Aptiv PLC — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filing dated February 6, 2024. Aptiv supplies automotive electrical architectures, safety technologies, software and computing platforms through Signal and Power Solutions and Advanced Safety and User Experience. Amounts below are in U.S. dollars.
Financial performance
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Net sales | $20.051 billion | $17.489 billion | Up 15% |
| Gross margin | $3.439 billion; 17.2% | $2.635 billion; 15.1% | Margin up 2.1 percentage points |
| Operating income | $1.559 billion | $1.263 billion | Up 23%; includes $211 million restructuring expense |
| Adjusted operating income | $2.127 billion | $1.585 billion | Non-GAAP measure; up $542 million |
| Net income attributable to Aptiv | $2.938 billion | $594 million | Substantially affected by a one-time tax benefit |
| Net income attributable to ordinary shareholders | $2.909 billion; diluted EPS $10.39 | $531 million; diluted EPS $1.96 | 2023 EPS is not representative of recurring earnings because of tax-related items |
| Cash from operating activities | $1.896 billion | $1.263 billion | Up $633 million |
| Capital expenditures | $906 million | $844 million | Operating cash flow less capex was approximately $990 million |
| Cash and cash equivalents | $1.640 billion | $1.531 billion | At December 31 |
| Total debt / net debt | $6.213 billion / approximately $4.6 billion | $6.491 billion / — | Repaid $301 million Tranche A term loan in October |
| Available liquidity | $4.137 billion | — | Includes cash, $2.0 billion undrawn revolver and $497 million available factoring capacity |
Quarterly results
In Q4 2023, sales were $4.919 billion versus $4.640 billion a year earlier, while operating income fell to $355 million from $440 million. Q4 net income was $919 million, including an approximately $725 million tax benefit related to corporate-structure changes and intellectual-property transfers. Q4 restructuring charges were $130 million.
Segments and drivers
- Signal and Power Solutions: sales of $14.404 billion, up from $12.943 billion; adjusted operating income of $1.676 billion versus $1.441 billion; gross margin 18.0% versus 17.2%.
- Advanced Safety and User Experience: sales of $5.695 billion, up from $4.587 billion; adjusted operating income of $451 million versus $144 million; gross margin 15.0% versus 8.9%.
- Sales growth reflected higher vehicle production and volumes across regions, favorable pricing net of contractual reductions, and $634 million of sales from acquisitions. UAW strikes reduced 2023 revenue by an estimated $180 million and adjusted operating income by approximately $80 million.
- Cost pressures included approximately $365 million of higher semiconductor and commodity costs, partly offset by approximately $110 million of lower costs, mainly logistics-related.
Material changes, outlook and risks
- The reported effective tax rate was negative 144%, versus 12% in 2022. Aptiv recorded an approximately $2.080 billion net tax benefit associated with intercompany intellectual-property transfers and a Swiss tax incentive. This benefit drove much of the increase in reported net income; it is not an operating-performance measure.
- Restructuring expense rose to $211 million from $85 million. Management expects about $75 million of additional charges in 2024 for the salaried headcount program and approximately $140 million of restructuring cash payments in 2024.
- Management expects 2024 research and development spending, net of customer and government co-investment, of approximately $1.2 billion, and non-cash amortization expense of approximately $220 million. The filing does not provide a consolidated 2024 revenue or earnings guidance range.
- Management said existing cash, liquidity and operating cash flows should be sufficient to fund operations and capital investment in 2024 and beyond. Aptiv intends to continue repurchases under its authorization; it repurchased $398 million of shares in 2023, with approximately $1.615 billion remaining authorized at year-end.
- Growth strategy centers on software-defined vehicles, advanced safety, electrification and connected systems. Aptiv reported record new business awards of approximately $34 billion, based on projected volumes and prices; these awards are not guaranteed customer orders.
- Motional, Aptiv’s autonomous-driving joint venture with Hyundai, had initial production deployments in Q4 2023; commercial launch was planned for the first half of 2024. Aptiv recorded $299 million of equity-method losses in 2023, primarily attributable to Motional. Motional’s separate audited financial statements were to be filed by amendment by March 30, 2024.
- Key risks include automotive production cyclicality; OEM pricing pressure and customers’ rights to cancel or re-source programs; supply-chain, semiconductor and commodity exposure; customer concentration (top ten represented 54% of sales); foreign exchange; China competition and demand; EV investment delays; labor actions; cybersecurity; product warranty and recall exposure; and geopolitical, trade and regulatory developments. Mexico’s statutory minimum wage increased 20% effective January 1, 2024, with further labor reforms possible.
- Potential contingencies include customer claims related to past supply-chain disruption; Aptiv said loss was not considered probable and recorded no reserve at year-end. Environmental reserves were approximately $4 million. Warranty reserves were $61 million, with reasonably possible additional exposure estimated at zero to $25 million.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. Critical audit matters included uncertain tax positions and revenue recognition.
Investor verification priorities
- Separate recurring operating performance from the approximately $2.080 billion tax benefit and assess future effective tax rates, tax-incentive conditions and uncertain tax positions ($222 million recorded).
- Review the final Motional financial statements and the sustainability and funding implications of continued joint-venture losses.
- Track 2024 restructuring charges, cash payments, cost savings and operating-margin effects.
- Test whether the $34 billion of awarded business converts to realized sales, given forecast-volume assumptions and customer cancellation rights.
- Monitor cash conversion and working capital, particularly elevated inventories, along with debt maturities and available liquidity.
- Assess impacts from OEM production, strikes, EV program delays, input-cost recovery, currency movements and Mexico labor-cost changes.