped offset stronger-than-anticipated headwinds from FX and commodities. And combined with lower net interest expense and a lower share count, earnings per share totaled $1.86.

Lastly, we generated $818 million of operating cash flow, more than half of which we deployed towards share repurchases and debt reduction. Varun will discuss each of these in more detail a bit later.

I'd like to turn to Slide 4 to touch on our achievements during 2025 and review the progress we made further strengthening our business model and increasing shareholder value. First, we continue to enhance our product portfolio with the launch of a number of new innovations across each of our segments, including interconnect product lines that leverage our expertise in both the automotive and aerospace markets, next-generation sensing and AI-powered software solutions that deliver market-leading performance at a competitive cost for applications across a broad range of end markets. And lastly, high-power distribution solutions for applications in energy storage. Second, we continue to gain new business with target automotive OEMs and further penetrate higher growth, higher-margin nonautomotive markets as reflected by almost $4 billion of new business bookings with leading local China OEMs. New business awards with non-China Asian OEMs that totaled just under $4 billion, representing an increase of 20% over the prior year and nonautomotive new business bookings that reached more than $4 billion.

Third, we continue to strengthen our operating model to further enhance our execution capabilities and enable profitable growth, including the continued enhancement of our supply chain digital twin with 95% visibility down to at least Tier 3 levels, and 99% of our semiconductor supply chain down to Tier 5 level. The opening of a new engineering technical center in Chennai, India to support our growing software and services business and further optimization of our manufacturing footprint through the consolidation of 7 facilities in North America, EMEA, Asia Pacific, all which enabled us to deliver record financial performance, including the impact of headwinds associated with tariffs, FX and commodity prices, further complemented by disciplined capital allocation, which Varun will talk about in more detail shortly.

Moving to Slide 5 to review our new business bookings. As expected, customer awards were strong in the fourth quarter, leading a record second half of the year bookings, bringing full year new business awards to $27 billion, short of our target of $31 billion, the result of customer awards shifting to the first half of 2026 as we previewed in the last quarter. Customer awards were strong across each of our segments and were highlighted by awards in the China market totaling $5 billion, of which almost $4 billion was with the leading local China OEMs, awards with Japanese and Korean OEMs that totaled $3 billion, representing a mid-single-digit increase over the prior year and new business bookings in the rapidly growing India market, which increased significantly to over $800 million.

We exited the year with a large and growing pipeline of commercial opportunities and expect 2026 bookings for total apt, including Verstegen to increase to over $30 billion.

Let's now review each segment in more detail. Moving to Slide 6 to review fourth quarter and full year highlights for our Intelligent Systems segment. A couple of notable program and product launches in the quarter include numerous launches of local China OEMs across our product portfolio, including a Gen 7 radar launch with the kind of market of just 4 months, a smart camera launch also leveraging Wind River VX works and launches that leverage local China for China solutions for SoCs and software. The launch of an interior sensing system for a leading commercial vehicle OEM incorporating advanced biometric and [indiscernible] monitoring software features, the launch of new ADAS software features on an existing system for a leading European OEM and the introduction of next-generation radar solutions as well as the Wind River Cloud platform for AI-ready private cloud applications.

Moving to new business bookings, which were principally driven by strong demand for Aptiv products, a Gen 6 ADAS system awards spanning multiple models and variants for a leading Indian commercial vehicle OEM that includes the full software stack and Gen 8 radar solution, a next-generation high-performance compute solution spanning multiple platforms developed in partnership with the top global OEM, and a full stack ADAS system for a large Korean OEM, incorporating active Aptiv's software and sensors, reflecting the continued expansion of our technology partnership. In addition, we announced multiple new partnerships, featuring integration with our innovative sensing solutions such as Pulse, advanced compute and Wind River software suite with Vector Robotics to codevelop next-generation autonomous mobile robots, or AMRs, enhancing safety, intelligent and cost effectiveness across warehouses and factories and robust AI to co-develop AI-powered cobots, accelerating innovation in warehouse and industrial automation.

We're encouraged by the momentum we have in the robotics sector, and look forward to sharing further developments during 2026.

Lastly, wind River established a strategic partnership with a leading global cybersecurity provider to jointly pursue next-gen software tech stack opportunities in the automotive market.

Moving to Slide 7 to review the fourth quarter and full year highlights for our Engineered Components segment. Our product and program launches as well as our new business awards validate the strength of our product portfolio and operating capabilities across multiple end markets. Notable new product program launches during the quarter include the Lightspeed single pair Ethernet technology for applications across increasingly connected and space-constrained end markets, such as A&D, industrial automation and next-gen mobility, a compact connector featuring high-speed data interfaces for seamless integration with sensors for a Japanese OEM SUV models, a next-generation safety-critical rapid power reserve for a local Chinese OEMs all electric SUV, and a high-voltage connector launch for a European OEM's global EV platform.

New business bookings included a modular connector award for a major European OEM, enabling scalability across platforms to support next-gen architectures, an award from a leading North American OEM on their top-selling truck and SUV platform, including high-speed interconnects, connectors and terminals and a ruggedized high-performance interconnect award for use in marine applications, validating the lightweight, flexible and highly durable nature of our products.

Turning to Slide 8 to review our Electrical Distribution Systems segment. New program launches reflected the strength of our new business awards over the past few years, including a launch for a high-volume SUV program for the leading North American-based global electric vehicle OEM, the launch of [indiscernible] and extended RanV for a local China OEM that are planned for export markets, a launch from a major India OEM's premium SUV, and a complete low-voltage commercial vehicle launch for next-generation high-performance agricultural vehicle.

Moving to new business awards would span all major geographic regions and include an award with a leading China-based global electric vehicle OEM for production in Europe, serving as a key enabler of their regional manufacturing expansion, an award with a leading European-based global OEM on their new software-defined vehicle architecture, an award for low- and high-voltage content across brands, models and powertrains for a Korean OEM, and lastly, an award for a high-efficiency energy storage solution engineered for grid optimization.

In summary, we executed well throughout 2025, and finished the year with strong momentum in the fourth quarter. Each of our 3 segments is enhancing their market positioning, deepening their customer engagement and broadening their revenue mix through the penetration of new end markets and regions.

The customer awards we've received validate our strategy and the investments we're making to capture the opportunity ahead.

I'll now turn the call over to Varun to go through our financial results and our full year and first quarter guidance in more detail.

Thanks, Kevin, and good morning, everyone. Starting with our fourth quarter financials on Slide 9. Aptiv delivered solid financial results in the fourth quarter, reflecting our continued execution, focus on driving operational efficiencies and reducing costs across our business. Revenues totaled $5.2 billion, an increase of 5% on a reported basis and up 3% on an adjusted basis.

Adjusted EBITDA and adjusted operating income margin rates were in line with our Q4 outlook and down only modestly on an absolute basis year-over-year. This was entirely driven by the impact of unfavorable foreign exchange and commodities, which amounted to a 160-basis-point headwind to margin in the quarter. Excluding FX and commodities, our Q4 operating income margin would have been up 70 basis points versus prior year, reflecting flow-through on volume and ongoing performance improvements.

Earnings per share totaled $1.86, an increase of 6% from the prior year, reflecting the benefit of share repurchases and lower interest expense from capital deployment initiatives over the course of the year, partially offset by a higher tax rate.

Operating cash flow totaled $818 million, a decrease versus the prior year, owing to an increase in net working capital as we continued to invest in semiconductor inventory as well as approximately $80 million in separation costs related to the upcoming spin-off of Verigent.

Turning to the next slide and looking at fourth quarter adjusted revenue growth on a regional basis. In North America, revenue grew 8% with double-digit growth in both Intelligent Systems and EDS. In Europe, revenue was down 1%, in line with vehicle production in the region and relatively comparable across our segments. And in China, revenue was down 5%, reflecting the continued impact of unfavorable mix. That being said, our performance versus the market in China improved further this quarter, a positive sign as the team works to further enhance our customer mix. And of note, approximately 80% of our China new business awards in 2025 were from the local OEMs.

Moving on to our segment performance on Slide 11. Starting with Intelligent Systems, revenue of $1.4 billion increased 2% versus the prior year, predominantly driven by North America and the benefit of new program launches. Intelligent Systems operating income declined 17%, reflecting 3 items. First, investments across both product and go-to-market capabilities as we continue to expand into non-auto markets; second, the timing of engineering and commercial -- engineering credits and commercial recoveries; and third, unfavorable FX. For Engineered Components, revenue of $1.6 billion increased 1% versus the prior year, operating income increased 8% and margin expanded 60 basis points, driven by flow-through on volume and continued performance improvements. This more than offset the impact of unfavorable FX and commodities, which were driven by higher copper, gold and silver prices.

And lastly, for our EDS business, revenue of $2.3 billion increased 5%, principally driven by North America. EDS operating income declined 2% year-over-year and margin contracted 90 basis points. This was driven by a significant headwind from FX and commodities as well as unfavorable labor economics, which were partially offset by performance improvements across manufacturing, material and volume flow-through.

Now let's turn to cash flow before we discuss guidance. Starting with Slide 12, we generated $818 million of operating cash flow in the fourth quarter. The decrease versus the prior year was primarily owing to unfavorable net working capital with investments to build semiconductor inventory. In some cases, this inventory build has been customer required or even funded and has yielded dividends with our ability to mitigate supply chain constraints that have emerged in the industry.

In addition, as we get closer to the spin, we incurred approximately $80 million of separation costs in Q4, bringing the year-to-date total to approximately $180 million. Nevertheless, our full year operating cash flow remained robust at well north of $2 billion, which led to an elevated year-end cash balance of $1.9 billion. Our capital allocation efforts in 2025 were twofold. First, retiring $1 billion in debt to reduce our leverage following the accelerated share repurchase program. And in Q4 specifically, we retired approximately $150 million in debt through open market repurchases. And second, deploying $400 million towards share repurchases in the third and fourth quarters. This includes repurchasing 3.9 million shares in Q4, deploying approximately $300 million.

As a reminder, since Q3 of 2024, with the accelerated share repurchase program, we have deployed approximately $3.5 billion towards share repurchases, reducing our share count by 20%. And we remain committed to returning excess cash to our shareholders.

Let's turn now to our 2026 financial outlook. Our full year 2026 financial guidance includes a view on total Aptiv, which we believe is important for continuity and comparison as well as views on each of new Aptiv and [indiscernible] on a pro forma basis to provide visibility into our future stage following the spin expected to be effective on April 1.

Starting with new Aptiv. We forecast revenue in the range of $12.8 billion to $13.2 billion, up 4% at the midpoint, reflecting the benefit of new program launches, the abatement of certain headwinds that weighed on 2025 revenue growth as well as improved end market and product mix. EBITDA and EBITDA margin are expected to be $2.42 billion and 18.6% at the midpoint. This includes approximately $50 million in stranded costs for the full year and $35 million of engineering and go-to-market investments we are making across our businesses as we continue to grow our non-auto revenues. Excluding stranded costs, new Aptiv pro forma margin would be up 30 basis points year-over-year, reflecting the benefit of volume flow-through and performance improvements, primarily in manufacturing and material. EBITDA margin will also reflect continued improvement in our business mix, specifically faster growth in software and services.

Adjusted earnings per share is estimated to be in the range of $5.70 and to $6.10, which assumes an effective tax rate of 18.5%. Please note that our new Aptiv EPS guidance does not incorporate the benefit of returning capital to shareholders through repurchases. However, it does incorporate the expectation that we will pay down approximately $1.9 billion in debt in 2026, funded principally from the [indiscernible] spin dividend proceeds of approximately $1.6 billion, with the remainder funded with cash on hand. Subsequent to this, both new Aptiv and Vesigen gross leverage is expected to be in the range of 2 to 2.5x, in line with what we outlined at Investor Day.

Free cash flow, measured as operating cash flow less capital expenditures is estimated to be $750 million at the midpoint. This is net of approximately $250 million in separation costs associated with the EDS spend to be settled in 2026 and a further $200 million investment in semiconductor inventory build. As we mentioned at the beginning of last year, we have worked diligently to strengthen the resiliency of our supply chain and invested to build semiconductor inventory coverage to approximately 12 weeks. This has positioned us well given the heightened concerns over an industry-wide DRAM shortage, and we see minimal impact to us from a supply perspective in 2026.

While we are confident of our ability to build inventory, and work on long-term solutions with our customers and suppliers, we do expect to see higher input costs related to semiconductors, which we will pass on to our customers.

Moving on to [indiscernible]. We forecast revenue in the range of $9.1 billion to $9.4 billion, an increase of 2% at the midpoint versus a backdrop of vehicle production down 1% in 2026. We expect EBITDA and EBITDA margin of approximately $990 million and 10.7% at the midpoint. On a year-over-year basis, margin expansion is expected to be driven by flow-through on volume and manufacturing and material performance improvements offsetting headwinds from labor economics, FX and commodities. And lastly, free cash flow is expected to be $250 million at the midpoint, reflecting continued investments in footprint rotation and manufacturing automation that we discussed at Investor Day.

Moving now to our first quarter guidance and expected cadence through the course of 2026. As a reminder, given the effective -- the expected effective spin date of April 1, Our first quarter results will be reported as total Aptiv. We expect first quarter revenue for total Aptiv of $5.05 billion at the midpoint, reflecting adjusted growth of approximately 1%, with new Aptiv slightly above this range and EDS slightly below. Q1 revenue growth is below the full year range, primarily owing to the cadence of expected global vehicle production in 2026. IHS forecast vehicle production to be down 4% in Q1, which equates to down 2% on an Aptiv weighted market basis. We expect adjusted EBITDA and EBITDA margin of $740 million and 14.7% at the midpoint. This includes a 120-basis-point headwind, associated with FX and commodities, and earnings per share of $1.65 at the midpoint, and this reflects an effective tax rate of 20.5%.

For total Aptiv, the increase in the effective tax rate from 17.2% to 20.5% is attributable to the implementation of the Pillar 2 global minimum tax, though the cash tax rate is expected to be lower than the ETR by approximately 300 basis points.

Finally, as I close, I'd like to reiterate that our resilient business model and relentless focus on optimizing performance, we remain confident in our ability to drive strong execution and financial results as well as enhanced shareholder value. And with that, I'd now like to hand the call to Joe Liotine for his thoughts on Verstegent.

Thanks, Varum. It's great to speak with all of you again. Since we last spoke, we've continued to work diligently to ensure a smooth transition ahead of our first day of trading as an independent company on April 1. As Kevin shared, EDS had a very good year in 2025, and -- we posted solid revenue growth and expanded our EBITDA margins through continued progress on our operational initiatives and drove another year of strong bookings, laying the foundation for future growth. We have momentum heading into 2026. And as an independent company with a strong financial profile, we're confident in our ability to deliver value for shareholders. And I look forward to meeting with many of you in the coming months. I'll now hand it back to Kevin and Varum to lead the call.

Thanks, Joe. As I wrap up today's call, I want to provide some additional context on 2025 and our outlook for 2026. Let me start by level setting out where we've been. During 2025, we continue to enhance the resiliency of our business model with the introduction of a broad range of market relevant products and solutions, the continued increase in bookings with target customers across regions and end markets and the ongoing enhancement of our supply chain and manufacturing capabilities. During the year, we also illustrated our ability to execute in a dynamic environment. We navigated changes in geopolitical trends and global trade policies as well as customer-specific challenges, and delivered earnings growth in the face of FX and commodity headwinds that were significantly larger than we had initially anticipated.

As we look ahead to 2026, we expect the macro environment to continue to remain dynamic. But with the strength of our operating model, we're confident that we're well positioned to execute our strategy. We're poised to capture commercial opportunities that are higher growth and higher margin across multiple end markets, and we'll continue to invest in our product portfolio and go-to-market capabilities to execute on these opportunities, while also continue to further optimize our cost structure and eliminate the stranded costs associated with the spin.

2026 is a very exciting year for both Aptiv and for Versigen as we unlock value through formation of 2 independent, optimally positioned public companies. Our team remains relentlessly focused on navigating the challenges and opportunities ahead, flawlessly serving our customers and delivering strong financial results that enhance shareholder value.

Operator, let's now open the line for questions.

[Operator Instructions] And we'll go first to Dan Levy with Barclays.

I wanted to start first with the question on your memory exposure because I think that's top of mind for a lot of folks. You said that this wouldn't really be an issue into 2027. Maybe you could just give us a little more insight into what percentage of the or COGS memory is of RemainCO? And when the -- when your contracts reset in 2027, what magnitude of impact this could be? And what is the line of sight to fully recovering all of those higher costs?

So it's Kevin. Let me start with just sizing it. So to put it in perspective, memory, the purchase value is roughly $175 million, as we sit here, 2026. And the majority of that is DRAM 3 and DRAM 4. So those are the categories. Pricing or price increases for us in calendar 2026 are low double digits, and that's the result of the supply chain management strategy that we've been implementing over the last couple of years have included higher inventory levels as well as longer-term contracts with our semiconductor suppliers.

As we head into 2027 or look at 2027, those negotiations actually had started months ago. So we're well ahead of kind of the current outlook for overall price increases. And we're confident that we'll be able to come in at a level won't be consistent with 2020 will be higher, but at a level that is certainly below the the 100% to 120% price increases that you're hearing thrown around today.

As it relates to whatever that price increase ends up being, we've been successful in the past, obviously, pushing through price increases, cost increases associated with with various aspects, our various inputs, including semiconductors. I think this is an area we've already had conversations with all of our OEM customers, they understand the situation. And not that we won't have to have some difficult conversations, but we're highly confident we'll be able to push those cost increases through to our OEM customers.

And just a reminder, you recovered 100% of your semi inflation from the '21 chip prices?

Yes, a little less than 100%, but pretty close.

Great. As a follow-up, I wanted to ask about the guide for New Aptiv into 2026. You're guiding to an adjusted growth of 4%. It is at the low end of the range of the 4% to 7% that you talked about at Investor Day. Maybe you could just give us a sense of what's a little lighter in '26 versus what accelerates into the out years?

Dan, it's Varun Laroyia. Listen, with regards to RemainCo guide, if you go back to Investor Day, the 4 to 7 points growth that we had talked about through 2028, that remains intact, right? It really starts with RemainCO still has about 3/4 of its business in the auto industry. And as you think about where expectations are for global vehicle production in 2026 and then in '27, '28, which it gets back to some level of growth, that's kind of the starting point, number one. And then the second point I'd like to highlight is, with regards to our nonauto revenues, those are growing strongly on a full year basis. 2025, non-auto grew about 8 points. And in the fourth quarter, our other industrial revenue growth, grew faster than our commercial vehicle revenue grew for new Aptiv.

So that continues to grow and grow well. But again, it's about 1/4 of the business. So in the outer years, with the investments we're making in both product but also in go to market, we expect that business to come through strongly. And finally, our software and services business continues to grow at mid-teens, which we're pleased with.

[indiscernible], if I could just add with Varun just talked about, it really -- it comes down to vehicle production and assumption. If you look at where -- we were in IHS was for the 2026 calendar year back in October, November. And the average weight of market basis, our outlook was vehicle production up 1%. As we sit here today, our outlook and where IHS actually sits is actually for -- on a comparable basis for vehicle production to actually be down 1%. So it's that swing in global vehicle production and the weighting by market.

We will move next to Emmanuel Rosner with Wolf Research.

Continuing on this, the outlook for the new Aptiv. I was wondering if you could just frame for us some of the puts and takes in the EBITDA outlook for 2026. Margins basically stable at the midpoint, but obviously, pretty decent organic growth. And then you have some puts and takes in terms of onetime cost, inflation and some of the offsets. So if you could just give us a sense of what that walk looks like, lending you around stable margins?

Yes. Emmanuel, it's Varun Laroyia. Listen, as we think about new Aptiv '26 versus '25, here are some kind of key elements just to highlight for you. The first is just in terms of revenue growth, the volume that comes through associated with that and obviously the EBITDA, and that will kind of pick up just over 1 point, okay? Commodities are expected to be in negative in 2026 for remain, again, it's a far smaller number associated with RemainCo versus [indiscernible]. So about 50 bps is what we currently forecast with regards to EBITDA margin hit associated with that. We have our usual net price down to think about the 1 to 1.5 points of what we typically have with net price downs. So that will be another -- that will be a negative associated with that. And then we've talked about investments to grow our non-auto side of the business. This includes go-to-market and also engineering, but again, and stranded costs, as I mentioned, also, which is about 40 basis points or about $50 million.

Offsetting this, our other performance items such as manufacturing, material and also labor economics that you see from a RemainCO perspective, that will kind of help offset some of those pieces. So net-net, as you think about it, outside, excluding stranded costs, we do expect on, a pro forma basis, new Aptiv margins moving up on a year-over-year basis.

That's super helpful. And then as a follow-up, would you be able to provide a similar framework for SpinCo?

Yes. Yes. No, certainly. Listen, from a SpinCo perspective, overall, 26% versus 25% margins are up. And if you were to keep them at a midpoint basis, on a pro forma basis, up about 40 basis points, right? And it really starts with the volume associated with the group that's anticipated. So obviously, [indiscernible] EDS had a terrific 2025, finished the year strong, tremendous momentum in the business, great bookings coming through. And so from a growth perspective, roughly about -- the volume growth that comes through and the volume flow-through that comes through is a positive. On the flip side of it, as I mentioned, commodities are expected to be in negative, roughly about 50 basis points net price downs, about 60 basis points. And then finally, some stand-alone costs, which are roughly about $15 million that we talked about at Investor Day.

And again, offsetting these elements are performance items such as manufacturing, material, which will add back the better part of about 130 basis points of positive EBITDA. And that kind of are the key elements to think through from a bridge perspective '25 to '26.

We'll go next to Itay Michaeli with TD Cowen.

Just a follow-up on the last question. Curious how you're thinking about just the FX commodity impact on new active kind of beyond 2026. I think the targets for 2028 assumes a minimal impact in the 200 bps of EBITDA margin expansion. Do you think that's kind of recoverable beyond this year? Or kind of how should we think about the kind of longer-term impact?

Yes, definitely. I mean we're still confident in our ability to expand margins at RemainCO by 200 basis points. And obviously, to do the same in [indiscernible] business. 2026 as it relates to RemainCO, obviously, there's the impact of stranded costs that Varun talked about. There is some incremental investment in engineering go-to-market capability that he walked through. Those are more 2026 related than they are 2027, 2028. Stranded costs, obviously, will come out of the system in 2027 and be gone by 2028. There's a bit more that comes out in 2027 than in 2026 as you -- as we sit here today. So we remain very confident in our ability to expand margins by 200 basis points.

Terrific. Very helpful, Kevin. And then as a quick follow-up. Hoping you can give us a little bit of a high-level view of how you see our revenue performing regionally this year. You've had a very strong outperformance in North America. You mentioned China also improved sequentially. Hoping to get a little bit more color as to kind of how you see regional revenue progress this year?

Itay, it's Varun, here. Great question. And really what I'd point you towards is how we performed in 2025. If you think about North America, certainly global vehicle -- well, vehicle production versus water initial estimates were and where it finally ended up certainly provided a tailwind for North America. But I think importantly, as you think about our nonauto revenue growth, software and services, predominantly in North America, so from that perspective, I would probably share with you that North America will continue to lead the way. And then from a European perspective, based on where GDP is expected to be out there, roughly flat to slightly down. And then from a China perspective, our overall mix continues to improve with the China local OEMs, number one. The second piece I kind of highlight about Asia Pac and China, in particular, is, we will end up lapping a couple of programs in Intelligent Systems that we had called out in the second quarter. Those will lap, and so we will expect to see a better second half number come through from China.

And finally, I'd say is, and Kevin referenced this in his prepared comments, the group that we are seeing with the Japanese OEMs, the Korean OEMs and also in India, that again, is strong coming through. And so as you think about '26, North America, APAC and then I'd say Europe will be flat to slightly down.

We will go next to Mark Delaney with Goldman Sachs.

You said that the S&P outlook for the production cadence this year as being consistent with your view that 1Q growth is slower and then growth picks up beyond the first quarter. Can you speak more to what you're seeing with OEM schedules? And how much visibility Aptiv has into that pickup starting in 2Q?

Yes, it's Kevin. I'll start. And Varun will provide you with more details. Obviously, as you look at the first quarter, at least 4 to 6 weeks out, we're on customer schedules. Now we have forecasts from most of our OEMs out for full year. And as we sit here today, the schedule support a relatively weak year-over-year market in the first quarter, right? So vehicle production being down roughly 4%. We're seeing weakness or we see weakness in China in line with what IHS is forecasting at this point in time. Beyond that, the forecast we received our -- we see from our customers, we see continued strengthening into Q2, Q3, Q4. Those aren't schedules that are locked in at this point in time, but as the order continues to evolve, we'll get increasing visibility. And to the extent we're out communicating in the open market, we'll share updates to investors in terms of what we're seeing from a market outlooks team. But right now, we would say it very closely mirrors exactly what we're forecasting from a 2026-year production standpoint.

