president and chief executive officer€¦ · accelerated growth and margin expansion through the...
TRANSCRIPT
CECP CEO INVESTOR FORUM
February 24, 2020
Kevin ClarkPresident and Chief Executive Officer
This presentation, as well as other statements made by Aptiv PLC (the “Company”), contain forward-looking statements
that reflect, when made, the Company’s current views with respect to current events, certain investments and acquisitions
and financial performance. Such forward-looking statements are subject to many risks, uncertainties and factors relating
to the Company’s operations and business environment, which may cause the actual results of the Company to be
materially different from any future results. All statements that address future operating, financial or business
performance or the Company’s strategies or expectations are forward-looking statements. Factors that could cause actual
results to differ materially from these forward-looking statements are discussed under the captions “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s filings with
the Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible for us
to predict these events or how they may affect the Company. It should be remembered that the price of the ordinary
shares and any income from them can go down as well as up. The Company disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise,
except as may be required by law.
Forward Looking Statements
CECP CEO Investor Forum | February 24, 2020 | Aptiv2
OPERATING
CASH FLOW$1.6
Aptiv Overview
$14.4 REVENUE
$4.80 EARNINGS
PER SHARE
2019 FINANCIAL PERFORMANCE1
$ billions, except per share amounts
$1.5 OPERATING
INCOME
POSITIONED TO WIN
3
1. Reflects 2019 actuals communicated on January 30, 2020
EG
We are a global technology
company that develops safer,
greener and more connected
solutions, which enable the
future of mobility.
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Compelling Mission
4
CLEAR AND COMPELLING MISSION AT THE HEART OF EVERYTHING WE DO
A society that sees zero fatalities,
zero injuries and zero accidents
Zero emissions: minimize the vehicle’s
total lifecycle environmental impact
Seamless integration between the car,
its passengers, and the world around it
STRATEGY EXECUTION SUSTAINABLE BY DESIGNMISSION
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Advanced safety technologies
can eliminate virtually all driver
errors, saving over 1 million lives
and 40 million injuries annually
Electrification can potentially
reduce transportation CO2 by
more than 50%; these emissions
currently account for ~15% of
global totals
OTA can quickly and efficiently
update vehicle software, saving
the industry $35 billion annually
by 2022
SAFE
Portfolio Aligned To Safe, Green And Connected
GREEN CONNECTED
5
APTIV TECHNOLOGIES HELPING ADDRESS CUSTOMERS TOUGHEST CHALLENGES
APTIV MISSION
A SOCIETY THAT SEES ZERO FATALITIES,
ZERO INJURIES AND ZERO ACCIDENTS
APTIV TECHNOLOGIES
• Perception systems and sensor fusion
• Active Safety software and multidomain controllers
• High fidelity / reliability interconnects and signal distribution
• Gesture and voice recognition for hands free control
• ASIL-D engineering, design and test competencies
ADDRESSABLE CPV
$5,000+
APTIV MISSION
ZERO EMISSIONS: MINIMIZE THE VEHICLE’S
TOTAL LIFECYCLE ENVIRONMENTAL IMPACT
APTIV TECHNOLOGIES
• High Voltage wiring and electrical centers
• High Voltage connectors, plug-in chargers and cord sets
• Aluminum wire harnesses for light-weighting
