Aptiv PLC — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022. Aptiv supplies automotive electrical architecture, vehicle technology, active-safety systems and software. Results include Wind River and Intercable Automotive, acquired in Q4 2022.
Financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Net sales | $4.818 billion | $4.178 billion |
| Gross margin | $760 million; 15.8% | $589 million; 14.1% |
| Operating income | $348 million | $256 million |
| Net income attributable to Aptiv | $162 million | $89 million |
| Net income attributable to ordinary shareholders | $146 million; $0.54 per share | $73 million; $0.27 per share |
| Cash from operating activities | $(9) million | $(202) million |
| Capital expenditures | $269 million | $247 million |
Operating cash flow less capital expenditures was approximately $(278) million, versus $(449) million in Q1 2022. Cash and cash equivalents were $1.1 billion at quarter-end, down from $1.531 billion at year-end 2022. Total debt was $6.518 billion, including $45 million current debt; net debt was approximately $5.4 billion. Available liquidity was $3.588 billion, including a fully undrawn $2.0 billion revolver and eligible receivables-factoring capacity.
Gross margin improved to 15.8% from 14.1%. Operating margin was approximately 7.2% versus 6.1%; net income attributable to Aptiv was approximately 3.4% of sales versus 2.1%. Interest expense rose to $67 million from $43 million. The effective tax rate was 12% in both periods. Equity-method losses increased to $82 million from $63 million, primarily reflecting Motional.
Material changes and segment performance
- Sales increased 15%. Aptiv cited 12% volume growth, favorable pricing of $118 million, and $178 million of sales from acquisitions, partly offset by $128 million of unfavorable foreign-exchange effects. Global vehicle production rose 5% (9% on Aptiv’s weighted-market basis).
- Signal and Power Solutions sales were $3.464 billion, up from $3.106 billion; adjusted operating income was $374 million versus $308 million. Segment gross margin rose to 17.1% from 16.3%.
- Advanced Safety and User Experience sales were $1.366 billion, up from $1.082 billion; adjusted operating income was $63 million versus $16 million. Segment gross margin rose to 12.2% from 7.7%. Results include Wind River.
- Higher volumes and favorable pricing supported results, while Aptiv reported approximately $130 million in higher semiconductor and commodity costs and $56 million in unfavorable foreign-exchange impacts. Acquisition-related costs also increased amortization and SG&A.
Outlook, risks and unusual items
- No quantified company-wide revenue or earnings guidance is provided in the supplied filing text. Management expects global supply-chain disruptions, including semiconductor shortages, to continue throughout 2023.
- Management expects current cash, liquidity and operating cash flows to be sufficient for operations, restructuring, debt service, preferred dividends and capital expenditures. It cited automotive-cycle exposure, inflation, commodity and semiconductor costs, foreign exchange, geopolitical uncertainty and customer pricing pressure as risks.
- Customers have raised potential claims related to lost production and other costs from supply disruptions. Aptiv said a loss was not considered probable and recorded no reserve. Warranty reserves were $54 million; the reasonably possible additional exposure beyond reserves was estimated at zero to $20 million. Environmental reserves were approximately $4 million.
- Q1 included an $18 million impairment of the LeddarTech investment and $3 million of losses on publicly traded equity securities, partly offset by $22 million of interest income. Other expense, net was $1 million, compared with $39 million of expense in Q1 2022, which included a $32 million securities valuation loss.
- Aptiv expects approximately $35 million of additional restructuring costs for approved programs, primarily within the next 12 months, and approximately $40 million of cash restructuring payments over that period.
- The 11.5 million mandatory convertible preferred shares are scheduled to convert on June 15, 2023 into 1.0754 to 1.3173 ordinary shares each, subject to adjustments. Q1 share repurchases totaled $70 million. On April 3, Aptiv acquired Hohle Ltd. for approximately €39 million.
- Aptiv reported compliance with debt covenants. A credit-agreement amendment dated April 19, 2023 transitioned benchmark rates from LIBOR to SOFR, subject to the stated treatment of loans already outstanding.
Investor facts to verify
- How much of sales and margin growth came from underlying volumes and pricing versus acquisitions, foreign exchange and commodity pass-through.
- Whether working-capital movements, particularly receivables and inventories, improve enough to restore positive operating cash flow.
- How semiconductor and commodity costs, customer recovery actions, and continuing supply disruptions affect margins and potential claims.
- The conversion terms and resulting dilution from the preferred shares, and the pace of ordinary-share repurchases.
- Progress integrating Wind River and Intercable Automotive, final purchase-accounting adjustments, and the performance of Motional and other equity investments.
- Execution of approved restructuring plans and maintenance of covenant headroom as debt costs and interest rates evolve.