My other question is on the bookings. And you had spoken last quarter about the potential for some timing to shift into '26, which came through. But maybe just talk a bit more on the broader bookings environment in terms of some of the programs that did shift, and anything in common that led to that? Is it more regionally driven or any any commonality by powertrain type that may be behind some of that shifting? And when you look at your win rates, to what extent is that tracking in mind with your expectations and supportive of that longer-term growth that you laid out at the Investor Day?

Yes. win rates continue to be strong. The shifting we saw in the fourth quarter related to programs in North America and Europe, we're well positioned, we're confident that those are programs that will be awarded. It's just a matter of timing. I think when you're in markets like we've been over the last year or so with the dynamics of trade, with tariffs, with for -- some products, shortages or tightness for some OEM customers if they're having specific unique supply chain issues, the focus of the procurement organization tends to shift to managing those situations versus awarding business. But ultimately, if they don't -- they don't want to impact SOPs, business needs to be awarded, so that engineering organizations can start working on those programs.

We'll go next to Joe Spak with UBS.

Just going back to the '26 outlook, and Varun, I appreciate all the puts and takes. I just want to maybe dive in on a couple more things, specifically on the top line, like for [indiscernible], like how much is copper helping the top line in that growth number, maybe FX for each company as well? And then we also saw some big numbers put out by some automakers in terms of cash they're going to give to suppliers for canceled programs or lower volumes. Is any of that baked into your outlook? And if not, is that something you -- are those conversations you're having and something you think you could expect to receive over the course of the year?

So let me start with the last, and then Varun can walk you through your first few questions. Listen, as it relates to commercial recovery, that's an active dialogue that quite frankly is going out with customers all the time as it relates to various, whether they're distinct or unique programs that are canceled or other items. As it relates to some of the larger decisions, principally in North America as it relates to EV programs, those are discussions that are underway now at this point in time. Certainly, the resolution of those is factored into our 2026 outlook. I wouldn't consider it upside to our overall operating performance. They still need to be negotiated and finalized. I think some of the larger programs with some of the OEMs that we do with especially in North America, I would say there's a strong agreement that the situation needs to be resolved, and they need to support the supply base. So I don't think it's a matter of negotiating those recoveries. It tends to be how much.

So yes, they're in our outlook at a level that we have high confidence in, but, Joe, there's -- the nature of this business is there's an amount of that activity that goes on year in and year out. And it could be things like labor economics, program cancellation, program delays, commodity pricing, things like that, that maybe there is a contractual mechanism to deal with that need to be dealt with [indiscernible].

And let me pick up the first part of your question, Joe. With regards to commodities and essentially from our perspective for Vesigent, it's primarily copper. We expect copper, as of now, we've budgeted that at $5.50 versus 1 pound versus $4.51 number in actual 2025, that leads to close to $200 million from a top line revenue perspective. Though I do want to share with you and clarify when we talk about a 2% growth at the midpoint for [indiscernible], that is adjusted growth. So that excludes the impact of any FX or commodities.

And the other thing, just from a mechanism standpoint, the way that works, Joe, is copper's index. So roughly 70% of our overall activity where we sell copper and principally in the EDS business, it's index. That price increase is passed on to the customer, typically 3, sometimes it's 6 months, but more often than that, roughly on a 3-month sort of delay. So that's how it effectively plays out from a reimbursement standpoint and pricing statement.

Okay. Maybe just 1 more because I know this has sort of changed over the years, but it's something that's come in to more focus of late with investors is the peso because I know you used to hedge a lot of that, and I think you started to let more of it flow. Can you just remind us sort of what the the current status of that is and maybe the sensitivity to the peso as well?

Yes, Joe, thanks for raising that. Again, listen, as we think about FX, with the weakening U.S. dollar and our lack of an operational hedge primarily for our Vesigent business, that's where the peso hurt. As that -- if you're going to go back to a year ago, when we gave guidance for 2025, the peso was just shy of [ 21 ] to the U.S. dollar. I think we flashed at [ 27.5 ]. And if you see what's currently tracking at [ sub-18 ] that certainly causes a ton of OI impact. Having said that, obviously, we do have hedges in place. And then for 2026 in particular, we essentially hedged about 95% below 18%, okay? And so that certainly lessens the impact up to a certain point. But clearly, in 2025, from -- given the volatility from the start of the year to where it ended up, it certainly was a big driver of the impact that we certainly called out, and we're transparent in terms of what that was.

[Operator Instructions] We will move next to Colin Langan with Wells Fargo.

I think there was some concern heading into guidance about [indiscernible], I don't know that, right, Being down given EVs, particularly in North America are expected to be down a lot. I mean what are you assuming in terms of EV volumes? And then so what is actually keeping that growth positive of EV is sort of an underlying headwind within there?

Yes. Our outlook for EV growth as a company is roughly 15% year-on-year. The majority of that growth is driven in China. And it's a mix of BEV and slightly faster growth rate in plug-in hybrids and hybrids. So very low growth here in North America, moderate growth in Europe and then stronger growth in Asia Pacific, principally China.

So I think we're roughly -- Colin, I think we're roughly 5 or 6 points from a growth rate assumption standpoint below where IHS sits today.

Okay. Great. And then Intelligent Systems margins were surprisingly weak in Q4, particularly since normally a quarter where you get a lot of engineering recovery. Any color on the weakness? And I guess, more importantly, how should we think about margins into '26 as they kind of bounce back or...

Yes. On a full year basis, margins in Intelligent Systems were up 30 basis points if you exclude foreign exchange. So so strong year-over-year growth. In the quarter, I think we had 3 impacts. Varun talked about foreign exchange. So there, we were's impacted from a foreign exchange standpoint very significantly. I think it's roughly 170 basis points that we show on our chart. And then there are 2 aspects from a timing standpoint, 1 engineering credits actually were not as heavily weighted in the fourth quarter. I think in our Q3 earnings call, we made some commentary with respect to timing of engineering credits. And then second thing, just Varun mentioned, we've accelerated the investment in some engineering areas in and around technologies and solutions or bringing technologies and solutions into the robotics market. So we have incremental investment in the fourth quarter that will increase and that will continue into the first quarter of this year and through the balance of 2026.

So those are the 3 drivers of the year-over-year margin degradation for the Intelligence Systems system.

And I guess FX and the -- into Q1, the engineering investment continue. So those would be incremental headwinds as we think about [indiscernible]?

Yes, there's some headwind for our FX and commodities, much lower based on where we sit today than what we had in the fourth quarter. And then the engineering investment will continue.

We'll go next to James Picariello with BNP Paribas.

I just wanted to clarify first on the stranded cost that's embedded in the pro forma outlook because adding the EBITDA midpoints of new Aptiv and EDS, right? There's like a $75 million difference. Does that account for both the RemainCO's $70 million in stranded costs based on the Analyst Day as well as the standup costs that EDS will have as a separate entity?

Yes. James, it's Varun Laroyia. Yes. We call out about $70 million in stranded costs at Investor Day. What we -- obviously, we've made progress both from a headcount and nonheadcount actions. So those have been layered in. Some of those actions have already begun, but $50 million impact in the first full year on a pro forma basis for new Aptiv, that's the $50 million, small, call it, public company set-up costs for vestige, roughly about $15 million. And then the other piece, as we called out where some of the investments from a go-to-market perspective and product perspective that we're making in RemainCO across both Intelligence Systems and Engineered Components. Those are kind of the key elements to think about from that perspective.

Perfect. That's very clear. And then my follow-up is on Wind River and its potential with respect to robotics and just how you foresee that the future end market demand tied to AI and robotics, human or robotics? Does Wind River have a TAM there and a place to play?

Yes. So Wind River, I would say, is, from a software standpoint, the tip of the spear. So they serve multiple markets, including the robotics market of today with Linux solutions with [indiscernible] solutions and other software products. So it's a TAM that we estimate to be about $6 billion. When you look at the comparable to our content per vehicle that we use for the automotive sector, it's roughly $4,000 to $5,000 of content on a rollout when we look at sensor solutions when we look at -- so that could be vision or camera as well as radar when we look at the software tech stack and then when we look at the interconnect and the cable or wire harness solutions. So our -- we view it as a very attractive market.

The partnerships that we've announced to date, we're making meaningful progress with, we think during the first quarter, we'll have more commercial relationships or partnerships that we'll be announcing that will show the traction that we have in place. And that's what, quite frankly, gives us the confidence to increase the investment targeted that specific market, just given the opportunity.

And that was our final question. That will conclude today's question-and-answer session. I will now turn the call back over to Mr. Kevin Clark for any additional or closing remarks.

Thank you, everyone, for joining us today. We really appreciate your time, and we look forward to speaking with you and meeting with you over the coming months. Have a nice day.

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

Good morning, everyone. I'm Joe Spak, Head of U.S. Autos here at UBS. Very pleased to start off a full day of auto meetings with Aptiv. We've got Kevin Clark, CEO; Varun Laroyia, CFO. We're going to have a little bit of a fireside chat. There's also an opportunity for you to ask questions. You should see a QR code on their table. If you want to ask a question, snap that code, ask questions. Will pop up magically on the sideboard here and ask a question on your behalf.

With that, gentlemen, thanks for coming in. I know you recently had a big Investor Day that talked about the split of the company and the future for both sides of the company, and I want to spend the majority of our time talking about that.

But just to get some of the other minutiae out of the way, I guess, we are basically have 3 weeks left in the year. You did give an outlook at the end of third quarter that expressed, I think, a fair amount of caution on some of these industry factors that could impact your results. I was wondering if you just market to market, give us an update on sort of how things have progressed over the quarter.

Sure, sure. Maybe I'll start and Varun could -- so we gave full year guidance or fourth quarter guidance, I guess, effectively in Q3 earnings call -- during Q3 earnings call. Obviously, it's a dynamic environment that all of you know that we're operating through as a part of our guidance, we obviously incorporated what we saw from a customer schedule standpoint, overlays as it related to additional conservatism for potential supply chain disruptions.

We would tell you things are playing out as we expected in terms of vehicle production rates across the globe and how that translates into revenue and earnings for us. So high level of confidence in the guidance that we've given and we'll finish the year, we're confident on track.

Yes. No, I think that's comprehensive, pretty much on track with what we had stated apart from the revenue and the EBITDA, OI performing well on cash, and we're certainly deploying that.

So -- but your guidance did assume, I think, an extra level of caution. So would you say that caution ended up being warranted or may -- or there is -- it ended up being more prudent than that.

Yes, I would see an appropriate level of caution. I mean, the Nexperia challenges are obviously something you're all aware of, right, some of the semiconductor potential shortages that are out there. Obviously, there's a large North American OEM that was impacted by a supplier fire in upstate New York related to aluminum.

Some of you may be aware of some of the activities going on in Mexico as it related to farmers and agricultural workers and what they were doing in terms of slowing products shipped across the border. So we've encompassed all of that. It's a very -- it is a very dynamic environment that we're operating in.

And we've overlaid an appropriate amount of conservatism in there. We have confidence in our guidance. It's -- I'd say sitting here today, I'm sure Varun agrees with me, it's difficult to say that we were overly conservative relative to how things will play out. We think we're appropriately conservative.

So I know at the Analyst Day, you sort of gave midterm views. And when we -- when you report fourth quarter earnings in, I'm assuming, January, maybe early February, you'll give the '26 guide. Is that sort of the approach we should expect you to continue to take sort of this appropriate level of conservatism? Or have you seen some of the uncertainty that has plagued the industry over the past couple of years actually somewhat normalizing?

I think it's fair to say that, listen, over the past year, there's been a lot of dynamism that's taking place. Earlier this morning, as we're talking to, there's a new piece that's kind of coming through. And while we have kind of predicted it and we've poured through this piece in early in the year when we talked about the investment of almost $0.25 billion that we were making on semis, including memory, there were a number of people that were talking about what is it that you were seeing, and we just felt that this was the right thing to do.

So I think in terms of as we look forward, this perhaps is the new normal, right? And just being agile, nimble and kind of staying ahead of the curve, we feel good about where we've positioned the company. And then from a bookings perspective, the acceleration versus 2025, we feel good about that.

So let's talk about that topic, saying just we've got a lot of inbound questions about it as it's been picked up and maybe a little bit more about the potential DRAM shortages impacting the automotive industry. Maybe you could just again sort of level set for us how that sort of supply chain works? Are you responsible for getting the memory? Is it sort of direct source -- directed towards you in some cases? How that works? And then how do you actually see this playing out? Is it really a volume and availability issue? Or do you just sort of expect prices to move higher? If they do move higher, what sort of recourse do you have to sort of pass that on through? And if you have any sense of sort of when this pain point from a timing perspective might really?

Yes. Maybe I'll start. So I think we've been very focused. And I think getting back to the kind of new normal. I think the industry -- all industries are doing much better operating in a dynamic environment. I think we're all much closer connected with our suppliers as well as with our customers. So I think from an industry impact, that's part of what you're experiencing.

We're able to respond more quickly. As it relates to specific to Aptiv and the recent news regarding memory capacity and availability post the semiconductor crisis back 2021, 2022, we were very conscious in terms of we've been vocal in talking about how do we derisk. And we've done that through investments in inventory. So you'll see that on our balance sheet, especially in the area of semiconductor chips and SoCs on validation of multiple sources of product so that we have optionality and flexibility, and that's both for quantity of product, but it's also price leverage, quite frankly, to push back when you see constraints, localizing in local markets.

So we're, by and large, in China, local for local across our supply base. That does two things. One, it makes us more relevant in the China market. But two, it frees up what we have from a capacity standpoint with our Western suppliers to support our Western customers.

So we're confident that we're in very good shape as it relates to the balance of this year through 2026 and into 2027. Now is everyone in the same sort of position that we're in? Probably not. Will there be some tightening? There probably will be. Could that impact vehicle production? It could.

Our current outlook, and we've predicted this memory shortage actually going back 2 years ago. It could, but we'll see. I think the industry will figure out ways to navigate. I think we're in a much better position today than what we were back in 2021 and to identify alternatives for supply and free up capacity from a product standpoint.

I think it ultimately translates less of a supply constraint issue, more of a price issue. Our view, it really doesn't affect anyone until 2027 as we sit here and look at it at the situation today. And again, we've derisked from a pricing standpoint to make sure that we have multiple sources of product contractually, right? And we can play one supplier off another.

Perfect. Let's move to the spin, the Analyst Day, the outlook. For simplicity purposes, well, I'll refer to them as sort of new Aptiv in EDS. So new Aptiv, 4% to 7% organic CAGR through '28. That consisted of 10%, I think, in the nonauto business. So I want to sort of disentangle both sides of that, first of all.

So that means our math is correct, it's something about like 4% automotive growth, and you sort of said about 1% LVP. The -- within those businesses specifically, that 3% outgrowth, and I know you don't like talking about outgrowth anymore, but that, let's just call it, low to mid-single-digit revenue growth, what -- is that specifically being driven by programs already won, not yet launched? Is it sort of the continued ramp-up of programs being won? Any color you could give us on sort of what's sort of driving that by either product or region would be helpful.

Yes. Yes, absolutely. So let me answer the auto side first, right? That's where a specific one is because on the nonauto side, the 8% to 10%, that's pretty much where we are currently tracking in any case in 2025, right?

I want to get to nonauto.

We'll get to that in any case. So on the auto side, think of it, one, it starts with bookings. The bookings that we have been able to get across all 3 segments, EDS, ECG and also our intelligent systems business, robust bookings coming through. That's point number one. The other two points that I should highlight, and I will, is active safety. We see that to be a mid-single-digit grower. That's number one.

The other piece, which we've talked about in the past is our UX business, which has been lapping for several quarters, certain ramp down of programs. Those essentially abate early in '26. And I think that's the other piece to think about because the UX business is growing outside of the ramp down that's taking place. And that was the piece that I certainly want to clarify because that also gets us to that, call it, mid- to low single-digit upside on -- from an auto perspective.

The final one is what we talked about software-defined vehicles, zonal architectures and the entire software side of the auto piece that we've been building up. So as you think of it from an auto perspective, bookings, number one, active safety, mid-single digits, UX lapping and then...

Does UX grow? Or is it the absence of a headwind?

It actually grows, but the growth is being masked by the ramp down. And that's the piece that kind of abates in early '26 and now then you kind of begin to see that.

Yes. And how much of the historical sort of underperformance in China moving to sort of more of an in line-ish number, how much does that sort of contribute to the outlook as well?

So our ECG business is performing incredibly well from a China domestic OEM perspective, by far, the highest penetration across about 3 segments. And it's a sizable business of the almost $4 billion that we do in China, a big business, doing incredibly well. Intelligent systems is the smallest from a revenue perspective. However, they do have a large percentage for China domestic. So if you think of it, penetration of China OEMs starts with ECG, intelligent systems and then EDS. And then EDS, really, I think what we think about is in terms of bookings that are coming through, north of 80% of their new bookings are all with China domestic.

Yes. If I were to break it down into subsets, right, I would say the user experience ADAS business, mid-single-digit growth rate. If you were to look at electrification across our business units, high single-digit sort of growth rate. If you look at China market overall, high single-digit growth rate and solid growth across all the businesses to the point Varun mentioned through very strong bookings with local OEMs over the last 2 years, especially this year, strong growth on export platform, not only in China for China, but export platforms out of China into Europe and Southeast Asia, very strong growth in India on new program launches principally. So I would say it's a mix -- it's a pretty balanced mix between new program launches across all those as well as some -- on certain things like user experience lapping the down -- the drag that we've had over the last couple of years.

Moving on to the nonauto side, 8% to 10%. I know you said that it's been growing about that level. I think -- to be candid, I think this is one of the areas where in conversations we've had with investors, there's a little bit of a question mark uncertainty about the ability to sort of continue to grow at that pace because -- and maybe you could just sort of go through some of the drivers as to what -- why you think that business can still grow high single digits because when you look at some of the end markets you laid out, right, and I think in auto, you went to front -- commercial vehicle, which is really, I think, the closest adjacencies to what you're doing. Then you had A&D and then datacom. Now I think if I just look at those end markets overall, datacom is clearly growing probably faster than that. A&D maybe around there. But again, I think as you sort of go maybe left to right on that chart you put out and sort of I just described it, like your exposure diminishes.

So how are you really able to grow at that level when the end markets that you have more exposure to outside of automotive, I don't think are expected to grow that fast. It implies share gains or more content, but maybe you could sort of double-click a little bit.

Share gains content market shift. So on our outlook for -- to your point, on commercial vehicle, our revenue growth outlook for commercial vehicles is roughly in line with what the commercial vehicle market will grow with that perspective over the next 3 years roughly 4% per year, 5% per year is our overall outlook. You look at the balance of our nonautomotive business, the principal markets we serve are aerospace and defense.

From a market standpoint, high single-digit growth rate on top of that, a market that we treat separately is space, a market growing much faster than that. On the telco side, across the globe, a lot of support of transition to 5G. So I would refer that to beyond market growth, it's content growth as 5G V-RAN, O-RAN adoption comes into play.

So we're benefiting from that from an overall market standpoint. We've seen very strong growth on the industrial side, especially in the interconnect space. That's probably market share gain, quite frankly, but very strong growth there. And then on the software side, it covers markets that include enterprise, that include telco, that include A&D, where our software revenues today at baseline of $600 million are growing roughly 20% per year.

That's all through the Wind River...

Yes. The bulk of that is Wind River. So that's where we've achieved it. I'd say we have a very high level of confidence in our ability on the nonautomotive side to increase our mix of nonautomotive business 2025 through 2028. We made a comment during our Investor Day about -- ideally wanting to get to a target where 40% of our revenues are nonautomotive related.

Clearly, that will take a longer period of time post 2030. A part of that will be organic. And then a part of that will be through bolt-on acquisitions, similar to what we've done with Winchester in terms of building out our product portfolio there. I think if you look at our guidance, the cash flow efficiency of the RemainCo business with 100% cash flow conversion, we have -- we can get to that roughly 35%, 40% target 2030, maybe a little bit later and do that pretty efficiently, effectively, while at the same time, returning a fair amount of cash to shareholders.

So since you sort of went there and sort of the cash generation and sort of the M&A strategy, maybe, again, like with the spin, it looks like you're leverage neutral, you'll generate a good amount of cash at RemainCo. So it does seem like you have a true sort of strategic vision here to sort of try to grow that business organically. But maybe you could just sort of talk to us a little bit about how you sort of balance or make the decision between, let's say, a share repurchase or an inorganic.

Yes. No, it's a great question. And listen, we'll do both, right? We definitely have the flexibility to do that. As we look at the M&A opportunities, I would characterize them as bolt-on opportunities in spaces that either strengthen our product portfolio or give us broader market access.

I would say those M&A opportunities, quite frankly, more of them sit in that interconnect space. I think from an intelligent system software, those will be more partnerships, maybe investments that we augment our overall portfolio and bring with other partners' products to market.

From an acquisition profile standpoint, there's a couple of things. They need to be financially accretive. So they need to diversify our revenues. They need to expand our margins. They need to generate synergies. They need to be easily integrated. They need to increase cash flow generation. So the financial -- they make the financial profile of the RemainCo continue to make it more and more attractive.

Maybe just to close on RemainCo, and then we can move over to EDS for a little bit, right? But you sort of pointed about 200 basis points of margin expansion there. Can we just go through some of those drivers? I know you sort of talked about manufacturing savings, material cost savings.

But I guess when -- you also sort of provided some of that subsegment color, if you will, between intelligent systems and ECG. Given that I think that the majority of the software is in that IS business. I was a little bit surprised that maybe some of the incremental margins at least imply one a little bit stronger because I would imagine that has pretty high flow-through. So what -- is that just because there's also further reinvestment in that business? Or maybe you could talk a little bit about that.

Yes. Listen, so the 200 basis points that we talked about from '25 through '28 on new Aptiv, 3 key drivers that is going to keep it very simple. Clearly, driven by manufacturing performance, that includes material performance, right? And it's what we've been doing for years with regards to consolidation, and then also just kind of footprint rotation, right?

And we kind of see that come through. So that's kind of one key driver. The second one is what we talked about a couple of minutes ago that Kevin elaborated on is just higher margin flow-through on the nonauto side, which is growing 8 to 10 points.

That flow-through comes through. Within that is the software side of it also, which, again, from an intelligent systems perspective comes through. And then the final one is SG&A benefit. Just as we kind of think about the target operating model, how we're kind of working that piece through in serving a new RemainCo business, we're seeing benefits on that.

We've got plans already in flight at this point of time. You'll kind of see that through, essentially kind of getting rid of the stranded costs, for example, right, that we called out. The offset to that is the investment in engineering and some additional capabilities to drive the nonauto growth.

But that's what kind of clips some of those margins in terms of why is there not a higher flow-through. So manufacturing performance, which includes material that we've been doing in any case, higher flow-through on high-margin revenue and then SG&A benefits offsetting some of the investments we're making.

Just on the stranded cost because I think this was a little bit of a source of confusion in some conversations I've had investors because the 200 basis points you're talking about, right, that's a '25 estimated number versus a '28 number. So -- it's not in the '25 number, but it's also not in the '28 number.

That's right.

So it's not -- so -- but in reality, what's going to happen then is in '26, which I know you didn't sort of guide to, you will have $70 million. So there will be sort of a step down for you to recover.

That's exactly right, Joe. You're right. So essentially, between '26 and '27, we eliminate those $70 million of stranded costs, right? So when you look at the bookends, '25, hasn't taken place, it's clean. '28 will be clean, right? And so what we will do is when we provide guidance, we will give insight in terms of the level of stranded costs that is kind of weighing on the '26 margins, for example, and as to how they tested....

And is that -- and this sort of maybe is a good bridge to sort of EDS as well, but is that $70 million of stranded costs net of any TSA payments you get from?

It's de minimis in terms of -- for the TSA. So the overall TSA piece clearly in terms of separating companies of this size and scale, the vast majority of the TSAs are on the technology side where we're carving out systems. And so that will take about 18 to 21 months to kind of get through. But that's basically providing a service.

But our technology team has done an outstanding job just in terms of to ensure we don't end up with stranded costs post the TSA elimination. And given the high level of conveyance that we have with regards to talent, but also systems, we don't see that to be a major problem.

Okay. So let's move on to EDS a little bit here, you pointed to 3%, 4% organic growth CAGR. I'm assuming you had a very similar sort of LVP assumption for that business.

It's the same.

Yes. I imagine that same. This has, I think, a smaller mix of nonauto, but there is some nonauto there. Is that sort of 8% to 10% nonauto growth in EDS also what you expect? Or can it be a different level?

Slightly lower because, again, if you think about 90% of the EDS business is auto, right? And the remaining 9% of the 10%, 90% of the remainder is all commercial vehicles, right? And so as we called out the fact in terms of commercial vehicle production over the planned period is roughly 4 to 5 points. The EDS business and their programs that they have and the bookings that they have, they actually get a higher share from a CV production perspective.

So that will be, call it, mid- to high single digits. So that's where that growth is. And then the final point is that push into other industries such as robotics, for example, agriculture, construction, some of the other pieces, battery electric storage systems, nascent business. And so it's growing from a very low base. So on a growth percentage basis, it jumps up, but it's a small book of business.

Well, that could -- that's why I was sort of curious like because you could sort of paint the picture where actually maybe that growth ends up being a little bit faster because it is a smaller number. You have won some businesses like you mentioned on the storage side, which are 0 right now. So it's almost all incremental.