• Architecture optimization for mass and weight reduction
• Driver assistance systems with V2I
ADDRESSABLE CPV
$2,000+
APTIV MISSION
SEAMLESS INTEGRATION BETWEEN THE CAR,
ITS PASSENGERS, AND THE WORLD AROUND IT
APTIV TECHNOLOGIES
• Secure connected gateways (Cellular, Satellite, DSRC, GPS)
• V2X Modules: Vehicle To Vehicle / Infrastructure
• Wireless (Wifi, BT), Media Modules and Consumer Ports
• Over-The-Air (OTA) for Software and Firmware
• Edge Processing, cloud analytics and cybersecurity
ADDRESSABLE CPV
$3,000+
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Right Strategy, Rigorously Executed
6
DRIVING OUTPERFORMANCE TODAY, AND IN THE FUTURE
Connected
Services
Automated
Driving
Smart
Vehicle
Architecture
Adjacent
Markets
Active
Safety
High Voltage
Electrification
Quality &
Delivery
Human
Capital
Customer &
Regional Mix
Footprint &
Efficiency
BUSINESS FOUNDATION
Optimizing global execution capabilities,
which give Aptiv the right to play across
current and future platforms
CURRENT PLATFORMS
Leveraging pan-Aptiv capabilities to increase scale
and relevance in fast-growing product areas
FUTURE PLATFORMS
Seeding the next wave of growth, while
diversifying business models and end markets
• Built top-tier automated mobility technology capabilities
• Established data monetization platform
• Expanded into non-auto markets
• $5.6B High Voltage bookings since 2016
• $13.2B Active Safety bookings since 2016
• Divested businesses that did not fit our strategy
• Drove $250M in overhead cost savings 2014 - 2019
• No single customer more than 10% of sales
• Balanced Regional Mix1: North America (38%),
Europe (33%), APAC (27%)
CECP CEO Investor Forum | February 24, 2020 | Aptiv
STRATEGY EXECUTION SUSTAINABLE BY DESIGNMISSION
1. Regional revenue calculated as a percent of 2019 total revenue as communicated on January 30, 2020
Proactively Addressing the Changing Environment
7
SMART EXECUTION OF OUR BUSINESS MODEL AND TIMELY CAPITAL DEPLOYMENT
HAS ENABLED APTIV TO ADAPT AND THRIVE IN A DYNAMIC MARKET
2014
2020
Jun 2015
Thermal
Jul 2015
Reception Systems
Dec 2016
Mechatronics
EXITED HARD-PARTS businesses,
where limited opportunity for differentiation
was increasingly driving price pressure
INVESTED IN AUTOMATED DRIVING & DATA
CAPABILITIES at attractive valuations, while
helping accelerate Active Safety and central
compute product lines
Dec 2017
Powertrain Spin-off
POWERTRAIN SPIN-OFF created two
independent public companies, better positioned
to pursue independent strategic priorities
Jul 2015
ottomatika
Dec 2017
nuTonomy
ACQUISITIONS increasing our scale and leverage in
electrical architecture, while expanding in adjacent
markets
Jun 2018
KUMOct 2018
Winchester
Dec 2015
HellermannTyton
Nov 2015
Control-TecNov 2019
gabocom
Q1 2020
50/50 automated
driving JV expected
to close with Hyundai
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Aptiv Perfectly Positioned Today
8
PROVIDING END-TO-END SOLUTIONS THAT ENABLE THE COMMERCIALIZATION OF NEW MOBILITY
POWER
Energize sensors and
components
DATA
Transmission and
processing throughout
the vehicle
COMPUTE
Collect and process
the information
SOFTWARE
Act on the information
to enable functionality
+
ACTIVE SAFETY
Increasing levels of safety automation
on the path to automated driving
CONNECTIVITY
Improved in cabin experiences for
greater comfort and productivity
HIGH VOLTAGE ELECTRIFICATION
Greater vehicle electrification for
propulsion and performance
Aptiv’s advanced technologies and deep
systems knowledge across the brain and
nervous system of the vehicle…