Yes, I would say the opportunity there is significant, right, in reality, I just that we're starting at a low point as it relates to power storage as an example, a low point as it relates to robotics. But we have business in that space, and the trends are positive in those areas.

And we have the ability to apply a portion of our product portfolio and expertise into those use cases. So we're excited about it. They're just coming off of a smaller number. So to your point, you can foresee it isn't year 1, but it's year 3 that you have meaningful growth driven outside of the automotive space that...

And the margins that segment also conveniently 200 basis points of expansion. Here, you talked a little bit more about more automation in what's historically been a very labor-intensive portion of the business. You also mentioned, and I think a lot of this is maybe coming from Asia, but correct me if I'm wrong, sort of more full service systems, which I think tend to be a little bit higher margin. So maybe you could just again, Kevin or Varun, sort of walk through sort of the drivers of the margin you see in that.

Yes. I would say the bulk -- so there's an element of mix, to your point, full service solutions, which I would say it's pretty balanced by region, quite frankly, which where we tend to do more of the engineering, more of the development, and we have the ability to design solutions that save our customers' money and actually optimize our product mix and our profitability.

So that's an item. The second is, quite frankly, I'd refer to it as self-help. So it's facility consolidation. It's footprint rotation. It's things that we do actually very well and continuing to execute on that plan. And I would say that's probably half, if not a little bit more of the overall margin improvement that we have included in our outlook from 2025 to 2028.

Then there's an element of automation. So we're automating some portion of the overall assembly process for wire harnesses, and that's taking place across regions. And then there's our typical benefits associated with overhead reductions, SG&A reduction, things like that, that factor in.

And then maybe the other side of that stranded cost equation, so SpinCo, right, like the 25 estimated number. Obviously, they're getting their share of allocation now. But then again, practice, when some companies they're going to have whole bunch of stand-up costs right?

It's de minimis.

It's not even worth, to be transparent to talk about. Okay. So that's a pretty clean 25.

Yes, it is 25.

Okay. And then capital allocation on the EDS side, you said a competitive dividend. Is that right out of the bat or...

Yes. Yes. So through out of the gates from a balance sheet perspective, I think, as I mentioned, 2.1 gross, 1.8 net. That's what we're targeting through out the gates. The models that we run, the business' ability to do a regular cash dividend right out of the gates. It's cash generative from day 1.

Obviously, closer to time with the appropriate timing and stuff, we kind of call that piece out. But we've modeled in a good competitive dividend to the business. That's the thesis of the business, right? It's a steady growth from a revenue perspective, good margins relative to its competitors, but a tremendous cash generator.

And as you think about where that cash gets deployed, obviously, organic growth, some of the kind of footprint rotation consolidation side of it, some tuck-ins potentially. But the rest of it, given the balance sheet is going to be -- from a financial metrics perspective, investment grade, but again, given the auto cyclicality and the auto sector and stuff will be kind of high sub-investment grade. And you kind of saw the ratings agencies deliver their evaluation, their assessment on the day of Investor Day. The dividend is something which is easily supported.

It also seemed like part of the rating was nascency of the business, lack of stand-alone sort of track.

Exactly.

But do you -- I guess the question is, over time, then do you expect the rating to sort of be that investment-grade rating? Or is there a desire to sort of stay...

A lot of that have to be kind of decided by the Board and the new management team. The ability for them to kind of step up will certainly be there. I think the question really is, do you really want to be there or not in terms of the flexibility that may be so.

I think what we control and what that Board will control, what do the financial metrics look like? So investment-grade credit statistics without a doubt. And then we'll see how it plays out with the rating agencies.

Okay. Why don't we see if there's any questions. Again, if there are any, use the QR code, and we'll see if anything came in here. It's my first time using, so bear with me. I'm not sure if anyone has a question or I don't know if sorry, if there is anyone in the room that has a question, you could also raise your hand. Otherwise, I'll keep going on.

I guess [indiscernible] sort of just alluded to this a little bit on the EDS side, consolidation, right? As you survey the wiring landscape, let's say, right, like you obviously have a good idea about your capacity, right? And you've mentioned some of the footprint rotation you want to do.

At an industry level, how would you classify the capacity? Because I think, Kevin, like in the initial call announcing the spin, you sort of alluded to a comment that this is just an area of the value chain that needs probably some industry consolidation. Is that -- maybe you could expand upon that a little bit.

Yes. I think, to be honest, I think there are a fair number of areas in the automotive space that could use some industry consolidation. It's one of them. The EDS business is a leader in electrical architecture across the globe.

And in every region that it operates, it's either #1 or #2. And the margin profile of the business really reflects those -- we talked about the full service sort of solution, our ability to design optimized solutions that take weight mass, cost out of a wire harness and improve performance for OEM customers.

So it saves them. So they lead and are by far in a way the strongest in the industry. There are a number of players out there who -- when you look at the margin profile, it's different than the EDS business. They tend to be built to print. So OEMs or maybe in some situations, players like ourselves design a wire harness.

And from a sourcing standpoint, the OEM decides to go down a build-to-print sort of path with a particular vehicle program. That excess capacity obviously impacts the profile of the industry. And I think there are several of them that if you follow our industry closely over the last 5 years have been financially troubled and have gone through very difficult times and created difficult situations for our OEM customers. So I think in this particular space, it's one where you get a lot of customer support to bring expertise like the expertise our EDS business has to certain of those players.

One housekeeping, which I know has sort of been asked as well. There weren't any -- if I recall, any sort of -- you gave free cash flow guidance, but there was no sort of CapEx guidance. But we've obviously seen the level of CapEx. Any reason to think it should sort of change meaningly from what we've seen in either of those businesses?

No. Pretty much in line with our historical CapEx.

Okay. Maybe to close and turning back to new Aptiv and I guess, specifically with the ECG business, which I know, Kevin, you spent a little bit of time talking about. I'm probably going to oversimplify this, and I don't know if this is how you think about the business.

But the way I sort of think about it is you've got maybe 3 groupings. You've got the traditional power and signal business, which, let's be honest, like maybe you win some business, maybe lose some business, but that's probably more or less growing in line with industry, right?

Then you've got the, let's say, electromobility part, which is obviously in full effect in China, although given that over half the vehicles are already on EVs, maybe the growth starts to slow. Europe is still -- has some potential. U.S. seems like it's on pause, right?

So then the last level is, I guess, the -- maybe let's call it the data connectivity, the high-speed connectivity, and that's where you're sort of talking about the software-defined vehicle, the smart vehicle architecture, the zonal architecture approach. It seems to me like that's got to be -- and again, maybe you disagree with sort of how I bucketed it, but like if you follow along my thinking, it seems like that last bucket has to be the biggest growth driver over the next 3 to 5 years for you to hit this. Is that fair?

Yes. I think -- so high-speed interconnects, product areas like that are amongst the fastest growing. Our general view from a global standpoint is electrification continues. It may not be full battery electric vehicles depending on region.

That is a driver of incremental growth. To the extent there's more content going into the car that requires any sort of power, that is more growth for the interconnect business. You're right, there are certain areas now that it's just power distribution that grow at vehicle production.

But net-net, I think you look at our -- the growth of our ECG business within automotive is a mid-single-digit sort of grower with 0% to 1% vehicle production growth rate. That's how it plays out. It's a business that -- or a sector that as you transition to what we refer to as smart vehicle architecture, whether that's central vehicle controllers or zonal controllers. The reality is weight mass comes out of copper comes out, but more interconnects actually go in, right?

You benefit -- that business benefits from that trend. So whether it's in automotive, we're obviously excited about that business and how it's positioned. It's the #2 player there. I'm sure everyone here knows who the #1 is. We're growing significantly in commercial vehicle. I'd say that's due to focus and expansion of our product portfolio, which will continue. And then we have a number of great opportunities outside of automotive.

And just on that smart vehicle architecture, there's obviously been a little bit of a delay. There's been programs that have been canceled mainly because they were electric, maybe not necessarily because they were smart vehicle architecture. But -- and look, I think some of the companies probably sort of had some challenges even sort of getting some of those first-generation architectures out because it is a big change. But in your conversations with your customers, do they realize the importance of this? Is this still sort of a full force? And as we get to, let's say, 2030 end of the decade, do you expect most of sort of the new programs to come out to sort of have some sort of zonal...

Yes. From an -- so 5 years ago, when we started talking about it, the question was where was the industry going to head in this direction or not. And I think there isn't an OEM that you talk to across the globe that this is a path they're on, some faster than others, some starting and stopping over a period of time.

So it certainly is the trend, and we think you'll see the benefits of that in our revenue line. Unfortunately, not as fast as what we had expected 3, 4 years ago. But end of the decade, you'll see some benefits. I think we talked about in our Investor Day in terms of our funnel of opportunities on smart vehicle architecture. Sitting here today, it's over 20 OEMs and I think close to $20 billion of lifetime revenues. So it's definitely. We're working with more OEMs now than what we were 3 years ago. So it's certainly a trend that we benefit from.

And even here in North America, where maybe some of the electrification like the zonal approach or a central approach still is the path they're taking even if they stay combustion engine.

Yes.

Okay. Well, I think we're about out of time. So gentlemen, thanks. Thanks for coming.

Thanks for having us.

Thank you.

Welcome Vice President, Investor Relations, Betsy Miller Frank.

Good morning, everyone. On behalf of the entire team at Aptiv, welcome to our 2025 Investor Day. Thank you all for being part of today's event. Those of you who are here with us live in New York City as well as those of you who are joining us via webcast. We have a great event for you today.

In terms of the agenda, we've designed it to give you more insight into where the company is today, what new Aptiv will look like post the spin of our EDS segment and what EDS will look like as a stand-alone company.

We'll begin the day with a strategic overview from our Chair and CEO, Kevin Clark; then move on to each of the new active segment leaders, starting with Javed Khan, who leads our intelligent systems. This is a segment formerly known as advanced safety and user experience. He'll then pass it on to Joe Massaro, who leads the Engineered Components and our CFO, Varun Laroyia, will then tie those presentations into our financial profile.

Kevin will close out some new active portion of the presentation before we take a short 15-minute break. After that, we'll move on to electrical distribution systems, where you will first hear from Joe Liotine, President of that business, and then Varun will present the EDS financials. We'll then have all speakers join on stage for about 30 minutes of Q&A, and then we will serve lunch.

But before we begin, it is my duty to direct your attention to the forward-looking statements here on the screen because during today's presentation, we will be providing certain forward-looking information that represents Aptiv's current view of future financial performance and may differ materially for reasons that we cite in our Form 10-K and other SEC filings.

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 are included at the back of the slide presentation, which can be found on our Investor Relations website. And with that, let's begin.

[Presentation]

Please welcome Chair and Chief Executive Officer, Kevin Clark.

Thanks, and good morning, everyone, and welcome to Aptiv's 2025 Investor Day. It's a pleasure to have all of you with us here today. We have a lot to share, and we have a large swath of the management team that you're going to hear from the business leaders who are really driving Aptiv forward.

So I'm going to start by talking about how we position the business, how the environment that we're operating in has evolved and how we've aligned our product portfolio as well as our operating model accordingly. I'm then going to talk about our plan to separate into 2 independent public companies and how that positions each business to increase shareholder value.

Starting with a brief overview of our Electrical Distribution Systems business or EDS. Before Joe Liotine, President of EDS, will provide a detailed review later in the day. So I'm going to spend most of my time on new Aptiv, covering the growth drivers and how our unique product portfolio and our operating model are positioned to deliver value for our customers as well as for our shareholders.

So over the past decade, we've transformed Aptiv from an automotive supply company into a diversified industrial technology company, providing advanced software as well as optimized hardware solutions that meet the evolving needs of our customers and it's increasingly across multiple end markets. At the same time, we've built the business with a very, very robust operating model that leverages our global engineering capabilities, our supply chain capabilities, manufacturing as well as our commercial capabilities, maximizing our operating efficiencies and ensuring flawless execution for our customers each and every day.

And all of that resulted in revenue and earnings growth as well as cash flow generations that's translated into shareholder value creation. So I'll move to provide a little bit of context on the automotive industry, how it's evolved over the past few years and where we believe it's headed from now until the end of the decade. So since 2022, our total addressable market for automotive has grown at a compound annual rate of 7%, including low single-digit growth in vehicle production.

And when you dissect that, virtually all of that has occurred in -- with strong growth in the China market. Content growth added another 4 points, driven by increasing levels of electrification, active safety as well as software-defined features in the vehicle.

Now over the next 5 years, we expect our total addressable market auto to continue to grow, but it is going to grow at a moderated growth rate of 4%, reflecting 1% growth in vehicle production, which is pretty balanced across all geographic regions and another 3 points of growth from vehicle content. Now the secular tailwinds in and of themselves have not changed relative to a few years ago, the drivers of growth are really the same, but the shape of the adoption curve has changed, with some technologies taking longer than originally expected to materialize.

So a few examples. The pace of EV adoption has slowed, especially in North America and to some extent, in Europe, due to changing regulatory policies, lack of infrastructure as well as some changes in consumer preferences, causing OEMs to scale back on their investments in EV platforms. which has resulted in a slowdown in the development of new optimized vehicle architectures and has impacted the pace of the transition to the software-defined vehicle.

Now although the adoption curve for these technologies has been slower than originally forecasted, we can assure you the underlying secular trends do continue. And if you look out beyond the next 5 years, it's our view that the pace of adoption will actually accelerate. Now for Aptiv, these dynamics are leading to growth opportunities that vary between our business segments. And we're focused on positioning each one of them accordingly.

In terms of the value delivered to our customers, Intelligent Systems, with Betsy just mentioned, was formerly known as Advanced Safety and User Experience, as well as our engineered components business, provide productized solutions and our value proposition comes from delivering technology innovation at very high quality and at optimized costs.

In contrast, our EDS segment provides unique program-oriented vehicle architecture solutions and our value proposition is really anchored on process innovation and systems design expertise, executed flawlessly and enabled by our proprietary tools, which Joe will talk about later.

The product orientation of Intelligence Systems and engineered components are more easily leveraged into other end markets, where we've already established a meaningful presence through a series of acquisitions. On the other hand, EDS is in the early stages of end market expansion, which to date has principally been in the commercial vehicle market. Fully leveraging each segment's unique capabilities to capitalize on the different opportunities requires different strategies and capital allocation priorities.

For Intelligence Systems, this includes enhancing our sensor to cloud technology stack in both software and hardware, leveraging Wind River's leadership position in aerospace and defense, Telecom and Datacom and DIversified Industrial markets and expanding the breadth of our ecosystem partnerships.

Now for Engineered Components, this includes leveraging our traditional interconnect portfolio across current Winchester in HellermannTyton positions in other industrial markets, where we're seeing customers increasingly looking for bundled system solutions and enhancing our competitive position across markets through bolt-on acquisitions.

Lastly, the Electrical Distribution Systems business. This principally means further strengthening our leadership position in the automotive market through organic investment in our portfolio of products and capabilities and leveraging our leadership position to drive synergistic consolidation in the automotive market.

Now our assessment of the opportunities and the differing strategies needed to ensure commercial success and shareholder value creation led to our decision to separate EDS through a tax-free spin-off into a new public company, creating 2 optimally positioned independent public companies with increased flexibility to pursue their own unique market opportunities and capital allocation strategies.

New Aptiv is a higher growth, higher-margin company with strong cash flow generation and meaningful exposure to multiple end markets. Our EDS business is the market leader in electrical architecture, with solid revenue growth and a best-in-class margin profile. Now let's look a bit more closely at each of these businesses, and I'm going to start with EDS.

As I said, our EDS business is the industry leader for low-voltage and high-voltage signal power and data distribution solutions for the automotive industry with $8.6 billion of revenues, driven by its exposure to the right customers reflected in its commercial relationships with each of the top 10 global OEMs and revenue from content on 21 of the top 25 vehicle platforms globally.

Roughly 75% of EDS revenues are from programs where it has significant responsibility for vehicle architecture design, translating into more optimized solutions that result in lower cost for our OEM customers and higher margins for EDS.

EDS value proposition is compelling. First, its unique ability to design, optimized electrical architectures, enabled by deep technical expertise and proprietary tools, supporting strategic engagement with OEM customers. And second, the robust and global scale of its operating model enables the company to execute flawlessly and rapidly adapt to change. This translates into the development and delivery of industry-leading solutions at an optimized cost with consistently higher service levels than our competitors, resulting in an industry-leading financial profile.

Now let's touch on the priorities for EDS as it becomes an independent public company. As Joe Liotine will review in greater detail later, we're confident that the spin-off will result in increased shareholder value as EDS further enhances its competitive position and ability to provide differentiated value to OEM customers to gain market share, continues to optimize its cost structure through footprint consolidation and rotation as well as manufacturing process automation, and execute it's disciplined capital allocation strategy that enables both organic and inorganic investments as well as competitive capital returns to shareholders.

So let's now turn to New Aptiv, which represents more than $12 billion in diversified revenues across 2 segments: Intelligent Systems and Engineered Components. New Aptiv has a strong underlying customer base, which utilizes a broad portion of our product portfolio across both business segments. It has content on the leading platforms across automotive, commercial aerospace and telco networks.

Roughly 24% of New Aptiv's revenues come from markets outside of automotive, approximately $600 million of our revenue is generated from accretive software solutions that are growing mid-teens. Our strategy to create shareholder value is underpinned by the alignment of our product portfolio to the secular trends that are impacting multiple industries. The trends have been transforming automotive market and are transforming multiple other industries and the product portfolio we've built is increasingly relevant across multiple markets, presenting an opportunity, which is very large and growing.

And we deliver our products through a resilient operating model, including our unique systems level engineering, global manufacturing and supply chain capabilities that deliver unmatched performance at optimized cost, setting us apart from our competitors, which is reflected in our attractive financial profile that includes strong revenue growth and margin expansion and cash flow generation and provides opportunities to further unlock shareholder value through disciplined capital allocation, which Varun Laroyia will expand on later.

Now let's look more closely at the secular drivers impacting the end markets we serve. Now for over a decade, we've been positioning our product portfolio to benefit from the SAFE, green and connected secular trends transforming the automotive market. And over that time, they've evolved. For example, SAFE originally defined the automation behind functionality such as automatic emergency braking. Today, that same automation has expanded to include features such as hands-free driving.

GREEN [indiscernible], the adoption of battery electric vehicles.

Today, GREEN has expanded to include the transition to hybrids, plug-in hybrids as well as traditional hybrids. And lastly, CONNECTED originally reflected consumer demand for 5G and WiFi connected vehicles. Today, CONNECTED has evolved to represent consumer expectations for an in-vehicle experience that is akin to what they have with their mobile phones.

So today, we believe a more accurate description of the secular trends providing a tailwind for growth our automation, electrification and digitalization, which extend into a broader range of end markets. Automation extends into applications such as robots and manufacturing facilities drones for commercial and defense applications and other increasingly autonomous systems across diversified industrial applications.

Similarly, electrification extends beyond hybrids and electric vehicles, to other increasingly electrified devices as well as the infrastructure that supports them, such as data centers and energy storage systems. And lastly, digitalization extends beyond seamless connectivity to devices and systems becoming increasingly software-defined, continuously updatable and able to leverage AI to deliver insight, transform operations and unlock value.

These broader secular trends create similar product requirements for mission-critical applications across multiple industries, whether it's a vehicle, a plane, a robot, a drone data center or manufacturing plant, the trends are driving the need for more intelligence at the edge which requires both advanced software as well as optimized hardware.

Advanced software must deliver adaptable intelligence into physical systems and be built on a modular open architecture while ensuring rigorous safety and security standards. The optimized hardware must include scalable computing power to handle increased data and performance demands. As well as components that balance size, weight and power without compromising reliability for mission-critical applications where failure is not an option, devices need this integrated software and hardware to interpret data, make decisions, take action and improve over time.

And that's what our portfolio does. As the secular trends of automation, electrification and digitalization transform markets, the capabilities we enable actually become broader.

Our portfolio of Engineered Components, sensors and compute and software and services brings intelligence to the edge and enables a wide range of devices to send, think, act and optimize. By sense, we mean enabling devices to accurately perceive and monitor their surrounding environment. I think we mean representing the -- using that perception to make intelligent real-time decisions increasingly leveraging AI, app is where the intelligence becomes action, the result of safe and reliable operation of increasingly software-defined systems; and lastly, optimize reflects how this performance and the cost to enable it are continuously enhanced over the life cycle of these devices.

This framework of sense, think asks and optimize captures how our portfolio of products and our capabilities actually come together today to deliver value. As you can see on this next slide, we already have an established presence across multiple end markets. And we're making investments to further penetrate and unlock new growth opportunities.

With our roots in automotive, Aptiv first expanded into the commercial vehicle market, and together, they comprise Core Mobility, where we have a comprehensive product offering across both of these markets. Outside of Core Mobility, we serve 3 other end markets, which we collectively refer to as other industrials, where revenue growth faster and margin profiles are higher and where we see significant opportunity to drive profitable growth. To pursue this opportunity, we're enhancing our product portfolio, we're expanding our go-to-market capabilities, and we're leveraging our ecosystem partners.

So now let's turn to some specific examples by industry. As Javed Khan, President of the Intelligent Systems business will discuss shortly, our ADAS full system solution is a great example for how we're developing optimized solutions for both performance and cost that serve as a foundation for many of the capabilities we can apply to applications in these other markets.

Aptiv's industry-leading radar and vision centers deliver robust perception across dynamic environments. And as Joe Massaro, President of our Engineered Components business will explain our portfolio of engineered components enables the data from these sensors to be transmitted at high speed and fidelity to our scalable advanced compute platforms, which host our AI/ML powered software stack, which interprets the data and makes intelligent decisions to safely navigate complex driving scenarios.

And we continuously optimize the performance of our ADAS full system solution with our industry first end-to-end DevOps platform, Wind River Studio and the high performance of the system is enabled with a scalable, open architecture that gives our OEM customers flexibility while also providing them with significant cost savings, enabling Aptiv to build an industry-leading portfolio of ADAS products that are deployed on more than 70 million vehicles that are actually out and on the roads today.

Aptiv enables the same capabilities for customers in the commercial aerospace market that we deliver in the automotive market. Take, for example, avionics. Our interconnects and assemblies ensure that the critical signals such as air speed, position and nearby traffic are reliably transmitted from sensors around the aircraft to the avionics system, which is powered by our virtualization software and real-time operating system, enabling safe, intelligent and real-time flight control and navigation decisions based on those sensor inputs.

In addition to providing software that's certified to the absolute highest safety standards, we also provide customers with modeling and simulation tools that increase our engineering productivity, accelerate development timelines and reduce their costs. Now Aptiv is enabling these capabilities for all of the leading global aerospace manufacturers and our solutions are deployed across the 10 commercial aircraft models that are in service today.

Turning to the telecommunications industry, and more specifically, 5G, the backbone of next-generation connectivity virtualizing 5G networks is an area of investment for the telco industry today. As operators seek to create more flexible, scalable and cost-effective infrastructure that can support new services, applications and revenue streams. And the leading 5G virtual RAN and Open RAN deployments in the world today are powered by Wind River software which enables intelligence, real-time orchestration and life cycle management of thousands of virtualized distributed network nodes.

In addition to delivering six-nines reliability, we provide advanced analytics and automation tools that help operators predict issues, improve network performance and reduce network operating costs. Aptiv's highly engineered fiber and cable protection systems ensure that critical data is reliably transmitted across the physical layer of these 5G networks with a unique portfolio enabling both the physical as well as the digital foundation of 5G.

Aptiv technology is deployed in the infrastructure of each of the 5 telecom operators in the U.S. and Europe today. As you can see on this slide, Aptiv is already enabling devices to sense, think, act and optimize at scale across multiple end markets.

But as the automation, electrification and digitalization trends accelerate, the growing demand for intelligence on the device or at the edge is presenting new opportunities. As a result, we're enhancing our sensor to cloud portfolio to deliver advanced capabilities for next-generation highly automated and electrified edge devices such as robots and drones, while also supporting the cost-effective production at scale. And together with our ecosystem partners, we're strengthening our edge software platform to enable the deployment of advanced AI models in embedded systems, while also providing the edge to cloud connectivity required to enable rapid data telemetry, model training and life cycle management.

Lastly, as data center infrastructure scales to train and run these kit complex AI models, demand is rising for software platforms and interconnects to deliver the power, speed and reliability these workloads require. And Aptiv is very well positioned to meet all of these needs.

In summary, we're investing in our portfolio of products and solutions to capitalize on opportunities from the emerging intelligent edge while also continuing to leverage our ecosystem partners to help accelerate our efforts. Enabling devices across multiple end markets adds more than $100 billion to our addressable market, almost doubling the size to $240 billion as reflected on the slide.

Importantly, these markets are growing faster and have higher margins complementing our presence in the automotive market. Now we leverage our operating model to fully maximize the benefits of our product portfolio enabling us to deliver solutions effectively and at scale. Our operating model comprise of 4 key pillars that are fully aligned and integrated to drive increased value, including our industry-leading engineering and systems-level capabilities, our globally integrated in-region, for region supply chain, the global scale of our manufacturing footprint and lastly, our strong commercial capabilities that enable us to execute our full value proposition, each of which are critical to delivering high-performance, cost-effective solutions that scale for our customers, and provide a meaningful competitive advantage for Aptiv.

Javed Khan can and Joe Massaro will expand on how we leverage our operating model and their respective businesses a little bit later but allow me to provide an initial high-level overview. Starting with our engineering and systems capabilities, we're focused on developing productized, open architected solutions, which can be easily customized to meet the unique needs of our customers.

These modular solutions enable higher reuse and when combined with our well-defined product road maps, helped deliver advanced functionality at a lower cost.

Now we must not only develop these advanced solutions, but also we have to commercialize them. And to do this, we leverage decades of our experience in complex and highly regulated end markets. World-class technical resources that we have on a global scale and our engineering factory that's driven by our proven digital tool chains, which we have further enhanced to adopt the adoption of artificial intelligence.

As a result, we developed and commercialized the software-defined solutions our customers require at the quality and cost our customers expect. Our product design and development activities are closely aligned with our in-region, for-region supply chain strategy. Today's rapidly changing geopolitical and trade landscape makes the value of our resilient supply chain more important than ever. Our teams have the tools and capabilities to ensure we can anticipate supply issue -- issues and have plans to mitigate them before they cause disruption.

We've built a digital twin, a live digital map of our global supply chain down to the sub-tier supplier levels, and we use local intelligence to identify where there's potential risk.

Our supply chain capabilities are a significant differentiator across all the markets we serve, and it's an important part of the value proposition to our customers. Now our supply chain is also very deeply integrated into and leverages our global manufacturing scale and our in-region, for-region manufacturing model. Nearly a decade ago, we began to rotate our global best cost manufacturing model towards a more regionalized model, given the evolving geopolitical and trade landscape at the time, which has paid huge dividends in this current environment.

We have 76 manufacturing sites globally, principally located in best-cost countries, which in addition to our automation and digitalization capabilities enable us to produce advanced technologies at low cost, making our manufacturing scale an important part of our commercial value proposition, which is where we'll turn next. Sustainable commercial success requires a very deep understanding of evolving customer needs and the right relationships to support a more strategic collaboration.

Our commercial capabilities are underpinned by a robust account-based approach, which empowers our regional organization to serve as a front line of our customer engagements, ensuring customer centricity accelerates decision-making and enhances operating execution. We continue to position ourselves with the right product for the right customers on the right programs and in the right markets.

The alignment of our product portfolio to the broader secular trends that are providing a tailwind for growth across the markets we serve and our ability to leverage our operating model to develop and deliver our products and solutions efficiently and at scale has enabled us to build a strong financial foundation for the New Aptiv, reflected in our 2025 outlook of over $12 billion in revenues, roughly 24%, of which are from outside of automotive, growing high single digits and $600 million of which are software revenues growing mid-teens.

EBITDA totaling $2.3 billion, representing a 19% EBITDA margin, pro forma earnings per share of $5.50 and free cash flow of approximately $1 billion, providing a great starting point for the New Aptiv and a solid financial foundation from which we can further enhance our already attractive financial profile.

Varun will talk more about our financial outlook in greater detail later, but we're relentlessly focused on enhancing our financial framework, which encompasses delivering strong revenue growth and margin expansion which translates into mid-teens earnings per share growth and significant free cash flow generation reflected in our 100% plus cash flow conversion, positioning us to create incremental shareholder value through disciplined capital allocation, including organic and inorganic investments as well as returning excess cash flow to shareholders.

Now I'm going to hand it off to Javed and then to Joe before Varun walks you through the financials. I'll then come back up on stage and wrap up the New Aptiv portion of the day before we begin, Joe Liotine's more detailed review of EDS. So with that, I'd like to welcome Javed to the stage to talk about our Intelligent Systems business. Javed.

Thank you, Kevin. Good morning, everyone. I'm Javed Khan, President of Intelligent Systems, previously known as Advanced Safety and User Experience. We play a central role in enabling the next-generation systems in autos and increasingly a broader set of end markets with very similar needs. As we grow beyond auto, we realized that the segment naming needed to evolve. So this change is a metaphor for how our business has transformed, and better reflects how we are enabling transformation for our customers.

Let me start by setting the stage for what I will cover today. We'll explain how the secular trends are resulting in a demand for increasingly capable software and hardware solutions. And this is best represented by the transition to software-defined vehicles, but it's increasingly prevalent in a range of other applications where software and hardware must come together to deliver a new intelligent edge tech stack.

Now our experience commercializing safety critical applications, such as autonomy, which require advanced perception, compute and software have given us insights making us a partner of choice for a wide range of end markets. Our product portfolio is highly relevant and our operational expertise across software development, supply chain and manufacturing give us additional competitive advantages.

Let me start the brief overview of the segment. We are a leading provider of technology solutions with content on many of the top vehicle platforms, but also in aircraft and telco networks. While our historical presence has been in automotive, we have a growing portion of our revenues from a broader set of strategic end markets. And the acquisition of Wind River, along with the push of the auto tech stack, has resulted in a $600 million software business today.

Now picking up on the secular trends that Kevin talked about earlier, automation, electrification and digitalization are converging across multiple end markets, resulting in demand for increasingly capable solutions at the edge, such as self-driving cars, autonomous delivery drones and industrial robots. Each of these requires a tech stack consisting of advanced software and hardware to enable them.

Our intelligent edge devices need to be able to sense think and act without human intervention, and they need to be continuously optimized over their full life cycle.

Now let me explain an example that we are all familiar with the modern car. Vehicles need to be able to observe their surroundings, process what they're seeing, make intelligent decisions and then carry out those decisions in real time and consumers expect that vehicles will evolve and improve just like other electronic devices. In fact, all intelligent edge devices must do this, and it requires this new integrated tech stack. It means advanced sensors so that the device can perceive its surroundings, high-performance compute to operate powerful software and AI a robust Operating System and Middleware for abstracting software and hardware and intelligent software applications that use AI/ ML to deliver advanced functionality.

And finally, you also need cloud tooling to deliver connectivity, generate insights and then support the development of AI models. We have already built this tech stack in automotive. And in many cases, we are in our second or third generation of applying it, now allowing us to focus on ongoing feature updates and enhancements. Now let me explain how we are applying layers of our tech stack to other end markets, we've held a leading position with automotive sensors and compute for over 2 decades.

And our software applications layer across both active safety and digital cockpit is capable and proven and more recently, with the acquisition of Wind River, we filled out the tech stack with a robust operating system and a cloud platform.

Our prior product line structure reflected this fully integrated vertical tech stack within automotive. And we have product lines for active safety, user experience and smart vehicle compute and software. However, with the emergence of the intelligent edge beyond automotive and the access to broader markets provided by our Wind River customer base, we are well positioned to expand into new industries like drones in aerospace and defense, software infrastructure in Telecom and Datacom and warehouse robotics and industrials, all of which I'll cover in the next few slides.

But as we transition to pursue these opportunities in these diversified end markets, we will be shifting our focus from an automotive-centric product line to 2 new product lines, sensors and compute and software and services. Now before I get into these expanded end markets, let's first talk about our core solutions within mobility. Our Gen 6 ADAS platform was designed to be modular and scalable, giving our customers the flexibility to optimize both functionality and cost. We were the first technology provider to deliver a turnkey, hands-free ADAS solution.

And today, we have more than 4 million L2+ systems shipped worldwide. Let's break down how we create value for our customers. Our world-class sensors offer 360-degree perception in all weather and lighting conditions and we leverage both Radar and vision. We recently launched our 8 Generation of radars, delivering market-leading performance, thanks to a proprietary antenna and silicon IP.

Our modular compute offerings provide semiconductor flexibility for our customers is with over 7 different vendors supported for our ADAS controllers. An example of why this is important is we are now able to deliver a fully localized China for China solution. And our software stack delivers ML-based perception, multi-sensor fusion and human-like driving experiences. In fact, given enhancements in compute, generative AI and efficient data collection future deployments of our ADAS system will utilize a full end-to-end AI approach. And that has delivered dramatic improvements in performance, but also a better experience.

And finally, the Wind River operating system and cloud-based tooling completes the ADAS stack. With over $3 billion in active safety revenues of 20-plus OEM customers using our ADAS products today, we've built a strong foundation. And looking ahead, we expect continued strong growth in this business primarily driven by program extensions and new product launches. So let's switch gears and take a look inside the cockpit. In-cabin user experiences is actually a collection of a few different domains, each with slightly different requirements. The driver information domain delivers mission-critical warnings, vehicle information and dashboard [indiscernible].

In-vehicle infotainment enables noncritical comfort and convenience features. And interior sensing monitors driver and the cabin environment. These related, but separate domains provide a significant opportunity to apply modern software development methodologies to create value. For example, as driver monitoring is increasingly required, we can now use the same camera to offer incremental functionality such as vision-based occupant detection which will then eliminate the cost of traditional in-seat hardware solutions and replace it with software.

The delivery of over 16 million driver and cabin monitoring systems to date, and further enhancements planned in our product road map, this is a significant opportunity. At the same time, our infotainment offerings enable deep personalization and better integration into consumer ecosystems. We've got a strong pipeline of over $20 billion of new business opportunities across in-cabin user experience. And while the last few years have been challenging for user experience as a result of some program roll-offs, we anticipate the business to return to growth next year, driven by increased software-defined functionality and interior sensing content. So transitioning to smart vehicle compute and software.

We were the first to introduce a clean sheet vehicle architecture to support the transition to software-defined vehicles. This was smart vehicle architecture or SVA. SVA hardware portfolio includes zone controllers and high-performance compute, which simplify hardware complexity, but SVA is also about software where we recognize the need to abstract and serverize hardware from the applications that support it. And this was ultimately realized with the addition of [indiscernible].

This is important to enable faster and continuously updated life cycles for software as well as to have flexibility with hardware, particularly for things like SoCs and sensors.

SVA is also critical as traditional domains start to merge or fuse to enable new functionality. For example, the increasing prevalence of hands-free driving means that the driver and the vehicle must work collaboratively, managing hands-off while delivering clear information to the driver. This is an area that Aptiv is uniquely positioned as a leading provider of ADAS, user experience and the middleware. Now our solutions make this easy with modular software, standardized APIs and compute platforms capable of running these diverse workloads.

Now while we've seen the industry take a little longer to migrate to these optimized vehicle architectures as a result of the slowdown in electrification. We remain highly confident that the longer-term trend is still intact as evidenced by the faster adoption in China with OEMs such as Geely and Chery, where we are winning.

And our opportunity pipeline, which is roughly about $15 billion across approximately 40 different programs representing multiple customers and regions. And the fact is we are accustomed to challenges of leading innovation. And over the long term, it has generated an unmatched track record as you'll see on the next slide.

We've consistently brought technologies to market that enable intelligence at the edge in autos.

Now importantly, these innovations didn't just add functionality and improved performance, but they also delivered significant cost savings, allowing OEMs to then commercialize advanced features to a broader set of vehicles. As a result, the auto industry has effectively led the way in Edge Intelligence. And 2025 will be a record year with over 45 million vehicles at Level 2 ADAS or higher globally, many of which are enabled by Aptiv.

In contrast, other edge applications, such as highly automated drones and robots are still in the early stages of growth. But just like in the early days of ADAS we see tremendous potential for Aptiv to accelerate the commercialization of these emerging applications.

Now let's take a look at a few that we are particularly excited about. Industrial robots. They share a few of the same subsystems as vehicles. They need to perceive the environment, they need to identify objects and obstacles. And then they need to navigate autonomously, often in close proximity to people, and they need to be continuously connected into the broader IT and OT ecosystem.

We are in active discussions with more than half a dozen robotics manufacturers. An example of this is the collaboration we announced with robust AI last week. The robust team is integrating our innovative pulse sensor which will allow their industrial robot to have a much more comprehensive field of view at a substantially lower cost. In fact, early engagements with robust and other similar companies suggest that we can deliver significant savings in addition to the scale and the supply chain benefits we offer.

We are also working to deploy our AI-powered perception, fusion behavior and path planning software into these robots to deliver enhanced autonomy. Now ultimately, our ability to deliver higher performance at a lower cost extends to a wide range of industrial automation and robotics applications, which need to interact with the in real time with the physical world.

Now these devices in turn, are creating new demands for the infrastructure that supports them, such as 5G Telco networks. Wind River is a leader in decoupling software from hardware enabling network providers to leverage off-the-shelf hardware and to avoid vendor lock-in. With our Wind River cloud platform, we are orchestrating some of the world's largest 5G radio access networks or vRANs. And this proven scalable technology gives us the confidence to take this technology and orchestration capability to new markets.

So this most directly impacts the optimized phase that we discussed earlier, right? We want to be -- we want to enable our customers to deploy their edge applications and AI models. We want them to manage and collect the data they generate and then allow them to push updates and enhancements back to the edge, all with extremely high reliability and automation.

And as a result of the current and the emerging markets I just addressed, we expect our core automotive TAM will grow at about a 6% CAGR and reach $95 billion by the end of the decade. But what's even more exciting is that our targeted adjacencies, we estimate are growing at a double-digit CAGR and add a cumulative $60 billion to the new addressable opportunity.

While we remain selective in the specific applications we target, our productized approach allows us to quickly and efficiently scale into these new markets. Now as Kevin outlined, our success in capturing the significant opportunity depends on our ability to execute. And to that end, operational excellence is at the forefront of everything we do. But before I go into more detail, let me share a brief video, which summarizes our execution capabilities.

[Presentation]

So starting with innovation. We are investing in the tools and the processes required to enable an efficient software factory. For example, our AI-assisted code generation tools leverage the vast repository of safety-certified code and complex program requirements across regions to accelerate both current and future programs. Now this expertise plus 20-plus years conceiving, specifying and delivering safety critical systems across 75-plus countries is unparalleled in the industry and I think an essential component of our success.

Now these capabilities not only benefit Aptiv, but they also benefit our customers and partners globally. So let me explain. The automotive industry has struggled to transition to agile software development tools and processes. For context, today, a typical ADAS or UX program can run anywhere from 24 to 36 months, involve 500-plus engineers and necessitates that a Tier 1 and an OEM team manage dozens of suppliers across tens of locations around the globe. And in the past, each of these vendors would use their own tools for program requirements, software delivery, defect tracking and testing.

Software comes together infrequently via a waterfall approach with long but fixed and integration cycles. As a result, the industry has failed to realize the benefits of future velocity, higher quality and cost savings that a software-defined architecture should be delivering. Now this is where we are taking a unique approach for our programs by leveraging modern development tools and processes like Wind River Studio. Roughly 80% of the Aptiv development programs use Studio today, resulting in up to 25% efficiencies and our suppliers and customers and partners are also increasingly benefiting from its use.

So end suppliers and OEMs standardize on the same set of tools and requirements for CI/CD, defect tracking. We are now able to integrate and validate features much more often, deliver high-quality programs at a lower cost and also allow our customers to provide feedback throughout the development process. For example, one in-cabin user experience program in Europe is expected to finish 30% faster and at a lower cost as a result of these steps.

Moving to supply chain. Learning from our experiences during the pandemic, we've been particularly focused on SoCs. We have designed our solutions to be SoC agnostic with localized supply chains to mitigate geopolitical risk while managing costs. In fact, our Active Safety and User Experience pack has up to 12 different SoC options supported today. And we have over 1 million supply chain nodes mapped in our database, giving us extremely high traceability.

And we have 600 alternative semiconductor components pre-identified for rapid substitution during disruptions. And as a result of our supply chain capabilities, they allow us to deliver both resiliency and cost benefits. Another key competitive advantage for us is our highly automated and cost-competitive manufacturing.

At the product level, we not only designed for optimized performance and cost, but also for scalable and automated manufacturing and our product-centric approach is driving efficiency and scale. Our manufacturing footprint is distributed across the globe so that we can support the regional needs of our global customers, which is made possible through automation and modularity of our designs.

In the past year alone, our footprint in Integrated Systems was able to support over 150 new launches. This operating rigor in combination with our innovative modular product offerings have translated into commercial success across the globe. Examples of automotive wins this past year span across both product lines and regions with both full system and component wins.

While OEM architecture delays have resulted in fewer conquest opportunities, we have benefited from continued program extensions. And additionally, Wind River continues to add new logos across Telco and industrial sectors. This past year, we secured a deal with Vodafone to assist with their 5G rollout and extended our relationship with Schneider Electric.

Now in addition, we've got over 250 partnerships with key players across our product domains and end markets, which gives us improved access to a wider set of customers and channels.

Now before I turn it over to Joe, I want to summarize the key themes we've discussed. First, the secular trends are driving the need for intelligent safety certified software and more powerful and efficient hardware to run it. As these intelligent edge solutions continue to mature, vehicles and other devices will increasingly sense, think and act independent of human intervention while being optimized over their complete life cycle. Aptiv is one of the few companies delivering these capabilities at scale across any industry.

Now we will continue to be a leader in ADAS and user experiences. We are expanding our capabilities to other end markets with similar needs. Varun will talk more about the financial plan later today. But to summarize, this translates into a clear path to revenue growth in the range of 4% to 7%, including building more software revenue streams and EBITDA margin expansion of 180 basis points through 2028.

I'm confident that Intelligent Systems will be a value creation engine for customers and shareholders.

So with that, it's my pleasure to hand things over to Joe Massaro, who will take you through Aptiv's engineered component business.

Thank you, Javed. Good morning. It's great to see everyone, and thank you for joining us today. I am very excited to be talking to you as President of our Engineered Components business, a global leader in the development and manufacture of harsh environment electrical components and protection solutions.

Our Engineered Components products provide the connectivity needed to enable edge devices and solutions to sense, think, act and optimize. And as you will see today, we are successfully leveraging our industry-leading portfolio in core mobility to accelerate Aptiv's growth in a select industrial markets, while continuing our track record of operational excellence, resulting in long-term sustainable and profitable growth.

Let's start with a brief overview of Engineered Components. We are a $6.7 billion global business with balanced customer and regional diversification, delivering 4% to 7% growth with EBITDA margins heading to 24%. Engineered Components has also benefited from the successful execution of Aptiv's multiyear strategy to diversify into other end markets.

Leveraging both organic product growth and accretive inorganic growth. We have grown our nonautomotive business to over 25% of total engineered components revenues today. We offer more than 100,000 product SKUs to over 10,000 customers worldwide and go to market through a number of channels, including direct to OEM as well as an extensive distribution network.

Our top operational priorities remain consistent with our accomplishments in the past several years. As we will continue to grow within automotive, while expanding our position in new accretive end markets and products. And we will maintain our focus on operational excellence, providing customers cost-effective, high-quality solutions, while continuing to expand our margins and cash flows.

As Kevin discussed, the long-term secular trends of automation, electrification and digitalization represent strong tailwinds for Aptiv, including engineered components. Across all of our end markets, these trends are driving more complex system requirements that not only demand new robust component solutions, but more often than not, require these solutions in greater numbers per device, providing the added tailwind of content growth.

Our ability to capture the benefit generated by these trends really goes back to our long successful track record in auto. With levels of automation, electrification and digitalization, growing in edge devices outside of auto, we see increasing demand for cost and mass optimized component solutions that can be produced globally and at scale, providing us the opportunity to apply our capabilities in these markets.

Aptiv's engineered components create the foundational infrastructure that allows edge devices to function as integrated intelligent systems rather than isolated components. The ever-increasing levels of technology, particularly in automation has significantly increased the importance of signal fidelity and robust power connections.

Signal and power connections to peripheral sensors and central computes are required to be real-time uninterrupted pathways that ensure data from sensors is communicated cleanly and timely to the compute and that the decisions taken by the compute are clearly communicated to the actuating systems.

While everyday examples of systems sensing, thinking and acting come in the forms of autonomous emergency braking systems, or automated warehouse systems. Some of our fastest-growing products and applications all often involves far more exciting examples.

Our hermetic connectors are used in multiple aircraft and space applications, including a Gen 5 fighter program, a large air defense system and in a growing number of satellite programs. All applications that not only require signal and power integrity, but complete environmental ceiling as well. One of the most exciting and fastest-growing product categories are what we call high-performance interconnects.

Effectively, customer connector assemblies designed to meet very specific mission-critical applications, where the specific device or subsystem has an even more demanding performance requirement than the overall system. Today, Aptiv is a world leader in the manufacturer of high-performance interconnects for automotive airbags, and we are seeing strong growth in our aerospace and defense applications, including several aerospace programs.

Edge devices and systems must also be optimized to ensure they can operate reliably for years. We enable this automation through the design of mass optimized components. Because while systems continually require more signal and power, they need to become smaller and lighter and must always be cost effective. Additionally, protection solutions play a very important role in optimizing systems and through HellermannTyton, we are the world leader in management and protection solutions.

For example, our heat shrink tubing product provides insulation and environmental ceiling for avionics and submarine applications protecting the underlying systems from extreme temperatures and pressures. As we have successfully diversified our customer end market mix, we have also significantly expanded and tailored our go-to-market and product development capabilities to address market needs.

Our automotive DNA provided us the know-how and capabilities to produce robust connection systems at scale on a global basis, meeting high engineering and quality standards, millions of tons per day. The scale and global reach serves us incredibly well in the commercial vehicle and industrial end markets, where solutions are often standardized and can be sold directly and through distribution. And while our entry into the telecom and aerospace and defense markets has certainly benefited from our scale. We must often find that our specialized technologies and manufacturing processes of what our customers are most interested in.

Our key technologies like hermetic sealing and RF connectors have 1 important content positions on several large aerospace and defense programs. And while these programs are smaller in overall volumes than automotive programs, the growth rates and program life cycles are considerably higher and longer.

As I noted, our leadership in automotive has served as the foundation for Engineered Components, successful growth in other markets. With almost 4 decades of experience in automotive, having started as an offshoot of our EDS business, we have grown into the second largest provider of automotive connectors globally and the leader in cable management and protection solutions.

We serve over 25 global OEM customers in every major global Tier wire Harness maker and in addition to serving the broader automotive market through a growing distribution network. Our product development capabilities allow us to not only react to customer needs, but more importantly, anticipate what solutions these secular trends will require, enable us to proactively develop new products.

As you will see over the next 2 slides, the strength of our automotive product portfolio, combined with the global scale and expertise of our product development, engineering and manufacturing organizations ensure we are relevant to our automotive customers regardless of vehicle platform type or region. By way of example, a large SUV and pickup truck program representing one of the most successful vehicle platforms in North America.

Our engineered component content extends from low voltage and specialty connectors to electrical centers and media modules as well as cable management and protection systems. As the technology content has grown on this platform, we have been able to offer high-performance interconnect solutions, supporting domains such as active and passive safety systems as well as high-speed data connectivity.

Our expertise in systems integration has also allowed us to bring novel technologies to the overall system design, including the introduction of many coax connectors providing greater performance, while reducing mass and cost. In the China market, we have been an early leader in developing technology specifically designed for the local Chinese OEMs, who often require unique solutions and demand a much quicker design and deployment cycle than Western OEMs.

In this particular program, a fast-growing Chinese OEM. The time line from award to start of production was less than 1.5 years on a new advanced vehicle architecture utilizing zonal controllers. And although a relatively new relationship as compared to the North American OEM we just discussed, our strong product and engineering capabilities in China have allowed us to develop a leading position for high-voltage architecture incorporating all of our relative product offerings, including high-voltage electrical systems, automotive grade bus bars as well as low voltage connectors and fastening systems.

While our innovation, scale and execution has been critical for our automotive business, what is equally as exciting is our ability to leverage this foundation to extend our growth in other markets. As we sit here today, greater than 25% of our business is outside of the automotive market and is accretive to our overall segment growth rate and EBITDA margin.

The development of the non-auto business, nonautomotive business has been very purposeful, focused both on organic expansion of our product lines in a market like commercial vehicle as well as nonorganic strategies that have included the acquisition of HellermannTyton and Winchester Interconnect.

Our integration of these businesses into the broader Aptiv has been well executed, allowing them to continue to focus on driving significant organic growth, HellermannTyton has actually more than doubled size since acquisition, while leveraging core Aptiv capabilities such as supply chain and infrastructure.

In addition, a key part of our diversification strategy has been the continued successful development of our go-to-market channels across end markets. While we continue to drive innovation and growth in the automotive industry, our success in addressing the same secular trends in other key markets has provided the business with the benefits of revenue and know-how diversification that helps drive continued growth and margin expansion.

Over the past 4 years, we have grown our commercial vehicle business to approximately $500 million in revenue, making us a top 3 global supplier of commercial vehicle engineered components. Leveraging our core automotive technologies, we work closely with several leading OEMs to develop application-specific products, providing this market with differentiated and cost-effective alternatives.

Our Compact Transportation Connection Systems or CTCS-series, now serves as the backbone for all electronics applications in commercial vehicles, including powertrain, active and passive safety systems, as well as cabin electronics and telematics. And we also see increasing demand for electrification, allowing OEMs to increase efficiency through hybrid solutions, incorporating our high-voltage technologies.