…allows us to conceive, specify
and deliver solutions for our
customers’ toughest challenges
Foundational
elements for every
vehicle solution
CECP CEO Investor Forum | February 24, 2020 | Aptiv
AS&UX S&PS
Funding Investments for Growth
9
IMPROVEMENTS IN BUSINESS FOUNDATION ALLOWING US TO REINVEST FOR
ACCELERATED GROWTH AND MARGIN EXPANSION THROUGH THE CYCLE
Performance InvestmentsFor Growth*
$2.7B
PERFORMANCE AND INVESTMENTS2015 - 2020E
Engineering
Manufacturing
Mobility
EXPANDING EARNINGS
Performance more than offsetting price and
incremental investments for growth
FUNDING MOBILITY
Mobility funding decreases in 2020 due
to Aptiv-Hyundai JV closing in Q1
ACCELERATING GROWTH
Supporting record customer awards in products
such as Active Safety and Electrification
Material
OPTIMIZING COST STRUCTURE
Relentless focus on driving operational
efficiencies and improving flexibility
Price
* Incremental Investments: 2020E vs. 2015
$2.2B
D&A
CECP CEO Investor Forum | February 24, 2020 | Aptiv
People
Sustainable
Growth
Portfolio
COMPETITIVE MOAT EXPANDING
Reinvestment in the business improving competitive
positioning on current and future platforms
Best talent, organized the right
way, with the right tools
Improving portfolio of
differentiated solutions
focused on customers’
toughest challengesOutsized customer awards
in next generation solutions
Mobility
STRATEGY EXECUTION SUSTAINABLE BY DESIGNMISSION
Fast Growing Business Gaining Scale
HIGH VOLTAGE
ELECTRIFICATION$ Billions, % Adj Growth1
10
LEVERAGING FULL APTIV CAPABILITIES TO INCREASE SCALE AND
RELEVANCE IN FAST-GROWING PRODUCT AREAS
CECP CEO Investor Forum | February 24, 2020 | Aptiv
1. Revenue growth excludes impact of foreign exchange, commodities and divestures.
ACTIVE SAFETY$ Billions, % Adj Growth1
$0.9
$1.3
2018 2019 2020E 2022T
30%
$2.5+
~$1.7
$0.26$0.34
2018 2019 2020E 2022T
$1.0+
50%
~$0.5
ENGINEERED COMPONENTS$ Billions, % Adj Growth1
$4.7
$4.8
2018 2019 2020E 2022T
$5.5+
6%
~$5.0
Balanced Capital Deployment
11
CAPITAL
EXPENDITURES
35%-40%DIVIDENDS
10%-15%
M&A AND SHARE REPURCHASES
45%-55% DRIVING GROWTH
• Organic reinvestment to support active safety,
infotainment and engineered components growth
• Adding accretive acquisitions and technology
enablers; M&A pipeline remains full
RETURNING CASH TO SHAREHOLDERS
• Opportunistic share buybacks take advantage of
market dislocations
• Maintaining a competitive dividend
FOCUSED ON VALUE ENHANCING ORGANIC AND INORGANIC INVESTMENT OPPORTUNITIES
Long Term Capital Allocation Priorities4
1. FCF Conversion: (Operating Cash Flow – CAPEX + Spin Related Cash Payments) / Net Income; Spin Related Cash Payments of $38M in 2017 and $167M in 2018
2. CAGR represents growth of operational cash flow only
3. 2017 excludes the $310M payment for unsecured creditors settlement in 2017
4. Net of cash required to support business operations
OPERATING CASH FLOW$ Billions, Free Cash Flow Conversion1
2017 2018 2019 2022T
$1.4
$2.2-2.4
~10%CAGR2
85 - 90%90%
$1.6 $1.6
73%
3
85%
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Strategy Has Delivered Strong Results
GROWTHRevenue, IHS Production
INCOMEOperating Income1
12
EXECUTION TOWARDS LONG TERM FINANCIAL FRAMEWORK CREATING VALUE FOR SHAREHOLDERS
1. Adjusted for restructuring, stranded and other costs related to accounting treatment for Discontinued Operations (DO) and other special items
2. Peer group includes: CON, DENSO, LEA, MGA, VALEO, VC
3. Growth, Income, and Total Shareholder Return data sourced from Capital IQ
2015 2016 2017 2018 2019