Our success in evolving our product line from innovation extends beyond the core mobility markets. Over the past several years, we have grown our aerospace and defense business to approximately $250 million of revenues. We now serve all major commercial aircraft manufacturers and have wins on major defense platforms, including fifth-generation fighter programs and subsea applications like towed sonars. In addition, we also serve 3 of the top commercial space companies providing content for launch vehicles as well as satellites. And one of our most exciting product innovation of 2025 was the modular connector series developed jointly by our automotive and aerospace product teams. As you see in this video, the product was designed for low earth orbit satellites, providing high-performance signal and power connectivity.

Our team took this product from concept through feasibility and customer acceptance testing in under 9 months, and we've already secured initial awards worth $50 million of lifetime revenues. And lastly, we are very excited about the opportunities we have in the telecom and data markets, which we currently serve via both direct relationships as well as through distribution.

In addition to high-speed Ethernet cable assemblies and connector solutions, our cable management and protection product line includes our GigaDuct Cable Management System designed to both protect and facilitate installation of high-speed cabling and fiber.

We also see growing opportunity for additional high-performance interconnects and data center applications and have several development products -- projects underway with customers serving those markets. As we have diversified our product offering and end market exposure, we have significantly increased our addressable market. We estimate our automotive TAM will grow at a 4% CAGR to reach $40 billion by the end of the decade, driven primarily by content growth, the need for greater levels of connectors, high-performance interconnects and protection solutions in the vehicle.

However, with over 25% of our revenues already derived from other end markets today, we have an established product portfolio and go-to-market capability that significantly expands this opportunity. When factoring in these markets, which are growing faster than automotive, we more than double the TAM of our Engineered Components business to $85 billion by 2030, with aerospace and defense, telecom, data and other industrials all achieving mid- to high single-digit growth.

As we look across our global product portfolio, we see no shortage of opportunities to continue to deliver the needed innovation and cost-effective product solutions to these customers. While innovation and product development are essential to ensuring our products lead the way in enabling new technologies and applications, reliability and affordability are just as important. To help drive costs out of our business and ensure the quality of our end products, we have developed a number of core operational processes and we are constantly looking at ways to further automate our factories and distribution centers to maximize productivity.

We prepared a short video to show you how we operate.

[Presentation]

We support our customers with a global team of 4,000 engineers across 6 major technical and engineering centers, specializing in product-centric development that has resulted in 5,000 granted patents. Our global footprint is not only cost effective, with 70% of our engineers in best-cost countries, but also provides broad customer coverage, allowing us to share global practices and technology trends across all markets we serve. This has proven particularly useful as we are seeing increasing opportunities like the [ Modular's ] connector to take products originally designed for automotive into other markets that require harsh environment engineered components produced at scale.

As Kevin noted, one of the most important drivers of the resiliency and strength of our business is our global supply chain, utilizing a very proactive and assertive approach to supply chain management ensures we are capable of delivering to our customers despite what seems to be a constant stream of potential risk events.

The foundation of this approach is a thorough understanding of the supply chain itself ensuring we know where every key component originates from and ensuring we have identified multiple alternative sources. The supply chain for 95% of our parts and components are fully mapped in our digital twin, including the copper supply with 99% mapped directly to the source.

In addition, 90% of critical materials are sourced in region for region. We then use the digital twin to develop BOM health evaluations, allowing us to identify potential risk areas within the individual bills of material and then proactively address ensuring we have ample alternatives. A great example of this system in action goes back a couple of years when a flood in Europe significantly impacted an industry-leading supplier of copper strips, a common component and connectors.

Within 24 hours following confirmation of the damage to the suppliers plant, we had already secured alternative supply from other manufacturers and the available distribution channels. In several cases, we reconfirmed our ability to keep customers connected before the customers were even aware that there had been a flood.

Based on the strength of our supply chain management approach. We are now engaged in 5 assessments with customers, helping them through BOM health checks and sub-tier mapping of their supply chain. The resiliency of our supply chain is a major contributor to the strength of our manufacturing and distribution capabilities. The high level of surety of supply into our plants allows them to operate at world-class levels and maximize the benefits of our investments in automation and manufacturing processes.

And we do this at an amazing scale and volume. Engineered Components ships approximately 270 million parts per day at an on-time delivery rate exceeding 98% and at a quality rate of 99.9% parts per million. We do this across 61 major manufacturing and distribution facilities located within core regions to serve those regions. This regional approach not only provides us with the proximity to our customers, but has also helped us to minimize the impact of recent changes in global trade policies.

In addition, we are focused on ensuring we have a balanced approach to site selection, focused around core manufacturing capabilities and centers of excellence as well as cost to operate. When combined with our investments in automation and technology, the efficiency and effectiveness of our manufacturing and distribution footprint helps ensure we are delivering cost-effective products and solutions to our customers.

In addition to driving end market diversification, we have also grown our commercial capabilities with the ability to serve Tier 1 and prime suppliers as well as over 4,000 distribution partners, while retaining the ability to develop and sell product directly to OEM customers. Within core mobility, we have established portfolios of products within the technical libraries of all major OEMs, facilitating the innovation and design process at our OEM customers.

These library positions also help facilitate sales to the Tier 1 wire harness providers, who rely on the technical libraries to ensure the components comply with OEM specifications and standards. Within other key end markets, we also go direct to OEMs and have developed strong relationships with aerospace and defense primes as we have gained increased design influence and responsibility on key connector and interconnect technologies.

Our positioning as a Tier 2 supplier allows us greater flexibility to serve these various channels as demonstrated by our recent booking success, having booked approximately $15 billion of new business awards across multiple end markets and channels over the past 2 years.

Let me wrap-up before turning it over to Varun. As we have just covered, the secular tailwinds, our comprehensive product portfolio and market diversification and our focused execution has not only resulted in a strong track record but more importantly, positions us to continue to grow, diversify and expand margins in the coming years.

As we look ahead, our priorities are crystal clear. We will continue to expand our leadership in automotive leveraging our global footprint to support our customers as vehicles become increasingly automated, electrified and digitalized. We will deepen our presence in high-growth industries through both organic and inorganic strategies and remain laser-focused on execution, ensuring we continue to drive sustained profitable growth.

And now let me turn it over to Varun to cover the financials.

Good morning. It's a pleasure to be here today, and I'm excited to translate everything you've heard from Kevin, Javed and Joe into what it means for our financial trajectory over the next several years. What will come across is that Aptiv represents a compelling investment opportunity within revenue growth and continued margin expansion, resulting in robust free cash flow generation that provides opportunities to further enhance shareholder value via capital allocation.

I want to set the stage here today by reviewing total Aptiv's financial performance over the past few years, inclusive of EDS. We've grown revenue at a 4% adjusted compound annual growth rate, since 2022 and that was despite headwinds from slower-than-anticipated EV penetration in North America and Europe. Had this trend aligned with our original outlook, it would have added 4 percentage points to our growth rate.

Our automotive revenue growth was, therefore, largely in line with vehicle production of approximately 3%. However, we continue to diversify our business with growth in nonautomotive revenue of 7%, and these markets now account for 19% of total Aptiv revenue.

During this 3-year period, we also delivered over 300 basis points of cumulative margin expansion. Let me unpack a few items within this. First, we eliminated approximately $300 million in COVID related and supply chain disruption cost headwinds. Second, we delivered strong performance that essentially offset a headwind of over 400 basis points related to global labor cost inflation.

And finally, we overcame over 200 basis points of FX and commodity headwinds. Since 2022, we have generated over $7 billion in cumulative operating cash flow and net of $3.5 billion in capital expenditures. This has translated to over $4 billion in free cash flow. And we returned nearly $2 billion of this to shareholders in the form of share repurchases. If we include the accelerated share repurchase program, this number would be closer to $5 billion. The combination of these dynamics has resulted in a 30% CAGR in earnings per share, since 2022.

From this point on, I'm going to focus exclusively on New Aptiv, which excludes our EDS business. Kevin outlined the elements underpinning our robust business model, and our strategy for capitalizing on the growth opportunities that lie ahead. And I will walk you through how all these points translate into an attractive financial profile of revenue growth margin expansion and cash flow generation.

Let's begin with our financial plan through 2028. This remains consistent with the framework we outlined in January, when we announced the EDS separation. Our outlook through 2028 includes an expectation for revenue growth per annum in the range of 4% to 7%. And margin expansion of approximately 200 basis points on a cumulative basis to reach approximately 21% and a mid-teens growth rate in earnings per share, which excludes any upside from capital allocation initiatives.

And finally, we expect to convert earnings into approximately $4 billion of cumulative free cash flow from 2026 through 2028, which we expect to deploy in a disciplined manner. All of this, we believe, translates into a compelling financial profile for New Aptiv.

Over the past 3 years, New Aptiv has delivered revenue CAGR on an adjusted CAGR of approximately 5%. This reflects solid mid-single-digit growth across both our segments despite headwinds related to customer mix in certain geographies as well as a slower-than-anticipated pace of adoption in electrified vehicles.

New Aptiv is a well-diversified company, both across geographies and importantly, end markets where nonautomotive markets already account for almost $3 billion in revenue or approximately 1/4 of our business. Going forward, we have high confidence in our ability to grow revenue in the range of 4% to 7% per annum through 2028.

Our outlook assumes growth in global vehicle production on an Aptiv weighted basis of approximately 1% annually over the next 3 years. We expect automotive revenue growth to predominantly be driven by increasing content across both our segments related to electrification as well as the adoption of next generation of software-defined vehicle architectures.

This outlook is supported by a strong foundation of approximately $65 billion in cumulative bookings, since 2022 across all regions, segments and product lines. Outside of automotive, we expect revenue growth of approximately 8% to 10% through 2028 and this is driven by other industrial end markets, which we expect to grow faster than commercial vehicles.

We expect this organic growth to result in nearly $4 billion in revenue to the attributable to nonautomotive end markets by 2028. Now let's turn to the multiple levers we have to improve our cost structure. Our margin expansion from 2022 to 2025 is strong evidence of our relentless focus on our cost structure and operating performance.

Our investments in operating performance and cost structure optimization over the past few years have yielded on a pro forma basis, a strong 19% EBITDA margin. And through 2028, there remains significant opportunity for further cost improvements. We will continue to drive material performance through engineering design changes and working with our supply base, as well as manufacturing performance through footprint consolidation and rotation, which will help to offset the impact of continued labor inflation.

We expect further reduction in SG&A helped by overhead cost reduction initiatives that we continue to implement. These savings will be partially offset by investments in engineering and commercial capabilities to further penetrate nonautomotive end markets, which brings me to EBITDA margins. As we continue to grow and diversify our business and capitalize on efficiencies created through our best-in-class operating model, we expect to expand EBITDA margins by a cumulative 200 basis points through 2028 to approximately 21%.

This will be driven by strong flow-through on sales growth, net of normalized price downs in the range of 1% to 2% as well as an improvement in our product mix during that time frame, namely software and services. As I mentioned on the previous slide, other drivers of expected margin expansion through this period include continued improvement in manufacturing and material performance, which will be partially offset by continued unfavorable labor economics and a reduction in corporate and segment overhead expense as we enhance the scope of our global shared services and expand coverage through best-cost countries.

Lastly, it's worth noting that roughly $70 million in stranded corporate costs will remain in our cost structure on day one of the EDS separation. However, we have made solid progress through our internal task force on this topic and I expect that these costs will decline ratably over 2026 and 2027 and fully exit our cost structure by 2028.

Let's take a more detailed look at our segments, starting with Intelligent Systems. As Javed discussed earlier, our product portfolio in this segment is becoming increasingly relevant beyond automotive, thanks to the rise of intelligent edge devices. And so we are evolving not only the name of this segment, but also the way we categorize our offerings, sensors and compute and software and services. This now broadly reflects how we will go to market with customers across multiple industries, since 2022, Intelligent Systems segment has delivered a 6% revenue CAGR and has booked approximately $33 billion in new business awards.

With this foundation, we expect the segment will grow revenue in the range of 4% to 7%, resulting in roughly $7 billion of revenue in 2028. Within automotive, we expect growth across both our product lines of sensors and compute and software and services, driven by the launch of new active safety programs and also user experience programs.

We expect double-digit growth in industrial markets, driven by increasing applications for our technologies in industries such as aerospace and defense, telecommunications, and other industries that are demanding edge AI solutions. Software and services revenue is expected to grow at a mid-teens CAGR driven by continued investments in both product and talent, with the backdrop of this revenue growth, we expect EBITDA margin expansion of approximately 180 basis points cumulatively from 2025 through 2028, driven by flow-through on sales growth and increasing composition of higher-margin software and services revenue and continued improvements in performance, partially offset by investments in engineering.

Turning now to Engineered Components. This business is already very well diversified with over 25% of its revenues attributable to nonautomotive end markets including commercial vehicles today. Since 2022, this segment has grown revenue at a 4% adjusted CAGR and has booked approximately $32 billion in new business awards, providing a strong foundation for continued revenue growth. We expect future revenue growth to be consistent with New Aptiv overall at 4% to 7% over these coming years, resulting in over $8 billion of revenue in 2028.

Within automotive, we expect solid revenue growth across all regions, driven by the launch of new programs, our high-speed interconnects as well as continued traction with local China OEMs. Beyond automotive, we expect high single-digit revenue growth in other industrial markets, including aerospace and defense.

Finally, as Joe discussed, we remain focused on enhancing our commercial capabilities and our distribution footprint, which is expected to deliver strong growth through this channel in the coming years. We expect cumulative EBITDA margin expansion of approximately 200 basis points from 2025 through 2028.

This is expected to be driven by flow-through on sales growth and increasing composition of revenue from higher-margin nonautomotive markets and continued improvements in performance aided by further consolidation and rotation of a manufacturing footprint to best cost locations.

So what does all of this mean that I just described, what does it look like from the bottom line? A solid path for mid-teens growth in earnings per share on an organic basis, excluding any upside from capital allocation initiatives. Starting with the midpoint of our full year 2025 EPS guidance of $7.70 established on the third quarter earnings call a few weeks ago.

On a pro forma basis, accounting for the separation of EDS, New Aptiv earnings per share is expected to be approximately $5.50 in 2025 and is expected to grow to approximately $8 in 2028. We assume no share repurchases in our outlook other than to negate the dilution from equity grants. There remains upside to our EPS growth framework with capital allocation actions.

Let's turn to our capital allocation priorities. And this starts with cash flow generation, which we forecast will amount to approximately $4 billion on a cumulative basis from 2026 to 2028. First, we target leverage in the range of 2. We target gross leverage in the range of 2x to 2.5x. The EDS spin will, of course, impact our leverage as we are losing approximately $900 million of EBITDA with the separation.

However, we are compensating for this through a onetime dividend from EDS and in addition to existing cash on hand, both of which will be used to pay down debt, such that we anticipate the spin will be a leverage-neutral event pre- to post-spin for New Aptiv.

Beyond managing our credit profile, our second priority for capital allocation is to invest in organic growth opportunities. Continuing our efforts over the past decade to expand our product and technology portfolio and by expanding our total addressable market.

Third, we will continue to evaluate strategic inorganic investments including acquisitions that will build scale and bring diversification to our business. I'll talk more about these priorities on this priority a little shortly. And finally, we will return excess cash to shareholders primarily in the form of share repurchases, which leads me to M&A.

Our focus areas here are twofold fast, acquisitions that drive additional scale of our product portfolio across multiple end markets. These targets are expected to be accretive to our financial profile, while also enhancing our competitive position and increasing our penetration in nonautomotive end markets.

And second, investments and acquisitions that add to our product and technology portfolio, this contains the form of bolt-on acquisitions or more likely partnerships and investments. This will allow for efficient capital allocation in a way that will enhance our product portfolio and expand our presence into target markets.

So to summarize, New Aptiv is well positioned to create long-term shareholder value, our rigorous execution and relentless focus on unlocking shareholder value will deliver the attractive financial profile that I outlined today, making Aptiv a compelling investment opportunity.

With that, I'll hand it back to Kevin to wrap-up this morning's session. Thank you.

Thanks, Varun. I hope you've all learned a lot more about the New Aptiv today. I want to underscore that we've built a tremendous business, and we have significant future growth opportunities in front of us. The secular trends driving continued growth within the automotive market have expanded into other markets, providing additional opportunities.

We've transformed Aptiv into a more diversified industrial company providing advanced hardware and open architected software, delivering full system solutions that meet the evolving needs of our customers. And our operating model has been built to thrive in any environment and is uniquely relevant in today's environment, which translates into an attractive financial profile, as Varun just reviewed, that positions us to unlock shareholder value through earnings and cash flow growth and the execution of disciplined capital allocation strategy tailored to the New Aptiv.

It's a very exciting time for all of us here at Aptiv, and I'm optimistic about the opportunities that are in front of us. I'm confident in our ability to execute. We have a very strong management team supported by active engagement from our Board of Directors. We have with here today our Lead Independent Director, Paul Meister, who joined us. Paul, thanks for coming.

And so thanks to all of you for being here. We're going to take a short 15-minute break before we move on to EDS portion of the day and into the Q&A with all of the presenters following the EDS presentation. So thank you.

Please welcome back, Kevin Clark.

So take a minute, everybody can grab a seat. So thank you, and welcome back, everyone. We're now going to turn our focus to the Electrical Distribution Systems business, which is being spun out as an independent company at the end of the first quarter of 2026.

Now this is an exciting moment for EDS as an independent company it will have the focus and the flexibility to accelerate innovation and deliver even greater value to their customers as well as to shareholders.

To walk you through the strategy and give more insight into what EDS will look like as a stand-alone public company. I'd like to first welcome Joe Liotine to the stage. And then after that, we'll have Varun Laroyia, who'll take you through the financials and then as we mentioned at the front, we'll all come up on stage, all the presenters, and we'll answer your questions.

So with that, I'm going to hand it over to Joe.

Thank you, Kevin. Hello, everyone. It's a pleasure to be here today. Earlier this year, Aptiv outlined the next phase in a strategic evolution to realize the potential of EDS as a stand-alone global leader in electrical architecture design and empower the future of our business as the most respected and trusted player in the industry.

Today, I'm proud to be here to share more about the EDS business with you all. We are enabling power, signal and data innovations through purposeful design and thoughtful development combining engineering excellence with agility, seamless partnership with customers and unmatched expertise together in one offering.

EDS delivers advanced architectures with unmatched speed and reliability that customers demand. To better understand the opportunity ahead for EDS, let's focus on 5 key areas. First, how the secular demands of automation, electrification and digitalization are reshaping demand for electrical architectures. Second, how EDS differentiation as a full service solutions provider uniquely meets the increasing demand for next-generation architectures.

Third, how our leadership in automotive has been enabled by our unparalleled design capabilities rigorous operating model and global scale. Fourth, we'll define our robust expansion plans, including consolidation within our existing industry via bolt-on M&A.

And finally, I'll walk you through how all this translates into an attractive financial profile including solid revenue growth and margin expansion as well as strong cash flow. Following my presentation, I'll turn it over to Varun to review the financials.

Before I move into the focus area, let me share where we are today. EDS stands as an $8.6 billion revenue company. Global leader in design, manufacturing and delivery of low- and high-voltage architecture. The majority of our revenue comes from the core mobility market, automotive, commercial and agriculture and we're gaining traction in new market verticals, including energy storage and robotics, although small today.

We are well diversified across geographies, customers and platforms with approximately 75% of our business now attributable to designed architectures, where we partner closely with customers in the process of predevelopment. This collaborative approach very much differentiates EDS from our competitor set evidenced by our penetration into all of the top 10 OEMs globally.

Our operating model is lean and efficient with 95% of our hourly workforce in best cost countries, allowing EDS to deliver scale with flexibility in a highly competitive market. EDS is a clear vision for the future, powered by a proven business strategy, focusing on 4 priorities: first, strengthen our market leadership in automotive, leveraging our bespoke highly optimized solutions with value-added components, our customers demand that are margin accretive for us; second, drive our global scale in automotive to enter businesses in targeted adjacent markets, drawing upon our best-in-class engineering, manufacturing and supply chain.

Third, building an attractive financial profile of revenue growth and continued expansion of industry-leading margins, generating strong free cash flows; and finally, drive balanced capital deployment from the outset, including investing to grow our business, pay a competitive dividend and return excess cash to shareholders. We continue to benefit from the same secular trends transforming a number of industries, automation, electrification and digitalization.

Let's unpack what those mean for EDS specifically. Starting with automation. OEMs are increasing hardware content to enable more active safety and more autonomous features, which require more robust technical architectures to handle increased data, signal and power. Content is also naturally increasing as a result of electrification, which demands higher voltage electrical architecture content and drives a CPV uplift for us of 70% versus similar ICE vehicles.

And finally, digitization or the evolution toward more software-defined, feature-rich vehicles. It's driving an increase in the data they generate, which requires more capable distribution systems to support them. These forces are converging, driving greater demands on electrical architectures and the company is supplying them. Beyond advanced features and vehicles, electrical architectures must be robust to perform in mission-critical capacity, meaning zero tolerance for failure over long service lines.

They must also have an optimized design across every facet for size, weight, performance and ultimately cost. That means something different for every customer and every platform we support. While they all use common components, no 2 architectures are the same. On this point, automakers design their vehicles to provide targeted feature sets and electrical architecture is inevitably the last phase in design process.

This is why it's important that we drive early engagement with customers to understand their functional and performance requirements and why our proprietary suite of design tools are a unique differentiator. But the requirements do not simply end the products, but rather extend to the requirements of suppliers themselves.

Increasingly, the following criteria are critical to source new business. First, end-to-end capabilities from design to delivery and from components to full systems that are optimized for performance and cost; and second, global scale and resiliency, meaning the ability to provide the same product at the same quality on time for global platforms across regions.

I want to double-click on full-service capabilities because they truly differentiate EDS in the competitive landscape, architectures that seamlessly incorporate the entire breadth of our capabilities, from design and engineering to manufacturing and supply chain.

As I previously shared, this accounts for more than 75% of our revenue. This starts with our comprehensive portfolio, where we are well positioned to deliver any architecture a customer acquires based on their individual objectives and road maps, whether that's distributed, domain-oriented or zonal.

It's supported by our design optimization capabilities with early and close collaboration with customers and augmented by our proprietary system of tools and tool suites, including iHarness. And finally, even the best solutions don't work unless we can consistently and reliably deliver them.

Here, we are a global leader, thanks to our robust global manufacturing footprint and supply chain. Proprietary in-house automation processes actively improve quality, cost and throughput, combined with tools like our digital twin capabilities designed to strengthen our supply chain resiliency all of which are critical to our customers.

All of this results in stronger relationships and influence with our customers through every stage of design, engineering and manufacturing process, which ultimately allows us to design out cost and commoditize content by copper and design in value rich content, which I'll talk more about in a moment.

Before I get there, I want to briefly touch upon our comprehensive portfolio, ranging from low-to-high voltage architectures, components, all the way up to full systems, traditional distributed to domain-oriented to optimize zonal architectures, all of which supports miniaturization, standardization, and seamless transmission of increasingly more signal, more data and more power and ultimately, enables more automated, more electrified and more feature-rich vehicles.

Now I'm sure many of you are curious what the trend toward advanced architectures, capable of enabling the software-defined vehicle means for EDS. As Kevin discussed earlier, the evolution toward these architectures has manifested with automakers having added more features and functions that need to be supported by increasing electrical architecture content, and that is a good thing for EDS. That's why we are actively supporting our customers in their architecture evolutions. Based on our assumptions for high voltage, ADAS, user experience and other functionality, we see continued content growth, which will be partially offset by optimization.

Some of that will be experienced directly by the OEMs in the form of new designs. While other parts of it will come in the form of sharing a portion of the value created by our ongoing design improvements. The net impact of these factors is a content tailwind. Beyond the limited technical and packaging feasibility of larger, more complex harnesses, the need for more optimization resulted in a number of benefits for EDS in both margin and competitiveness.

From a margin standpoint, we generally don't realize a lot of benefit from increased copper in the vehicle. So it ends up being dilutive. Secondly, these next-generation architectures break apart the physical complex and give us an opportunity to design new solutions, where we can drive higher levels of automation. However, it's also good from a competitive standpoint as the trends toward more advanced architectures give us an opportunity to differentiate ourselves versus less capable competitors.

Let me give you a few examples on the next slide. These are just a couple of the many real-world optimization examples we have provided for our customers. At one end of the spectrum, we have a very low disruption option, where we didn't change anything on the final product. We focused on changes to increase automation of our process, reducing touch time and harness assembly and improving throughput and quality.

Again, all without any touches to the architecture itself. At the other end of the spectrum, we re-architected the design under a clean sheet approach, including Zonal partitioning, and we introduced modular connectors, resulting in 30% weight reduction. Evolving our approach also substantially reduces architecture complexity, providing an opportunity for standardization and scalability across models, programs and platforms.

The value speaks for itself and is reflected in our scale within automotive. We are one of the top 3 players in every major region in which we operate. With content on 1 in every 6 light vehicles produced globally. But perhaps more important, we are partnered with the right customers on the right programs. We have revenue with all of the top 10 automakers globally, in content on 9 of the top 10 global platforms by volume, meaning those top customers trust us with their most important programs.

Beyond that, we support more than 50 customers on 550 programs globally, spanning every region, supporting them with increasing number of increasingly complex launches every year. Just last year, for example, we launched 1,900 new projects, up almost 30% from previous years. The scale of our automotive business and our position with these major automakers is simply unparalleled and one of EDS' greatest competitive advantages.

Automotive has long defined our business, but our capabilities translate well beyond this industry. Our right to play in other end markets is because the same attributes and capabilities required in automotive are also valued in many other sectors specifically: 1, the ability to support increasing features and function.

2, demonstrate mission-critical reliability; and 3, design and provide solutions that are optimized for both performance and cost. As well as our end-to-end capabilities across design and engineering to drive global scale with an in-region, for-region footprint to maximize speed, efficiency and responsivity. As well as a resilient supply chain capable of reacting quickly to or mitigating changes in the geopolitical, macroeconomic or trade and tariff environments.

And we've already identified and penetrated target markets that represent an attractive economic opportunity and where we have a right to play. Specifically, we have established presence in commercial and off-highway vehicles. While the majority of our more than $800 million in revenue in this vertical today is attributable to on-road commercial vehicles, we also have a growing level of content with the leading players in construction and agricultural segments.

A few weeks ago, we shared our entry into energy storage, which was an exciting milestone for the team. And as of today, we have more than $150 million in new business awards and pipeline revenue. It's worth noting that the time line from award to production is shorter, and we have just begun to invest in this area. This is just one example, where we are already seeing success outside of core mobility, and we are confident in our ability to further penetrate new markets.

Now if we turn to the following slide. All this translates into an already large addressable market with upside. We estimate our core automotive TAM to grow 2% CAGR to reach $75 billion by the end of the decade, driven by demand for more robust electrical architectures to handle higher data, higher signal and higher power requirements as the industry continues to transition to our automated, electrified and digitized vehicles.

However, our addressable market nearly doubles, when accounting for other end markets that we can increasingly service, which are growing at a faster pace than automotive and generally offer higher margins than automotive. We've noted some of the key drivers for this growth on the right-hand side of the slide. But I would emphasize, they are all logical extensions of our capabilities and offer both a compelling revenue opportunity and margin for EDS.

Of course, the opportunity only matters, if we can execute, and execution is where EDS excels. We are delivering value to our customers, not only in the product we are selling, but the robust process underpinning it. Everything in this business is precise, and so are we.

Our operating model is built on 4 pillars, which is similar to the model Kevin outlined earlier today. Our engineering a resilient supply chain global manufacturing scale and finally, commercial excellence. To illustrate our commitment to operational excellence at EDS we'd like to share a video. Please roll the video.

[Presentation]

Now double-clicking on each of the components of our operating model, starting with our strong engineering capabilities. At the heart of our full service offerings and our design optimization capabilities is a proprietary software platform we call iHarness, which manages end-to-end design verification visualization in one seamless interface, true process innovation at work.

Here's how it works. We start by incorporating complex customer design data in its unique design language into our i-customer data translator, which converts this unique data into one standardized format.

Then this allows our engineers to design, validate and verify an entire architecture within an intuitive digital environment, cutting down on manual drawing time by 50%. Once this architecture is generated, the iHarness tool suite automatically carries out rule checks, creates a board drying, wire kits, producers work instructions and exports or release drawing from engineering to manufacturing.

Not to mention, generates a digital twin of the architecture. For example, when a design change is submitted by a customer, this can then be automatically processed. The iHarness system generating the downstream workflows of rule checks, work instructions, kitting packages and beyond.

This integrated process, again, enabled by our proprietary software improves productivity, reduces area rates and allows us to adapt to design changes significantly faster, delivering compressed turnarounds and higher quality for our customers. Another differentiator of EDS is a robust and resilient supply chain, which allows us to manage incredible complexity with both precision and reliability.

Our supply chain is integrated, supporting rapid order delivery in as little as 10 days for our customers. It's localized operating in region for region. For example, 95% of our cable is sourced in region. And finally, our supply chain is resilient, enabled by our end-to-end supply traceability, where we have 95% supplier visibility down to the Tier 3 level.

To put the complexity of our supply chain and our capabilities in a perspective, take for example, a KSK program, which is terminology for a custom just-in-time delivery model. For 1 KSK car model, we manufacture over 1,000 different electrical architecture combinations, depending upon the trim and feature selections by the end customer.

Over 1,000 different configurations for just 1 model, just 1 program and just 1 automaker. And from the time the automaker places the order for that specific Vin, requiring a unique harness, EDS is less than a week to deliver to the customer, essentially just in time for assembly. What's even more impressive is the scale at which we are executing, this level of complexity and precision for every single model on every single program at every one of our customers globally.

Every day, EDS receives 200 million parts globally from our supply base and ships out more than 1.5 million parts to our customers in more than 1,500 locations globally. As I mentioned earlier, we offer our customers integrated development, working seamlessly in real time across all aspects of the product life cycle, giving OEMs an advantage they cannot provide on their own.

Electrical architectures on their own may not strike many as overly tech-driven, but in reality, they are extremely complex as they deliver on a multitude of mobility and sensory demands. Our process is different as it's highly intelligent, leverages advanced engineering and is infused with leading enablers from advanced optimization models, AI and digital twin insights.

With this expertise, we process up to 45,000 design change request by customers every year, requiring more than 40 million architecture changes. And finally, perhaps most impressive, we are delivering parts to our customers at 99.9% quality and 99.9% on-time delivery. Calling this operational excellence is an understatement. The level of precision, reliability and complexity we are delivering on a day in and day out basis for our customers is an incredible feat, made possible our ability to innovate, remain versatile and laser-focused on results.

As we continue to improve our manufacturing and work processes through the increasing use of automation, improving both cost and quality. Taken together, the components of our operating model are a significant differentiator that drives our commercial success, which is, of course, attributable to our deep and early engagement with our customers.

What's important to understand on this slide is that our commercial engagement is a flywheel with all of the critical components cited, supporting one another. Our early engagement with customers is enabled by our proprietary engineering tools like iHarness as well as our knowledge and expertise across electrical architectures from full systems down at the subcomponent level.

We create substantial value for our customers and our full-service solutions and specifically, our ability to design out cost and commoditize content and design in value. And lastly, we can meet our customers where they are and offer them any level of configuration to meet their precise needs from traditional, distributed architectures to optimize zonal architectures.

And these commercial capabilities have translated into real results with more than $25 billion in cumulative bookings since 2024, translating to more than $12.5 billion annually. And just as important is our aggregate booking number. We are winning business on the right programs with the right customers, as evidenced by the stats here.

All of what I just described, the secular tailwinds, our full-service solution offering, our scale in automotive, opportunities in adjacent markets, and our operational excellence stands up to a compelling investment opportunity. EDS remains uniquely positioned to capitalize on these trends and what will be the necessary evolution of electrical architectures. Because of our differentiation sa a full service solution provider and a trusted partner.

We have unmatched capabilities and scale in automotive with an extensive and resilient global footprint, improving operational excellence and our strategy for penetrating adjacent markets positions us well for sustainable and profitable growth. I'll leave it to Varun to talk about EDS' financials in more detail, but I wanted to close with noting that all of what I just highlighted translates into a solid financial profile of revenue growth and opportunity for margin expansion in what are already industry-leading margins.

More importantly, we plan to deploy our consistent cash flow generation in a disciplined manner. I'm incredibly proud of the strong and resilient company we have built and the ways in which we are evolving to capitalize on these opportunities ahead, all of which I'm confident will unlock significant value for our customers, our employees, and our shareholders. Thank you for your time. I look forward to speaking with all of you more in the future as EDS becomes a public company.

Now let's bring up Varun Laroyia, Aptiv's Chief Financial Officer.

Thank you, Joe. Thank you. Hello again. I'm pleased to be back up here speaking about the other component of Aptiv's financials, electrical distribution systems. You just heard from Joe of all the ways in which our EDS business is differentiated and how the team is driving process innovation, efficiency, and ultimately, value for customers Now I'm going to walk you through how that translates into financial performance and what this means an opportunity for shareholders. Much like Aptiv following the separation, EDS as a stand-alone company will benefit from its ability to pursue its own strategic priorities and capital allocation strategies, which we are confident will enhance its market position, drive future revenue, earnings, and cash flow growth and ultimately, shareholder value. Let's dive in.

Starting with a look back at EDS' financial performance over the past few years, pro forma as a stand-alone entity, EDS is separating as a scaled business with $8.6 billion of revenue and adjusted EBITDA of approximately $900 million in 2025. Underlying these numbers is a track record of improvement. Since 2022, the business has grown revenue at a 3% CAGR, driven by low single-digit growth in automotive, largely in line with global vehicle production and high single-digit growth in commercial vehicle revenue, which now accounts for approximately 10% of total revenue.

The business has expanded EBITDA margins by 40 basis points on a cumulative basis over that time frame as volume flow-through and strong manufacturing and material performance initiatives have more than offset a 250 basis point headwind related to foreign exchange and commodities in addition to offsetting more than $500 million of costs related to global labor inflation. Notwithstanding the headwinds, the business has been laser-focused on future growth, driving more than $50 billion in cumulative new business awards since 2022 across key strategic areas such as electrification, targeted end markets, including commercial vehicles and targeted new customers, in particular, local China OEMs. This lays a strong foundation for the future, which I will now turn to.

Looking forward, we are confident that the core pillars of the EDS strategy will drive value for shareholders. This will be in the form of sustainable revenue growth, continued margin expansion, a healthy free cash flow generation, which the company will deploy in a disciplined manner.

Now let's turn to the specifics of our financial plan for the business through 2028. Our outlook through '28 includes an expectation of revenue growth per annum in the range of 3% to 4%, paired with margin expansion of approximately 200 basis points on a cumulative basis to bring the already industry-leading margins to 12% by 2028. Combined, we expect these factors to translate into a low teens growth rate in net income and excludes any upside from capital allocation initiatives. And finally, we expect to convert earnings into approximately $1 billion of cumulative free cash flow from 2026 through 2028. That we will allocate in a disciplined manner, anchored by a competitive regular cash dividend. And much like Aptiv, all of this, we believe, translates into a compelling financial profile for EDS.

Now let's dive a bit deeper into the future financial trajectory, starting with revenue growth. Over the next 3 years, we have high confidence in EDS' ability to grow revenue in the range of 3% to 4% per annum. Consistent with the past 3 years, this will largely be driven by growth in automotive, which collectively accounts for 90% of EDS revenues. Our outlook assumes growth in global vehicle production of approximately 1% annually over the next 3 years.

Beyond production, revenue growth is expected to be driven by new program launches, evidenced by the $50 billion of cumulative bookings over the past few years that I mentioned, including double-digit growth in electrification revenue across major regions. Outside of automotive, we expect continued growth in commercial vehicles, where we have a broad presence from light commercial vans to large Class 8 commercial vehicles as well as growing exposure to agriculture and construction end markets. And lastly, we have revenue opportunity in certain new markets such as energy storage, where EDS capabilities are increasingly applicable, although the sector is currently small in terms of total revenues realized.

Now let's turn to the EDS cost structure that supports an industry-leading margin and additional levers the company has on this front. As Joe discussed earlier, these industry-leading margins are enabled by the business' proprietary capabilities and full-service solutions offerings, which allows EDS to partner closely with customers from predevelopment to delivery, driving out cost and weight and complexity for EDS, ultimately designing in value across the board, all of which is margin accretive. That being said, we see additional opportunities for further cost improvements.

One of the primary areas of opportunity is manufacturing performance, which is driven by two key initiatives. First, the continued footprint consolidation and rotation to best cost countries, an ongoing initiative and dependent on the macroeconomic landscape. And second is an increasing automation through the manufacturing process. Both initiatives help to offset continued headwinds related to labor inflation.

Another area for cost improvement is SG&A as a result of the cost -- overhead cost reduction initiatives. These will, however, be partially offset by an investment in resources to further grow the non-automotive business and investment in engineering, thereby increasing efficiency through the use of software tools to improve quality and throughput, which brings me to EBITDA margins, which we expect to expand by a cumulative 200 basis points through 2028 to approximately 12%.

Beyond the initiatives that I just described, margins are expected to be driven by strong flow-through on sales growth, net of normalized price downs in the range of 1% to 2% as well as an opportunity to further improve the business mix of higher-margin full-service solutions offerings, which today comprise more than 75% of total revenue.

Now all of what I just described on revenue and margin translates into a path for growth in net income in the low teens range. This excludes any upside from capital allocation initiatives. Specifically, we assume no change in interest expense following the incurrence of debt associated with the spin, which I will get into in a moment. So we remain confident in the outlook for low teens growth with numerous avenues for upside, including share repurchases for EPS.

Turning to EDS' capital allocation framework. I want to emphasize that capital allocation is a very important component of the EDS value proposition and a driving force behind the separation of EDS into an independent company. Our capital deployment strategy obviously starts with the cash flow generation, which we forecast will amount to approximately $1 billion on a cumulative basis from 2026 to 2028.

The key priorities for capital allocation include the following: First, the business will remain committed to prudently managing its debt profile. This includes a target gross leverage ratio of 2 to 2.5x, consistent with the target level for Aptiv currently. The second capital allocation priority is to invest in the business to support organic growth, including increasing automation of manufacturing processes and further optimizing its production footprint to ensure a competitive cost structure.

CapEx as a percent of sales is expected to be in the range of 3% to 4%, and the business is expected to incur cash restructuring costs in the range of $75 million to $90 million per annum, primarily associated with the footprint optimization that I just mentioned. Third, the company is committed to returning cash to shareholders through a competitive common stock dividend with additional flexibility to return excess cash via share repurchases. And finally, EDS has an opportunity to pursue growth inorganically via bolt-on acquisitions, including participating in consolidation across the automotive sector.

I would like to now double-click into the balance sheet of EDS that we are targeting at separation. As I mentioned earlier, we are targeting to separate EDS as a well-capitalized company with a strong balance sheet. Our current plan is to access the debt capital markets to raise approximately $1.9 billion, comprising senior unsecured notes and the Term Loan A. We then expect to allocate approximately $300 million as initial cash on hand for EDS operations.

The remaining $1.6 billion is expected to be remitted as a onetime dividend back to Aptiv, and Aptiv will use these funds, along with additional cash on hand to pay down debt to compensate for the reduction in EBITDA such that the EDS separation will be a leverage-neutral event for Aptiv. Beyond the target debt to be raised, we plan for EDS to have an $850 million revolving credit facility to further enhance liquidity. All of this we expect will result in a strong sub-investment-grade rated company, as you may have seen in the releases by all three ratings agencies in EDS that were issued earlier this morning.

Further, the company is expected to be immediately cash flow generative upon separation and to improve over the next several years. This will provide further optionality for debt paydown and other initiatives that enhance shareholder value. I want to wrap up my presentation by reiterating the value proposition for EDS, which is evidenced by the strong financial profile. Much like Aptiv, EDS continues to benefit from secular tailwinds that are driving demands for its capabilities, which lay a strong foundation for future revenue growth.

This will be capitalized on by its best-in-class operating model that drives industry-leading margins and with further opportunity for expansion. This drives strong earnings and cash flow that are reinvested back in the business to drive a flywheel in further enhancing EDS' programs, capabilities, and market position as well as cash flow that is regularly returned to shareholders. In summary, we are very confident in the value of EDS as an independent company and the consistency with which it will drive value for shareholders.

With that, we're going to close this session on EDS and bring back the speakers on stage for the Q&A session. Thank you.

[Operator Instructions]

Emmanuel Rosner from Wolfe Research. [indiscernible] Can you share some of your thoughts around expected seasons of growth and margin improvement [indiscernible]. And that's the question on this business.

Sure. So maybe I'll start and then we can have Varun follow up my comments. I think with respect to the environment that we're operating in, clearly, there's -- it's a dynamic environment. So clearly, that causes us to reflect and be prudent as it relates to the guidance we've provided and both from a growth standpoint as well as from a margin standpoint. So I would start with that, and that relates to both businesses. I think secondarily, there's two aspects, top line and bottom line. I'll start with EBITDA actually.

As Varun walked you through, we have stranded costs that are certainly in the RemainCo business, and then there's some build-out costs as it relates to the EDS business that, that will flow through our P&L and then out of our P&L beginning in '26, then to '27 and '28. So I would say on a relative basis, when you look at margin rate, you would see incremental margin improvement in year 2 and year 3 versus year 1. So I'd say that's item one.

From a revenue growth standpoint, we have solid growth in automotive. We've talked about our strong growth in the non-automotive markets across both businesses, high single digits. That will continue to grow. That's an area where we haven't built into our outlook, but we would -- I would expect that as we get more traction, especially in RemainCo, both from a broader market standpoint as well as a software standpoint, we'd see accelerated growth in, again, years 2, years 3, and then beyond our guidance. So a little bit less in 2026. Part of that is stranded costs and stand-up costs that I talked about, Emmanuel and then I think some natural cadence as we get into years 2 and 3. Anything that you want to add?

No, Kevin, I think just to reiterate what you said, the stranded cost piece you've covered. On RemainCo, I will highlight the strong momentum that we have with software and services within our Intelligent Systems business. And if you recall, at the third quarter earnings, we mentioned that we were expecting the business to grow mid-teens. That is expected to continue. So that's the balance I would provide with regards to within RemainCo, the global vehicle production, call it, 75% of the business. But if you think about where the expected growth is, that continues. So we're excited about that growth. And then from an EDS perspective, we are seeing faster growth in the commercial vehicle side of things relative to automotive.

On M&A and portfolio actions. So I think in the past, M&A has been described as a key, especially for RemainCo [indiscernible]. Can you provide maybe some financial criteria in addition to sort of the strategic ones in terms of [indiscernible] the size of what you consider as desirable for this purpose? And then conversely, as part of portfolio action, is there also room for part of the portfolio to be reconsidered whether they still belong [indiscernible].

Sure. So let me start with your last question first. We're always reevaluating our portfolio. We do that constantly, consistently at a management team level and certainly at a Board level. So we're continuously evaluating our portfolio relative to the secular trends relative to what's going on in the industries that we serve. As it relates to M&A, each of our businesses have very focused organic strategies to take the product portfolio that we have today and either as a singular business or across business, go to markets outside of automotive. So we start with that.

And Joe Massaro gave a great example as it relates to our Engineered Components business and marrying up product capabilities between our Winchester business as well as our Connection Systems business to pursue opportunities in commercial space. So that takes place across all of our businesses. To make meaningful progress as it relates to diversification across industries outside of automotive, it does require M&A. I would say from the Engineered Components side, we have a long funnel of bolt-on acquisitions that enhance our exposure to markets like aerospace and defense, commercial aerospace, broader industrial. I think from the Intelligent Systems business, the focus is more on partnerships, investments as well as small potential M&A opportunities that help to build out our software stack or capabilities in other markets.

With respect to specific size, that's a challenge that's challenging to do. I would say bolt-on is where I would characterize those sorts of opportunities. As it relates to financial profile, listen, we evaluate alternatives versus returning cash to shareholders like repurchasing stock. So any sort of M&A deal like any organic investment needs to improve the financial profile of our business from a revenue growth standpoint, from a margin standpoint and quite frankly, from a revenue diversification standpoint. So it's really multilayered. It's a great question, but there isn't a specific single number that we could provide you.

I'm Joe Spak from UBS. Kevin, maybe to pick up right where you dropped off, I understand you're saying what you're looking for on the M&A side is more tuck-in in nature. But $4 billion in cash flow, potentially maybe even more cash if there's other portfolio review, that's some decent firepower. So maybe instead of thinking about an individual transaction, if we think about the cumulative impact of M&A over -- and I realize it can be lumpy, but if we think over like a 3-year, 5-year period, do you think M&A can add a point or so to the top line algorithm? Or how do you think about it from that perspective?

Yes. I think with -- both businesses have a very good cash flow dynamics. Certainly, RemainCo, when you think about cash conversion, the amount of cash flow we generate, it presents multiple opportunities to create value, right, whether that's returning cash to shareholders or it's completing M&A transactions. To meaningfully diversify our revenue base, and we need to do that in a prudent way, a planned way, it will require M&A.

To get to a situation where 40% of our revenues are non-automotive, which I would say, in general, is an attractive target as we sit here today as long as, again, we can deploy capital in an intelligent way. That's where we'd be focused. I don't know, Joe, if that adds 1 point or 2 points to our growth rate. Clearly, you look at the markets that we operate in, they're growing based on our forecast 2 to 3x faster than what we have our forecast for the automotive market. And the margin profiles tend to be significantly higher. So again, our focus is on taking existing technologies first with our product portfolio that we have today into other markets and then where can we intelligently augment that.

And maybe one on EDS. Like I realize a lot has changed in the environment from earlier this year when you gave some preliminary targets for -- in January. The margins did improve by about 200 basis points. So I'm wondering if you could just update us as sort of what as you reevaluate the change there for the opportunity. And then somewhat related on -- you mentioned manufacturing as a margin driver there between rotation to best cost countries, automation. I think it's given you a point over the next 3 years. But it doesn't seem like it maybe would stop in '28. So maybe you could just give us a sense of where in that journey on those two features you are and what's the opportunity [indiscernible].

Maybe I'll -- Joe, do you want to start and can add to it.

Sure. Thanks, Kevin. Yes. So in terms of our progress this year, we have seen quite a bit of margin improvement, much of that coming from materials as well as manufacturing improvements from an operational standpoint. To your point on automation, that's obviously where our future is, and we're striving toward getting more and more automation to our facilities with every program and every footprint rotation that we take.

Over the next 3 years, we expect about 0.5 point of margin improvement to come from that automation. Some of that's contingent upon what architectures really present themselves from OEMs, and some of that is fully in our control within the four walls of the confines of our manufacturing facilities. And so that really is the goal. We think we've demonstrated pretty good progress in '25. So we have confidence we can hit those goals and potentially even do better if the market changes a bit in our favor.

If I can just add, I'd say Joe and his team have done an outstanding job from a manufacturing, improving manufacturing performance both within existing four walls is through facility consolidation and rotation. I would say with respect to automating the manufacturing process, we think we can get to on our own with existing programs, roughly 30% by the end of the decade on our own.

We're working with several OEMs now in terms of identifying incremental opportunities, which the constraint there is they will have to change some of their processes, right, to get to the 50% or 60% sort of manufacturing automation as a percent of direct labor hours. But the most important point I want to highlight is Joe and his team are on a great path as we head into the spin in terms of margin expansion through operational rigor.

Itay Michaeli from TD Cowen. First, just curious on the automotive TAM assumptions for 2028 and 2030, kind of what you're assuming broadly for EV penetration as well as penetration of higher levels of autonomy calling L2+ and higher.

Do you want to start?

Let me start with that. So from a global vehicle production perspective, we've obviously kind of given our assumptions underpinning that. From an electrification perspective, we are forecasting mid-teens growth from an electrification perspective. Now clearly, there are differences between the regions. As Kevin mentioned, North America, we expect to be slower in the next couple of years. But if you think about China and where China is, for example, and the path that Europe is on, that's what we're currently expecting from an electrification perspective.

Yes. I think electrification market, roughly 15% global growth. Our outlook from a revenue standpoint is low double-digit growth. And to Varun's point, it varies by region, obviously, much slower growth in North America. As it relates to ADAS and ADAS solutions, broadly speaking, Itay, we can follow up on L2, L2+. We're at roughly high single, low double digits from an overall market growth standpoint or rate of penetration standpoint. Our outlook for our Active Safety business, '25 to '28 is mid- to high-single digits.

Terrific. Just as a quick follow-up, how should we think about the kind of content per unit in non-auto verticals like commercial aero drones and even humanoid robots? And as you think about M&A, are there targets of content per unit that you're trying to strive for to gain more scale? Just kind of curious on those.

So the content opportunity now, our real focus is how do we take our existing product portfolio and our capabilities importantly, like BOM cost reduction into those markets. We feel like on the AS&UX side of the business as it relates to perception systems, advanced compute, software stack, we have a significant portion of the capability to enter those markets. Go-to-market, those are new markets, different markets from where we operate today. So that would be certainly an area of focus. As it relates to engineered components, it's building out the product portfolio. Maybe, Joe, you can comment on that.

Yes. No, sure. Itay, it certainly varies when you get into the non-automotive applications, that traditional content per vehicle or content per sort of device map starts to change really based on the nature of, one, the platform you're on. You're on a fighter jet, obviously significantly more. So your connector content on a relative percent of the BOM is going to be a lot lower. I think what we try to target, what's important for us and what's worked really well is we're very focused on relatively within the component space, products that are a relatively low percentage of the BOM from a cost perspective, but very high cost of failure, right? That's really where we're successful in automotive, and that's really where we've seen the most success.

I referenced the hermetic connectors or the RF connectors. It may be a $3,000 connector, but it's going into a $35 billion aircraft, right? But it's an incredibly important component. And that tends to be for us, a sweet spot, just given our engineering strength, given the quality of our manufacturing and our delivery capabilities, that's where we really see the opportunity. But the CPV map doesn't necessarily work as consistent across different platforms, edge devices.

Tom Narayan, RBC. On the topic of the non-automotive business, when you look at the 200 basis EBITDA improvement in '25 to '28, I know you broke out like three parts of that like sales growth, better mix coming from non-automotive business and cost cutting. Could you maybe dimensionalize those three parts? Is most of it coming from the better mix?