Aptiv | 132
Peers2 | 115
Production | 101
2015 2016 2017 2018 2019
Aptiv | 124
Peers2 | 86
TSR2015 – 20193
56%
12%
29%
APTV
Peers
S&P 500
2
75%
10%
44%
APTV
Peers
S&P 500
2
67%
15%
57%
APTV
Peers
S&P 500
2
1-Year
(2019)
3-Year
(2017-19)
5-Year
(2015-19)
CECP CEO Investor Forum | February 24, 2020 | Aptiv
13
Sustainable by DesignFINANCIAL FRAMEWORK ALIGNED WITH STRATEGY AND VISION
MORE SUSTAINABLE BUSINESS
REVENUE DIVERSIFICATION
Disciplined revenue growth with balanced customer,
region and end market mix
IMPROVED COST STRUCTURE
Relentless focus on reducing cost and improving our
flexible business model
BALANCED CAPITAL DEPLOYMENT
Balanced capital deployment drives upside
ABILITY TO OUTPERFORM
IN ANY ENVIRONMENT
INVESTMENTS FOR GROWTH
Investment in the business to improve competitive
positioning
INDUSTRY LEADING PORTFOLIO OF TECHNOLOGIES
Continued validation of our relevant portfolio of advanced
technologies
CECP CEO Investor Forum | February 24, 2020 | Aptiv
STRATEGY EXECUTION SUSTAINABLE BY DESIGNMISSION
PROCESSES
We’re improving the resiliency and efficiency of our
supply chain, while enhancing our ability to
commercialize new solutions
PEOPLE
Our people play the key role in executing our
vision and strategy - in good times and bad - so
our culture of execution helps ensure we have the
right people organized the right way
More Sustainable through “The How”
14
CULTURE OF CONTINUOUS IMPROVEMENT AROUND OUR PEOPLE, PROCESSES AND
PORTFOLIO MAKES APTIV A MORE SUSTAINABLE BUSINESS
PORTFOLIO
Our innovative portfolio of technologies and
robust global engineering and development
capabilities have positioned us to meet the
increasingly stringent manufacturing demands
and consumer preferences for high technology
content
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Winning CultureSUSTAINABLE CULTURES DELIVER BEST-IN-CLASS PERFORMANCE FOR ALL STAKEHOLDERS
RESULTS COMPOUND WELL ABOVE PEERS
CORE VALUES AT THE HEART OF APTIV
Principles for how we work
15
ALWAYS DO THE RIGHT THING, THE RIGHT WAYCreated by Davidfrom the Noun Pro ect
PLAY TO
WIN
ONE
TEAM
THINK & ACT
LIKE OWNERS
ACT WITH
URGENCY
PASSION
FOR RESULTS
OPERATE WITH
RESPECT
ESG TAKING HOLD
CECP CEO Investor Forum | February 24, 2020 | Aptiv
World’s Most Ethical Companies for the
eighth year in a row
Ranked #4 in Autos & Parts industry
category and included in JUST U.S.
Large Cap Equity ETF
Sustainability Journey
CELEBRATING INTERNATIONAL
WOMEN’S DAY
CECP CEO Investor Forum | February 24, 2020 | Aptiv16
OPERATIONALLY FOCUSED ON MAKING APTIV A MORE DIVERSE COMPANY
RIGHT STRUCTURE
Beyond the right culture and portfolio of products, we believe it
is essential to have the right people, in the right frame of mind,
organized in the right way
47%
WomenManagement Positions 27%
Revenue-Generating Functions 21%
PERCENTAGE OF FEMALE REPRESENTATION
IN APTIV’S WORKFORCE
Events to strengthen the link between women and technology
leadership
Industry and educational forums to engage and inspire women
Heavily involved in campus activities targeted at developing
female technical leaders
EMPLOYEE ENGAGEMENT
Aptiv is constantly interacting with our workforce to ensure that
they are heard and provide the feedback and support they
need to develop their careers
DIVERSITY EQUALS INNOVATION
Diversity of thought and experiences are critical
to delivering on our mission
In addition to talent and skill, we believe race,
culture, ethnicity, gender, and age diversity are
vital to our success
PERFORMANCE BASEDNamed Executive Officer Pay Mix