Yes. No, let me double-click on your question about non-automotive. We're specifically talking about new Aptiv, right? And that's the 8% to 10% top line growth that we see. Peeling back that, within the non-automotive revenue, we've got commercial vehicles, which we expect to kind of grow in line with production of the industry, so call it mid-single digits. It's the other industrials, which we expect to be growing at double digits to get to that blended 8 to 10 points, right? So that's kind of point number one.

We've got a great set of bookings on the commercial vehicle side and expanding into the other industrial also. There is a margin differential, okay? And as Joe just alluded to a couple of minutes ago, the math on the commercial vehicles versus other end markets is significantly skewed towards other industrial end markets. The third piece I'll call out is within our penetration of other end markets is our software business, which resides within our Intelligent Systems business. And that's growing at mid-teens CAGR, okay? The software and services margin profile is significantly different to, say, an automotive margin profile. So it's a combination of those key pieces, which really is driving not just the 8 to 10 points top line growth for non-automotive, but as you kind of peel back the onion and then you think about the margin profile, there is a differential in those pieces.

Maybe the way to think about it, Tom, there's a little bit of overlap between this. But when you look at EBITDA flow-through on RemainCo, for each incremental dollar, excluding foreign exchange, commodity prices, it's roughly 26%, 27% sort of flow-through. Now some of that's the benefit of revenue. Some of that is the benefit of cost actions, although we are investing in engineering as it relates to RemainCo and go-to-market resources for these other markets.

But you get the benefit of flow-through through that improved product mix, both software and the Intelligent Systems business as well as continued strong growth in the Engineered Components side. If you compare that to the Electrical Distribution Systems business, that EBITDA flow-through is closer to roughly 22% on an EBITDA basis to put it in perspective. But it's a mix, but product mix is a reasonable portion of that overall 200 basis point expansion.

Maybe as a follow-up to that, there was a slide that showed the TAM growth between '25 and 2030, a lot of it was still automotive. But then the non-automotive was like a much lower point. It looked as though the trajectory after 2030 might be huge. So that 40% you said is like maybe a target for where you want to be on automotive. How do you view this, I don't know, 15, 20 years from now? Is that totally going to transform where you guys are going to be?

Well, we haven't gone out 20 years, to be honest. But listen, the trends that we talk about, right, the automation, the electrification, the digitalization, they are -- and it's something we spent a lot of time on as a management team and quite frankly with our Board, they are trends, they are accelerating across multiple industries. And a bigger piece of that is advanced hardware and software solutions.

The trends towards separating hardware and software, it's consistent across all these markets. As we have business outside of automotive, consistently, those customers are coming to us with not only what do we bring from a technology standpoint, but how can we help them with the bill of materials so that they can actually commercialize the technologies that they're developing, whether that be robots, drones, other areas regardless of applications or markets. So we believe there's real opportunity.

And yes, you can paint a picture where it's significant exposure, and it is a very different business. As I mentioned to you, I'd say informally, we want to plan or have a -- want to make sure that our plan delivers roughly 40% of our revenues are non-automotive revenues. And we're leveraging technology, which is consistent across markets in those other markets so that, one, we can leverage the capability, but two, we can leverage the investment and have enhanced margins. So I hope that answers your question.

Colin Langan, Wells Fargo. If I look at the growth CAGRs in the Investor Day, it's pretty consistent even with EV slowing for the EDS and the connector business, but a big step down in Intelligent Systems. I think it was last Investor Day, you were talking 10% over market. Now you're talking 6% to 7% overall. Why slowdown in those markets? And any color -- I think you mentioned Active Safety is growing sort of mid- to high single. Any color on the user experience really dragging that down a lot?

Yes. I would say relative to our prior Investor Day, impacting, quite frankly, all of our segments is the slowdown in EV adoption. That probably accounts for roughly a 60% to 70% reduction in overall revenue growth. And again, I would say that's across EDS, connection systems and AS&UX. I think the second part as it relates to Intelligent Systems, sorry about that, is smart vehicle architecture getting pushed out of it. Now smart vehicle architecture revenues were never a big part of the '22 to '25 sort of time frame. Revenue started to show up in a more meaningful way beginning in '26 and '27. So I would say that would be that second leg, Colin, that would have some impact on the growth outlook of that business today versus what we had previously.

I guess a follow-up on user experience. I mean just from the I think over half of the business is Active Safety, which is mid-to-high, the average growth is closer to the mid. Does that imply user experience, which is the other big business fairly growing?

Our outlook for user experience in some of the other product areas within the Intelligent Systems business is mid-single digits.

[indiscernible] mid-single and the other is mid-to-high.

Mid-single digits -- mid- to high-single digits, I said on the Active Safety area and it mixes out to that sort of mid-single digit sort of growth rate, right?

I guess I had an EDS question. So Joe, you talked about a lot of where you're best-in-class across a lot of different metrics. How far would you sort of talk about -- I don't know how much you want to give away, but talk about how far you are ahead of competition on some of those metrics, whether it's manufacturing, full systems? And then just a quick follow-up. What is the relationship, the supplier relationship with Aptiv connectors after the spin or EDS?

So Joe, why don't you touch base, especially on full service versus our other customers, and then I'll talk about the relationship between EDS and connectors.

Okay. Great. Yes. So from an engineering standpoint, we talked quite a bit about it in the presentation. You really do have an integrated suite of tools that are proprietary that are built in-house. And we know that's a big contributor to our early engagement, the number of times we're in predevelopment with customers. And as a consequence, greater than 75% of our business is designed architecture, so full-service solutions. That's definitely not the industry average. It's not public and we don't necessarily know what the industry average is, but we know in general, we're disproportionately perceived as the leader. And so customers come to us for that service. You combine that with how we interplay into manufacturing, and we bring that technology into manufacturing to provide best solutions with the best quality and the best scalability.

And then our overall footprint is also quite different from our competitive set in terms of where we're present in what countries, in what regions and the proximity to our customers. So the comparison to competitors, they don't necessarily have visibility of all of that. That's not our information. But we know, in general, we're built a little differently. Our results in this capacity in terms of full service are a little different. And as a consequence, we generally do better in the most complex businesses, complex harnesses because of those tools.

I would say if I can add to Joe's comment. I think if you're supporting or serving automotive customers, you have to have be competitive from a cost structure standpoint. We have to be. And I think in the EDS business, having observed it for the last several years, I think there's two pieces. One is that program mix that we talked about full service. The other is just ability to execute extremely well in very complex situation.

As it relates to the relationships between, I would say, RemainCo and our broader portfolio of businesses because we all do some element of business with EDS. So obviously, we have transition services agreements that include everything from IT support and other items as well as for a period of time, commercial agreements so that we make sure as we separate, there's literally no impact on our customer base. So commitments on the RemainCo side as well as the EDS side.

Dan Levy from Barclays. I know we spent a lot of time on the earnings call in the past talking about the China dynamics, the growth relative to the underlying China market. And I know you talked about your exposure with the domestic OEMs. How confident are you that in this upcoming 3-year period that the growth headwinds from customer mix in China will be addressed? And maybe you could just talk to if you are increasing your mix of revenue with domestic Chinese OEMs that the margin on that business is going to be in line with the total opposed dilutive to the overall margin.

Yes, absolutely. So kind of starting off with new Aptiv and then I'll kind of go to EDS. From a penetration of our local China OEMs exposure, over the past couple of quarters, you've kind of heard us talk about the cumulative year-to-date bookings of being about 85% in China with local Chinese OEMs, point number one, that will flow. The second one is in China at this point of time, there's about 5 million to 6 million units that are being exported outside China. We have a growing business on that front, which on a run rate basis this year, will do about $300 million. The third point is a number of the Chinese domestic OEMs are looking to put down sticks out in regions outside China. We are well-positioned on that front also.

Talking about the businesses, if you think about our Engineered Components business, it is the one that is, I'd say, the furthest along its revenue exposure to China domestic businesses, local OEMs, followed by AS&UX, which arguably is smaller. And then EDS with its bookings will also ramp up. And your final point was about margins. Yes, while it is a competitive market, all markets are competitive, our teams out there that continue to work through value engineering, working an indigenous supply base, whether it be footprint rotation in addition to that, so moving from the East Coast further inland to the western parts of China have just done an outstanding job to make sure that the margins across all three businesses are not dilutive.

And as a follow-up, I wanted to go back to the topic of EDS margins. You talked a lot about automation. I think we know that the wire harness area is an area that the automakers have to down really fast. They know it really well. And I think this is an area where because of the inflation in recent years, it's been tough to price that out. So I want to understand, is automation here a necessity just to offset underlying wage inflation? Can you expand margins even if the growth in that business is flattish?

Joe, you want to answer?

Yes. So overall, we show a lot of progress this year on overall manufacturing results and costs. Part of that is automation, part of that is just performance elements. In addition, we have footprint opportunities that also contribute to that equation, and that's value accretive for us as well. And so then automation ends up playing multiple roles. It helps defer some cost on labor, certainly, but it also helps quality. It helps other things in the factory.

And so we're pursuing different variations of automation depending on where we are in the manufacturing process from final assembly to kind of receiving testing and shipping. And all of those generally have a pretty good return for us. So of course, they help defer the labor cost, but they also help margin. And so in our plan, we have about 0.5 point of margin increase over the 2030 period as a result of automation increases. So we do believe it is accretive in addition to the cost coverage.

I think, Dan, one thing I would say, listen, I think from an automotive standpoint, the business model is over a protracted period of time, no growth makes it challenging to expand margins, right? That is the reality. I think Joe's team, quite frankly, the Aptiv team. So Javed, Joe Massaro, and Joe's team has done a very good job as it relates to as we see labor inflation, going to customers about labor inflation and areas of opportunity to offset that, working with them, whether that be just pure commercial or it be an element of footprint rotation or automation of the manufacturing process. So that's a part of what we work in.

I think the second piece is, as it relates to automation, it's not just about labor inflation. The reality is the complexity of harnesses, the size of harnesses, the ability for [indiscernible] to actually assemble harnesses is getting much more complicated and challenging. So there's an element of automation that you need at a minimum in certain parts of the assembly process.

Okay. I think we have time for one more question. There one in the back.

James Picariello from BNP Paribas. On EDS, regarding the addressable content per vehicle slide where you have 2030 baseline versus 2030 optimized. Can you help unpack what's actually embedded in the optimization? And to what extent does that help drive the 200 basis points of margin expansion to 2028 for EDS?

Yes. So on that slide, we were depicting kind of the evolution. And so think about as architectures require more in-cabin autonomous has more demand. So we're building out more complex architectures to meet those needs. That's accretive. Then from an optimization standpoint, we're finding ways, depending on the architecture and the customer to take out copper, to take out other complexities that don't drive a lot of value, essentially cost.

And so some of that has to do with what platform it's on, and some of that has to do with us being able to provide full-service solutions to get out the best idea possible. So it's a combination of both. And we're essentially saying even with those optimizations, what we're taking out in large part is copper, which is dilutive. And if you look at that slide, you also see we actually forecast continued price compression of about 1, 1.5 points in addition to the optimization. So we're really just trying to depict that there are net tailwinds even after all those events.

The faster we adopt EVs, hybrids, other things, that's even more beneficial because all those vehicles in theory, in practice, essentially carry more content and more requirements, and that's good for us. So that slide, that 1% CAGR is essentially saying affecting all events based on what we see, it's still a good thing for us as opposed to maybe some of the commentary that wasn't sure about that previously.

And I would just add, so that's not a fully optimized smart vehicle architecture sort of solution, right? That's an optimized kind of legacy vehicle architecture program for Aptiv.

Got it. And this was already hit on, but I just want to take a shot for more clarity. As we think about new Aptiv to 2028, 4 to 7 points of revenue growth, 200 basis points of margin expansion. What would you say is the specific contribution from non-automotive towards both those targets? And within the 2028, $14.5 billion of sales, what is the implied non-auto revenue mix?

What is the implied amount of...

Non-auto [indiscernible].

I'm sorry, non-auto [indiscernible].

So today -- so frame it up, 4% to 7% growth, non-automotive growth, which includes both commercial vehicle as well as other industrial growing low double digits. Margin profile obviously favorable on the non-automotive side. Software growing, Varun talked about mid-teens at a margin profile of kind of 25%. So I think if you take the starting point that we showed you, you can back into a range of what those numbers could look like.

James, just to add to what Kevin said, if you think about non-automotive pro forma for new Aptiv approaching $3 billion at this point of time from the $12.5 billion. By the time we get to 2028, our forecasts are that we get to almost $4 billion in non-automotive revenue. That includes commercial vehicles, right? So I just want to kind of give you that. And as you think about the growth trajectory algorithm that Kevin just mentioned, from the 24 points of revenue in today's state for non-automotive, we would expect it to grow roughly about 1 point a year over the next couple -- over the next few years just organically.

Okay. Back to you, Kevin.

All right. So maybe I'll wrap up with the team here. So just a couple of takeaways that I noted is we were going through today, just I wanted to reinforce to everyone. So I'm going to start with EDS. And I want to make sure everybody knows, EDS is, it is the market leader in vehicle architecture, the market leader, and that's reflected in the customer mix, the program mix, the full service mix. And it's obvious it's translated into strong -- a very strong financial profile, which, as Joe has said, is we're in a position to continue to enhance. So plenty of opportunity there from a growth within automotive as well as potentially outside of automotive.

As it relates to new Aptiv and a bit aligns with the question Tom asked earlier. Listen, the secular trends are continuing, right? And they're touching a number of industries outside of our primary industry, the automotive industry. And we've, over the last several years, been very purposeful about building out a product portfolio that benefits from tailwinds, secular tailwinds as well as very focused on how do we diversify revenues with customers, with regions as well as across markets. And again, that, in our view, presents a real tailwind. There's real opportunities in the automotive market.

We're very focused on continuing to serve our customers and continue to grow there. But we also think there's real opportunities where we can bring the product portfolio that we have today, the capabilities that we've developed in automotive with a customer who's very focused on performance, delivery, execution at low cost. So it's not just solving the technical problem, it's solving the commercial problem for a number of the industries that we've talked about.

And we think there's real opportunity to do that, and we validated that with our conversations, our programs, our existing business with several customers. And that presents new meaningful opportunities for profitable growth, which we believe will position the business to continue as well as EDS to create significant shareholder value, which is our principal focus, creating significant shareholder value.

So with that, thanks, everyone, for their time. We appreciate you joining us. I think we have lunch at the end. So if you have more questions, we're happy to follow up with you while we're here. So thank you.

Thank you for joining us, and please enjoy your day.

Good day, and welcome to the Aptiv Q3 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 Third 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 will 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 stated otherwise, all references to growth rates are on an adjusted 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 Laroyia, Executive Vice President and Chief Financial Officer. Kevin will provide a strategic update on the business, and Varun will cover the financial results in more detail before we open the call to Q&A.

With that, I'd like to turn the call over to Kevin.

Thank you, Betsy, and thanks, everyone, for joining us this morning.

Starting on Slide 3. We had another strong quarter. We capitalized on the underlying growth in vehicle production in North America and Asia Pacific, while also continuing to experience strong revenue growth in nonautomotive markets. Our resilient operating model has allowed us to proactively respond to shifting global trade policies, allowing us to keep our customers connected with minimal impact to our operations and profitability, thanks to our in-region, for-region integrated supply chain network, underpinned by the end-to-end global visibility provided by our comprehensive supply chain digital twin.

Our robust operating model has been validated by the Supplier Quality Excellence awards we've received from Volkswagen and General Motors this year, underscoring how Aptiv is trusted by our customers to consistently deliver high-quality solutions on time. And when combined with our unique full system solutions, we're able to provide our customers with flexibility and cost savings, which expands our competitive moat and which we've leveraged to accelerate our penetration of other end markets. Lastly, with our focus on further maximizing shareholder value, we're progressing as planned with the separation of our Electrical Distribution Systems business by the end of the first quarter of 2026.

Moving on to our third quarter financial performance. The strength of our product portfolio and operating execution translated into another quarter of record financial results, including revenue, operating income and earnings per share. Our third quarter bookings of $8.4 billion validate customer confidence and strong market demand for our portfolio of advanced technologies. Revenues increased 6% to $5.2 billion, reflecting strength across multiple areas of our business as well as stronger-than-expected vehicle production in North America and China. Operating income increased 10% to $654 million, reflecting the flow-through on volume growth and continued strong operating performance. Increased operating earnings and lower share count drove record earnings per share of $2.17. And lastly, we generated $584 million of operating cash flow and deployed $250 million for share repurchases and debt paydown. Varun will discuss each of these in more detail later.

Moving to Slide 4 to review our third quarter business bookings. As expected, customer awards accelerated in the quarter. Our portfolio of advanced technologies and track record of flawless customer service led to $8.4 billion of new business awards, including $1.6 billion in our Advanced Safety and User Experience segment, $2.1 billion in our Engineered Components Group and $4.7 billion in Electrical Distribution Systems, bringing our year-to-date new business bookings to roughly $19 billion.

We exited the third quarter with momentum, and our customer award pipeline remains large and is growing. We continue to expect roughly $31 billion in new business bookings for the year, although timing of some program awards slated for the fourth quarter could shift into 2026.

Let's move on to review each segment in more detail. Moving to Slide 5 to review the third quarter highlights for our Advanced Safety and User Experience segment. Revenue was flat year-over-year, reflecting the launch of new programs and continued strong growth for Wind River, over 20% in the quarter, partially offset by the ongoing headwinds related to the roll-off of a legacy infotainment program and the cancellation of certain programs with 2 Chinese local OEMs, both of which we discussed last quarter.

Third quarter program launches reflect the breadth of our product offering. Highlights include the launch of Aptiv's new Gen 8 radar product, which unlocks new possibilities for hands-free driving in complex urban environments with improved cost and efficiency for our customers. The first high-performance cockpit controller launch for Mahindra's market-leading BE6 and XEV 9e high-volume electric SUVs, further underscoring Aptiv's ability to support different configurations based on customer needs and several launches for ADAS controllers with leading Chinese local OEMs, including Changan, incorporating an increased percentage of locally sourced components.

Moving to new business bookings. We continue to experience strong demand for our active safety products as well as our next-generation user experience solutions, evidenced by multiple awards with global OEMs extending their L2 and L2+ ADAS programs, a full stack cross-platform next-generation in-cabin sensing solution for a major Korean OEM and awards with leading Chinese local OEMs, including Geely, Chery and Changan across numerous product lines, including advanced active safety. Wind River was awarded new business across multiple end markets, including enterprise cloud offerings for Black Box, a global leader in digital infrastructure solutions, software application and VxWorks RTOS on mission-critical systems for an aerospace and defense prime and real-time operating system software for industrial market applications.

Efforts to expand Wind River's Edge AI ecosystem continue with 3 new strategic AI partnerships forged this quarter, including with Latent AI to bring AI capabilities to real-time edge platforms for mission-critical infrastructure, Toradex to advance innovation for aerospace and defense by uniting certifiable reliability with rapid development and SOCE, integrating its time-sensitive networking solution with VxWorks RTOS to create a scalable, secure and certifiable foundation for mission-critical applications.

Moving to Slide 6 to review the highlights for our Engineered Components Group. Our new business awards and program launches validate the strength of our product portfolio and established position across multiple end markets. Notable program launches include high-speed connector assemblies for an all-new fully electric midsized SUV for a global OEM, high-voltage solutions for multiple Asia Pacific OEMs, including connectors for a mass market electric vehicle platform with a Japanese OEM and an electrical center for Voyah, Dongfeng's luxury electric vehicle brand.

During the quarter, new business bookings included a cross-platform award for a large European OEM integrating our connectors and cables into our intercable automotive busbar application, enabling DC fast charging, high-voltage connector awards with multiple global OEMs, including a Conquest Award for next-generation EV platforms, customer awards for high-speed connector assemblies across nearly a dozen OEMs, including BYD, Chery and Changan, interconnects and assemblies for Alstom Transportation, a global leader of high-end passenger rail vehicles and equipment and interconnects across energy, data centers and A&D applications.

Turning to Slide 7 to review our Electrical Distribution Systems business, which delivered double-digit revenue growth, reflecting solid business performance and an easier year-over-year comp. New program launches reflected the pace of new business awards, including incremental content on a major SUV platform from a large North American OEM, multiple launches with select Chinese local OEMs that are focused on increasing their penetration of global markets, including Leapmotor and SAIC and the launch of our first program in the energy storage sector, demonstrating a market where automotive expertise easily translates.

[indiscernible] Moving to new business awards. We continue to book programs across low- and high-voltage architectures [indiscernible] as well as geographic regions. During the quarter, we were awarded incremental volume for a global OEM's top-selling North American truck platform as well as low- and high-voltage architectures for U.S.-based global EV manufacturers autonomous mobility program. We also booked over $1 billion of new business in China, a significant portion of which was with local OEMs, including Chery, Great Wall Motors, Changan and Xiaomi.

Turning to Slide 8. Before I pass the call to Varun to take you through our financials in more detail, I'd like to briefly discuss our updated 2025 outlook and the setup heading into next year. As Varun will discuss, we're raising our full year 2025 guidance, reflecting the strength of our third quarter results, partially offset by recent customer-specific production disruptions and an outlook for the fourth quarter that prudently incorporates an element of conservatism to reflect the amplified trade tensions beginning to impact semiconductor supply chains. Although it's early in terms of providing explicit guidance for 2026, as we sit here today, we're confident that our revenue growth will accelerate next year, driven by new automotive program launches and continued double-digit revenue growth in the other end markets we serve. However, the macro environment remains very dynamic with changing geopolitical trends, regulations and trade policies as well as customer-specific challenges, all of which are difficult to precisely forecast.

Regardless, our team remains relentlessly focused on navigating the challenges in the current environment, flawlessly serving our customers and delivering strong financial results that increase shareholder value. And we'll continue to provide you with as much visibility as possible into the macro dynamics we're facing. Lastly, the separation of our EDS business, which we'll talk more about at our Investor Day in a few weeks, will result in 2 independent companies that are well positioned to pursue their unique market opportunities and capital allocation strategies and will unlock incremental value for shareholders.

I'll now turn the call over to Varun to go through our financial results and our full year and fourth quarter guidance in more detail.

Thanks, Kevin, and good morning, everyone. Starting with our third quarter financials on Slide 9. Aptiv delivered record financial results in the third quarter, reflecting strong execution in a better-than-expected vehicle production environment, double-digit growth in non-auto end markets, the timing of certain customer settlements as well as the benefits of ongoing capital allocation initiatives. Revenues were a record $5.2 billion, up 6% on an adjusted basis. Adjusted EBITDA and operating income grew 9% and 10%, respectively, also reaching record levels. And operating income margin expanded 30 basis points, primarily driven by strong volume flow-through, manufacturing performance and the benefits from our ongoing cost initiatives.

These efforts helped offset the unfavorable impact of FX and commodities, a 130 basis point headwind to margin on a consolidated basis, largely driven by the impact of the Mexican peso and copper. Earnings per share totaled $2.17, an increase of 19%, reflecting the flow-through of higher operating income and the benefit of share repurchases and lower interest expense, partially offset by higher tax expense versus the prior year due to the timing of certain discrete items. Operating cash flow was also strong in the quarter, totaling $584 million, and capital expenditures were $143 million.

Before we go into details on the quarter and our updated outlook for the year, I wanted to discuss the noncash goodwill impairment charge that we recorded in the third quarter and is excluded from our adjusted results. The impairment charge of $648 million for Wind River is the result of our regular impairment testing of our reporting units. The charge reflects slower than originally expected growth in the business over 2023 and 2024, owing to delays in 5G adoption and the launch of software-defined vehicles. That being said, this impairment does not change our expectation for the long-term structural growth and value that Wind River represents for our business overall as evidenced by solid double-digit growth year-to-date and our expectation to deliver mid-teens growth in 2025.

Turning to the next slide and looking more closely at third quarter adjusted revenue growth on a regional basis. In North America, revenue grew 14%, driven by double-digit growth in AS & UX, primarily within active safety and Wind River, while EDS also grew double digits. In Europe, revenue was down 3%, driven largely by AS & UX, while both ECG and EDS grew low single digits. And in China, revenue was flat, which reflected the impact of unfavorable customer mix in the AS & UX segment that we discussed last quarter, offset by strong growth in ECG.

Moving on to our segment performance on Slide 11. And again, I'll refer to revenue growth on an adjusted basis. Starting with AS & UX, revenue of approximately $1.4 billion was in line with the prior year with strong growth in Wind River, up over 20% and strength in our North America business, which was offset by the roll-off of a legacy infotainment program and customer mix in China, headwinds we discussed last quarter. As a reminder, we expect these dynamics to continue through the end of this year before abating into next year. AS & UX adjusted operating income was down 16%, which reflected a $21 million headwind associated with lapping of a customer settlement from a year ago, which I discussed last quarter. Excluding this item and unfavorable FX of 80 basis points, margin would have been essentially flat in the segment.