LONG-TERM VALUE FOCUSED ACHIEVED THE RIGHT WAYStrategic Results Modifier (SRM) Component of AIP
17
1. Segment performance metrics based on Operating Income and Simplified Operating Cash Flow
2. TSR performance relative to Russel 3000 Auto Index peers
3. For Executive Officers
79%Aptiv Performance
Based
BASE PAY | 21%
Incentives Aligned To Creating
SHAREHOLDER VALUE10% SRMSTRATEGIC RESULTS MODIFIER
+ -
2020 SRM GOALS
TALENT & DIVERSITY
Attract and retain the best
CULTURE
Reinforce values and behaviors of a
winning team
QUALITY
Drive flawless launch and delivery
AIP
• 50% | NET INC1
• 10% | BOOKINGS
• 40% | CASH (CFBF) 1
ANNUAL
INCENTIVE
PLAN
(AIP) | 19%
LTIP
• 25% | NET INC
• 25% | TSR2
• 50% | RONA
75% Performance3
25% Time Based3
SRM Goals drive
strategic factors
52%Russell 3000
Average
LONG-TERM
INCENTIVE
PLAN
(LTIP) | 60%
Performance Based LTIP linked to
business plan; strongly incentivizing
commitment to outperformance
Incentives Aligned to Long-Term ValuePAY-FOR-PERFORMANCE CULTURE WITH METRICS TIGHTLY LINKED TO LONG-TERM VALUE CREATION
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Stock Ownership Guidelines:
CEO = 6x of base salary
Executive Officers = 3x of base salary
SUSTAINABILITY
Board Of Directors EngagementSTRONG PARTNERSHIP BETWEEN BOARD OF DIRECTORS AND MANAGEMENT
ON STRATEGY AND RISK MANAGEMENT
GOVERNANCE ETHICS & COMPLIANCE
STRATEGY FINANCE INVESTOR SENTIMENT
• Product portfolio review
• Operational planning
• Long-term enterprise risks and opportunities
• Strategic investments
• Financial performance and disclosures
• Annual budget and long-term business plan
• Capital deployment
• Market and industry insight and assessment
• Investor and analyst feedback / perception
• Communication strategy
• ESG priorities
• Long-term environmental goals and commitments
• Safety and compliance
• Community involvement
• Selection and evaluation of Board members
• Corporate governance guidelines
• Compensation planning
• Enterprise risk
• Company culture
• DRIVE Line cases
• Diversity and inclusion
• Human capital management
18 CECP CEO Investor Forum | February 24, 2020 | Aptiv
Aptiv 2025 Vision
19
…LOGICAL EXTENSION OF OUR STRATEGY
2025 REVENUE
~$22BCAPITAL DEPLOYMENT
UPSIDE
IMPROVED GROWTH PROFILE
Less cyclical, more predictable and more
diversified revenue growth
IMPROVED PROFITABILITY
Continuous improvement mindset
increases leverage in operating model
WINNING CULTURE
Winning teams deliver best-in-class
customer and shareholder value
SIGNAL & POWER
SOLUTIONS
ADVANCED SAFETY &
USER EXPERIENCE
FUTURE PLATFORMS EMERGE
Investments result in accretive solutions
CURRENT PLATFORMS SCALE
Driving scale in fast growing product lines
FOUNDATION OF EXECUTION
Continued focus on flexible and efficient cost structure
Active
Safety
High
Voltage
CECP CEO Investor Forum | February 24, 2020 | Aptiv
Summary
20
STRATEGY, PORTFOLIO AND RIGOROUS FOCUS ON EXECUTION MAKE APTIV A MORE SUSTAINABLE BUSINESS
Accelerating growth in
current and future platforms,
while optimizing global
execution capabilities drives
increasing value for
stakeholders
Full system solutions
aligned to the safe, green
and connected
megatrends, provide a
tailwind for content growth
Deliver safe, green and
connected technologies
that enable the future of
mobility
Success emanates from a
strong, sustainable business
that makes the world a
better place, a business that
is Sustainable by Design
APTV
CECP CEO Investor Forum | February 24, 2020 | Aptiv
STRATEGY EXECUTION SUSTAINABLE BY DESIGNMISSION