For ECG, revenue of $1.7 billion increased 6% and was driven principally by growth in China, more specifically, nearly 30% growth with local OEMs and continued strong growth in the non-auto end markets. ECG adjusted operating income grew 10% and margin expanded by 20 basis points, driven by flow-through from stronger volumes, which was partially offset by a 120 basis point impact of unfavorable FX and commodities. Lastly, for our EDS business, revenue of $2.3 billion increased 11%. This was driven by growth across all regions, though principally North America, which benefited from an easier comparison as one of our major customers, took substantial production downtime in the third quarter of last year in addition to benefiting from strong EV production ahead of the EV tax credit phaseout. EDS adjusted operating income grew by 54% with over 200 basis points of margin expansion. This was driven by favorable volume flow-through, performance in manufacturing and timing of a $15 million customer recovery, all of which more than offset a 150 basis points impact of unfavorable FX and commodities.

Now let's review our balance sheet on the next slide. We generated $584 million of operating cash flow in the third quarter with the increase versus the prior year, owing primarily to higher earnings and also lower net working capital. We ended the third quarter with over $1.6 billion of cash and $4.2 billion in total liquidity. This is net of nearly $250 million in proactive capital allocation in the quarter, including $96 million of share repurchases and $148 million of debt paydown. Since the beginning of the third quarter of last year, we have deployed approximately $3.2 billion in cash towards share repurchases, including our ASR program. Additionally, we have paid down roughly $1.2 billion of debt on an LTM basis, net of $700 million of refinanced euro notes. Given the strength of our operating model and our balance sheet, we expect to continue these efforts through the end of the year. With gross leverage now at 2.4x and net leverage at 1.8x, our net leverage is now consistent with the levels prior to our ASR program.

Turning now to our guidance, which we are raising for the full year. Starting with our growth outlook on Slide 13. We now forecast active weighted global vehicle production to be approximately flat for full year 2025, equating to approximately 95 million units, and this is consistent with the industry's performance year-to-date. Relative to our prior 2025 outlook, this reflects stronger volumes in China and North America. Based on our vehicle production assumptions, we expect full year adjusted revenue growth at the midpoint of our guidance to be up 2% on a global basis, including North America up 5%, Europe down 3% and China down 1%. For the fourth quarter specifically, we forecast active weighted global vehicle production to be down 3%. Within this production backdrop, we expect fourth quarter adjusted revenue growth in North America to be up 7%, driven by growth in AS & UX as a result of new product launches, continued growth at Wind River as well as growth in EDS. Europe down 4%, driven by low to mid-single-digit declines across all segments and China down 4%, reflecting customer mix in the AS & UX segment.

Moving on to other components of our guidance. Our full year revenue outlook of $20.3 billion at the midpoint continues to reflect an adjusted growth rate of 2%. The higher midpoint is largely the result of FX, primarily the euro as well as stronger vehicle production, offset by recent supply chain disruptions and production adjustments at some of our OEM customers in North America and Europe. Adjusted EBITDA and operating income are expected to be approximately $3.22 billion and $2.45 billion at the midpoint, each up 4% versus the prior year. The higher midpoints largely reflect the stronger third quarter performance, offset by lower expectations for the fourth quarter, which I'll talk more about in a moment. Adjusted earnings per share is estimated to be in the range of $7.55 and $7.85, up 23% at the midpoint. This is $0.25 higher than our prior range, reflecting the higher operating income as well as the benefits of our capital allocation actions.

And lastly, we continue to expect operating cash flow of approximately $2 billion and capital expenditures of roughly 4% of revenue. Our fourth quarter guidance implies a revenue growth of 1% on an adjusted basis at the midpoint. This is slightly below what was implied by our full year and third quarter guidance provided in July, which primarily reflects the impact of recent developments at certain customers and within the broader supply chain. Specifically, based on our current visibility into customer schedules, we estimate recent known disruptions and production adjustments at a few of our OEMs in North America and Europe creates a revenue headwind of approximately $80 million.

Beyond this, our guidance has contemplated an element of conservatism related to amplified trade tensions impacting semiconductor supply chains. Our fourth quarter guidance implies operating income margin of 11.8% at the midpoint. Relative to our prior guidance, the margin reflects the impact of the flow-through of the known customer disruptions I just mentioned, elevated copper prices and the timing of certain customer settlements that were realized in the third quarter rather than the fourth. Lastly, we forecast fourth quarter adjusted EPS to be in the range of $1.60 to $1.90.

As with prior updates, 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. As a reminder, our direct exposure to tariffs is minimal, in large part because of a high compliance with USMCA and our low level of non-USMCA imports into the United States. In the limited areas where we have exposure and cannot change sourcing owing to the industry setup, we have largely been able to pass on the incremental costs. That said, with our resilient business model and relentless focus on optimizing performance, we remain confident in our ability to drive strong execution and financial results.

With that, I'd now like to hand the call back to Kevin for his closing remarks.

Thanks, Varun. I'll wrap up on Slide 15 before we open the call to Q&A. We exceeded expectations in the third quarter, delivering record revenue, operating income and earnings per share, and we're well positioned to continue our strong operating performance heading into next year. Our continued strong execution despite ongoing uncertainty in the macro environment is a function of our robust business model and our proactive efforts to continually enhance our product portfolio and improve our cost structure.

We continue to experience strong demand for our portfolio of industry-leading products and remain uniquely positioned to benefit from the acceleration towards a more automated, electrified and digitalized feature that's happening across multiple end markets. We remain vigilant on positioning Aptiv for long-term success through proactive portfolio management and cost structure optimization with the separation of EDS being a great example of our commitment to increasing value for shareholders. We look forward to updating you more at our Investor Day in a few weeks.

Operator, let's now open the line for questions.

[Operator Instructions] We'll go first to Chris McNally with Evercore.

Kevin, thanks so much for all the detail on the many headwinds on Q4. So if we could just break that down. I think you said $80 million known and then obviously, an added uncertainty because I think the [ NextEra ] is really just starting. I was wondering if we could call out [ Oswego ] as part of the $80 million because obviously, your North America was raised while it looked like your Europe brought down 2%. So it seems like it's focused on Europe. And so I just wanted to see if we can rank kind of where we saw the weakness. And then I'll follow-up on the chip issue.

Sure, sure. Thanks, Chris. So as you look at that $80 million, it does encompass some volume impact associated with the facility issue or the facility fire in Oswego. So that is contemplated as a part of that $80 million. There are other -- as you're aware of, there are other kind of unique customer-specific situations with OEMs, including OEMs in Europe that are impacting our outlook for European production. And then again, there's an element of not customer-specific, but an element of conservatism that we've overlaid in the European market and North America market as it relates to principally supply chain issues tied to some of the geopolitics and trade tensions going on.

Okay. Absolutely makes sense. So essentially probably getting into $100 million plus in Q4, which is a 2% headwind. So -- that makes sense. Without speaking about customer specific, could you just -- what is your knowledge of what's going on with NextEra? I mean it seems like it's so much more of a political issue at this point. Obviously, we can resource over time. But there seems like there must be something where the Dutch government and China come to some near-term remedy, or we're going to have a larger -- I think it's an 80% of European chips. Can you just -- how you are framing the issue because it seems like it's something that could be pretty bad over the next couple of weeks.

So you're right in framing it. It is a political issue, and it is a political issue between the Dutch government and China. So I think it's important to understand the parties involved. As it relates to the situation, we can tell you product is flowing in China. So as we sit here today, it does not -- we're certainly not being impacted. We would not expect production in China to be impacted. I would say it's a product area where, by and large, the industry has alternative sources. And there are players like us that have already validated where we have solutions where we have risk. I think that is likely a similar situation across the supply base. Some suppliers like ourselves may be further ahead versus others. But I think this is something that the industry has been contemplating.

It appears as though the issue in terms of a noise standpoint, seems to be a bigger issue in Europe than it is in North America at this point in time. I can't give you a great explanation as to why that's the case, Chris, but just based on what we're hearing in terms of suppliers that are being impacted and how they're impacting OEMs. If there's a resolution politically, it's something that will get fixed very, very quickly. If it's not resolved, it's something that will take some time to resolve, but is resolvable. And sitting here in our shoes, it's impossible to predict exactly between those 2 bookends where things fall out, which is one of the reasons we overlaid some of the conservatism into our outlook for Q4. For us, we have roughly 3 months of inventory. We were confident we won't impact any OEMs in the fourth quarter. And as I said, we have second alternatives that have been validated across most of our product portfolio that falls -- that matches with [ NextEra ].

We will go next to Joe Spak with UBS.

I want to follow along that conversation and maybe some of the impact to the margin guidance, specifically for the fourth quarter. And I know there's a ton of moving parts here as Kevin and the team as you just sort of went through. But the midpoint of fourth quarter is 11.8%. Even the high end is 12.4%. You just did 12.5%. Now I know it sounds like that third quarter number, if you adjust for that recovery is maybe 20 bps, so it's a little bit lower, and then you're talking about some conservatism in the revenue for fourth quarter. But even that seems like it would only add like 10, 20 bps, if my math is correct. So I'm just wondering, is there anything else going on, on the cost side or on the margin side in the fourth quarter? Because historically, there's been a bigger sequential improvement, if you will, given engineering recoveries, et cetera.

Joe, it's Varun Laroyia. Let me try and answer that one. Great question. So listen, I'd say kind of 3 key pieces to think about. One is just the flow-through on the weaker volumes that Kevin just referenced, right, that $80 million to $100 million of kind of lower revenue coming through. So the flow-through on that, as you rightly pointed out, the one customer recovery that I called out of about $15 million that we had anticipated in the fourth quarter, but that came in, in the third quarter.

And then the final one I'd like to highlight is just the elevated copper prices. I'd say the first 2 items, so this is the flow-through on weaker volumes and the elevated copper prices. Those are marginally higher than the kind of 20-plus bps that you calculated from the recovery timing. So think of it from that perspective, those are the kind of 3 key drivers in terms of kind of where we're guiding towards for fourth quarter margin rate.

Joe, I think -- so I would say you have volume, you have timing on that customer recovery. And then the year-over-year impact from an FX commodity standpoint is significant on a year-over-year basis. And it's both FX, principally the peso and copper. And that impact, at least based on our math, is north of 100 basis points on a year-over-year. So that might be the piece when you look at operating income and margin rate, you don't have the full visibility to.

Super helpful. And just on copper, I just want to make sure I get that right. That's a margin impact, but not -- but less of a dollar impact, correct, because it's passed through.

Well, there's some dollar impact. It's timing. It ends up being timing. You're right. You're typically right. But depending on how quick the movement is from a copper price standpoint, it can have more or less of an impact on the earnings number.

Okay. Maybe just bigger picture, and maybe we'll hear more about this at the Analyst Day in a couple of weeks. But non-auto, you highlighted, grew 14%. I know smaller numbers, but you're starting to sort of show some of these other areas, the EDS energy storage. Any way to sort of contextualize how big an opportunity you think that is? And is there any opportunity in that -- in, let's say, an energy storage business for the ECG business out there?

Yes. So the opportunity is very -- so one, we will talk about at the Investor Day across each of the businesses. So we'll share more. Two, the opportunity is very big, especially around areas like energy storage, like robotics, like drones, as an example, from a market standpoint. There's incremental focus across each one of our business units in terms of where we have existing product and the right to play. And we'll talk about opportunities maybe to make some incremental investment in certain product areas to leverage our existing base, both from a product standpoint as well as a market standpoint to actually grow in those markets. And the opportunity is big.

I mean today, when you think about nonautomotive revenues, we're approaching over $3 billion of total revenues. During the quarter, we grew mid-single digit or mid-double -- mid-teens sort of growth rate in that particular area, and it's being driven across the ECG, the AS & UX and the EDS portfolio. And we'll talk a bit about when you look at AS & UX, and I know the growth right now this year has not been outstanding. But when you look at the software portfolio, the GAAP software portfolio, we're up north of $600 million in revenues, and that's growing north of 20%. And we have bookings and plans to continue to grow that particular area as well.

A good sneak peek for a couple of weeks.

We'll go next to Dan Levy with Barclays.

I wanted to drill down on some of the growth dynamics in the quarter because I think you had given us maybe some parameters early on, some of the customer issues that were going on in China, but on the flip side, there are some launch activity. So maybe you could just help us decompose within the 3Q regional results where we saw North America do really well, Europe underperformed, China underperformed. How much of that was the launch activity coming through versus maybe things like JLR or the Zeekr, NIO issues that are maybe more temporary. So maybe just help us decompose and the line of sight to just growth in aggregate being better and specifically in China.

Maybe I'll start with -- at a high level, and then Varun can go through some numbers by regions, Dan. So right now, we're actually seeing very little push out of program launches. There's 1 or 2 here or there, but it's not -- we've not seen a significant trend. We have seen launches at lower volumes or the curve, the slope of the curve from a volume standpoint being somewhat lower. So that has had some impact. The bigger impacts for us in Europe and China tend to be tied to specific OEM volume issues in Europe as it relates to European volume, it tends to be a large German OEM, who is impacted both our AS & UX and EDS business as well as a French global OEM that we've seen reductions in existing production schedules for the European market.

In China, the big impact for us this year were those 3 program cancellations that we talked about for NIO and Zeekr in the second quarter. There is some slight, I would say, headwind growth from a growth rate standpoint when you look at, for example, our EDS mix versus overall market mix, but that business is closing the gap. So it tends to be, for us, significant sort of impacts by discrete customer situations, and they vary a little bit by region and they vary a bit by customer.

Kevin, the only piece I can add just to give a bit more context with -- when we kind of gave guidance in July for the third quarter is North America production, what we had anticipated going into the third quarter was roughly about down 3%, and that, as you all know, came through very strongly at almost 4 points above. So we certainly benefited from the stronger vehicle production that Kevin also mentioned previously. And so sales growth was the big aspect. And as I mentioned, also North America delivered and performed incredibly well. EDS was double digits. AS & UX also was double digits. But that really is the big piece which came through in the third quarter. And then obviously, the flow-through on OI that comes on the back of that sales growth side of things.

Great. As a follow-up, I wanted to maybe follow up to Joe's prior question. And as far as the growth opportunity in some of these adjacent areas inorganically, and I'm sure you're going to double-click on this at your Investor Day in a couple of weeks. But just the rough M&A framework and specifically, how you look at the willingness to do deals when reality is maybe some of the assets you might be pursuing are going to be at multiples that are higher than where you are. What is the willingness to deals that maybe on the surface appear dilutive and what the framework is in approaching that?

No, that's a great question. I'd start with each situation is unique. We can certainly do the math with respect to our multiple versus the multiples on some of those assets. We think the general view is in order to diversify meaningfully from a revenue -- market standpoint, revenue standpoint, M&A is going to have to be a part of that. When you think about that, that means that those transactions will have to have meaningful synergies, right, from a cost and maybe in some cases, a revenue standpoint. And we'll need to think about the framework in terms of size, multiple synergies, ease of integration and ultimately, how does that position us for future growth in markets outside of automotive.

So I don't think there's -- Dan, there's a one answer. I think it really depends on each unique situation. I would say we are committed to grow in other markets. A part of that is M&A related. And we have a large funnel of potential opportunities out there that we continue to evaluate and consider and understand the parameters or kind of the current dynamics with respect to our multiple versus some other market multiples.

We'll go next to James Piccarillo with BNP Paribas.

Can you speak to how active safety growth performed in the quarter and just how you're thinking about the second half? I believe you guys referenced challenges, temporary challenges in China. So curious on the progress and the outlook there. And then also for user experience, I thought the communication was that there's some stabilization on the near-term horizon. So curious what the assessment is there as well.

So when you look at active safety growth in the quarter and back half of the year, we would expect that to be low single digits versus first half of the year kind of high single digits. That is specifically the driver of those 3 programs that we mentioned. Those were active -- had significant active safety content. So those 2 OEMs or 3 programs, that's what's impacting growth rates in the back half of the year.

Listen, over the last couple of years, we've had solid bookings in active safety. This year, year-to-date bookings are close to $3 billion. So close to the size of our ADAS revenues today. We'll book more in the fourth quarter. We're making progress in China, just given the nature of that market and the shorter time frame between program award and launches. So we think that's something where you'll see solid return to growth in 2026.

Understood. And then I know this one is...

And then you asked -- there was a second piece, I'm sorry to interrupt you, but you asked about also on the user experience side. So impact or growth on a year-over-year basis, back half of the year will be down low double digits. We were down 10% in the third quarter. That's the specific roll-off, the program that we talked about. That will annualize end of the fourth quarter. So as we head into next year, we would expect to see user experience begin to return to a growth mode. We've similarly had program awards and other pursuits that are out there. So we'd expect that product line as well to return to growth mode in 2026.

Understood...

Sorry to interrupt.

No, no, not at all. And then, yes, I realize this is a sensitive question, but is the company potentially pursuing alternatives beyond just the spin-off of ADS concerning a potential asset sale? Or should we be squarely thinking about the spin-off in the first quarter?

Well, listen, we control the spin, right? At the end of the day, that's something that we have total control of. It's the path that we announced back in January. We're focused on driving shareholder value. So whatever outcome generates the best return, that's what the Board obviously will evaluate and ultimately make decisions on.

We will go next to Itay Michaeli with TD Cowen.

Just wanted to revisit -- good to hear the commentary on revenue growth potentially accelerating into 2026. I was hoping you could just share a bit more detail on some of the underlying assumptions for LVP, maybe mix, EV, anything you can share as well as if there are any puts and takes we should think of in terms of the kind of OI margin next year?

Those are a lot of specific questions about 2026 as we sit here in October and wrestle with some of the market dynamics. I guess at a very high level, Itay, as we think about the overall market, sitting here today, I think we would view the market is basically likely flat to maybe slightly down. Part of that is how we plan to be transparent. We tend to -- in terms of managing our cost structure and where we're making investments, we try to be conservative on the vehicle production side. So as we're -- Varun and team are going through the planning process now, that's kind of where we're baselining.

Having said that, we've had strong last couple of years of bookings. We are seeing -- we've had very strong launch activity during 2024 and the first half of 2025, which will translate into higher revenue. We've annualized on the electrification headwinds that we had last year and earlier this year. So those headwinds are, by and large, we feel like behind us at this point in time. And at the same time, we're seeing significant growth in China, strong growth or solid growth, I should say, in Europe. So that should prove to be a tailwind. We continue to see demand for things like active safety. We're having very strong growth outside of the automotive space in adjacent markets that's running double digits.

So as we look at all of those sort of factors, we think the setup is a reasonably good setup, and we'll caveat that with the geopolitics and potential changes to trade policy and tariffs that we're not -- we don't have full visibility to at this point in time. From a margin expansion standpoint, obviously, we're always focused on our cost structure. With that, revenue growth will deliver margin expansion. Not prepared to sit here and kind of walk through that today. We'll talk more about that during our Investor Day and the path on how we get there.

But I guess suffice it to say, even with all the macro trends that we've been wrestling with, the business has done a great job growing and increasing profitability on a year-over-year basis. You look at what we've done this year with FX headwinds on a year-over-year basis. And listen, you take a step back in reality, we'll end up -- on an FX-adjusted basis, we'll end up expanding margins by -- help me out -- sorry, by 120 basis points. And that's with all of the trade and other issues going on at this point in time. So the business model has been set up pretty well, and we feel good about the momentum we have as we leave 2025 and we head into 2026.

Kevin, if I can, I'm just going to add one more item. As you think about -- and we've talked about this, our continued growth in the non-auto sites. This includes commercial vehicles, but also end markets such as A&D, IT, data, telco, other industrial markets. That business is in the high $3 billion, rapidly approaching almost $4 billion. And that entire set of businesses, that's kind of growing high single digits, almost double digits, right? So as you kind of roll the tape forward on that into 2026, we expect that growth to be significantly in line with where we are currently.

So obviously, significantly faster than the auto side. And then also as you think of the product and services within that set of end markets such as Wind River, a higher margin profile. Again, listen, we provide more details, but I just want to make sure that, Itay, we gave you a comprehensive response on both the non-auto, but also the big push into non-auto end markets.

Yes. That's incredibly helpful. As a super quick follow-up, I'm curious how you frame the opportunity within the Gen 8 radar products, if you think you might be able to gain share from other Tier 1s? Is it more of a CPV? Or there's an opportunity to displace ultrasonics for surround sensing?

So the Gen 8 radar, we're confident is industry-leading versus any of our competitors. So there certainly is an opportunity to grow and to take share across all the regions that we operate in. We have other products, I think part of which you're referring to a product we refer to as Pulse that leverages our radar capabilities and allows OEMs to actually eliminate ultrasonics, replace those with radar and enhance parking systems and a bunch of other things that in addition to additional performance, it reduces OEM costs pretty significantly. So that's a separate product where we're getting significant amount of pull.

We will go next to Mark Delaney with Goldman Sachs.

First, I was hoping to better understand the degree of conservatism assumed in guidance from Nexperia as well as broader trade tensions that you referred to for 4Q guidance. It looks like sequentially, 4Q revenue is guided down roughly $160 million. About half of that you said is from customer-specific downtime. So when I look at typical seasonality, it tends to be flat to up. So it would seem to imply there's maybe to $80 million or a little bit more than $80 million from some of these trade factors that's conservatism. But if I'm misunderstanding, are there other ways to better frame that, it would be helpful.

Yes. I think to be honest, and it's a fair question, I think it's impossible to give you a specific answer to that. So we've looked at schedules. We've reduced our outlook for schedules. And that's what's translated into our outlook for the fourth quarter. I think Varun gave you the direct visibility to what we have seen from a schedule adjustment standpoint to date as it relates to some of those specific customer supplier issues that you guys are all very well aware of. The range of the Nexperia outcomes are so broad, right, that it's really tough to give you a precise number. So it's one where we just overlaid some incremental conservatism into our estimate.

Understood, Kevin. And then my other question was just around bookings. Your guidance for the year of roughly $31 billion implies a meaningful pickup in the fourth quarter. Maybe if you could talk about what areas you're seeing the most momentum as you look into the fourth quarter bookings. And then also, you did say that potentially some awards may move into '26. Any context as to why that may be occurring?

Yes. I would say the movement, it's just timing, just nothing more than OEMs making decisions. I think there's an element of certainly the disruption that we're -- or potential disruption that we see as it relates to trade policy doesn't help things from a decision-making standpoint. I would say there are a number of large AS & UX awards that are in the fourth quarter that are in and around or currently signed for the fourth quarter. Discussions with OEMs are progressing very well. So they're moving along at this point in time. They tend to be around, as you can imagine, ADAS user experience as well as some SVA sort of opportunities, North America, Europe as well as China.

We'll move to our final question coming from Edison Yu with Deutsche Bank.

This is Winnie Dong, for Edison. I wanted to drill a little bit down on the China mix. How much was it as a headwind to your growth over market for the full year? And then maybe just based on your bookings and what you might be seeing in the pipeline for next year, what you might be expecting for China mix into 2026?

Yes. I'll start with your last and then -- I'm not sure we'll give you an exact dollar amount on the headwind for a couple of reasons. But on the mix, this year, 85% of our bookings are with China local OEMs. Our focus with the locals is pretty limited to the top 10 with incremental focus on those who are focused on export as well as manufacturing outside of the China market. Growth in that category for this year, I believe, is in those particular -- those particular sort of programs is up like 84% on a year-over-year basis. So very, very strong growth across each one of our segments. And again, I'm referring to export revenues.

So our focus for China is how do we make sure that we're with the winners that we can support and serve them profitably and that we can work with them to take their products into international markets where we can add the most value. So I'm not sure we'll ever perfectly match the revenue mix with production mix given there are 76 OEMs in China today based on at least my last count. And there's a large portion of those that aren't strategically ideal for us to be supporting and serving.

Got it. And then my follow-up is on SVA specifically. I was wondering if you can give us maybe a latest update on the bookings you have in place. And then just as you're engaging with your customers, how they are thinking about this particular solution. I think in the market right now, we're seeing maybe a mixture of in-house developments versus outsourcing. So just curious what you're seeing there.

Yes, it's a mix. Today, we have active engagements with roughly 20 OEMs across all regions. I would say real focused engagement with 10. If I were to dollarize today, the bookings opportunities over the next couple of years, it's in the range of $5-plus billion that we're really focused on in terms of real opportunities. It tends to be focused in and around zonal controllers at this point in time. And I would say, today, we see much more activity in China. So a lot of our activity is there than we do in North America or Europe, but there are a few OEMs in North America and Europe that we're working with at this point in time.

From a revenue standpoint, sitting here today, 2025 revenues from Smart Vehicle Architecture will be about $150 million to $200 million and growing at about a 10% sort of growth rate into the out years. So I think Varun in his comments talked about a bit of a pushout on the software-defined vehicle. Obviously, that's reflected in some of the SVA activity. I would say it's not slowed at all in China. It's accelerated. Europe and North America slowed a bit. But again, we're seeing a pickup in the activity and continue to have a lot of dialogues with OEMs and a number of pursuits that are out there.

That will conclude today's question-and-answer session. I will now turn the call back to Mr. Kevin Clark for any additional or closing remarks.

Great. Thank you, operator. Thanks, everybody, for joining us today. We look forward to seeing you on November 18 in New York City. Have a great day and a great rest of the week. Thanks.

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