Aptiv(APTV) - 2025 Q2 - Quarterly Report

Part I - Financial Information This section provides a comprehensive overview of Aptiv PLC's financial performance and position for the periods ended June 30, 2025 Item 1. Financial Statements This section presents Aptiv PLC's unaudited consolidated financial statements, including statements of operations, balance sheets, cash flows, and detailed notes Consolidated Statements of Operations Aptiv reported a 3% year-over-year increase in Q2 2025 net sales to $5,208 million, with net income significantly decreasing due to lower equity method gains Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $5,208M | $5,051M | $10,033M | $9,952M | | Operating income | $486M | $441M | $934M | $860M | | Net income attributable to Aptiv | $393M | $938M | $382M | $1,156M | | Diluted net income per share | $1.80 | $3.47 | $1.70 | $4.24 | Consolidated Balance Sheets As of June 30, 2025, Aptiv's total assets slightly increased to $23,942 million, while total liabilities decreased, leading to an increase in shareholders' equity Consolidated Balance Sheet Summary (Unaudited) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $8,373M | $7,826M | | Total assets | $23,942M | $23,458M | | Total current liabilities | $4,751M | $5,131M | | Total liabilities | $13,967M | $14,373M | | Total Aptiv shareholders' equity | $9,690M | $8,796M | Consolidated Statements of Cash Flows Net cash provided by operating activities decreased to $783 million for H1 2025, while investing activities used less cash and financing activities used more due to debt repayments Consolidated Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $783M | $887M | | Net cash used in investing activities | ($212M) | ($829M) | | Net cash used in financing activities | ($732M) | ($264M) | | Decrease in cash, cash equivalents and restricted cash | ($125M) | ($231M) | Notes to Consolidated Financial Statements These notes detail Aptiv's accounting policies, including a corporate reorganization, planned spin-off of Electrical Distribution Systems, and Motional JV restructuring - In December 2024, the company completed a reorganization, establishing a new Swiss tax-resident parent company, Aptiv PLC[24] - The company announced its intention to separate its Electrical Distribution Systems business into a new, independent public company via a tax-free spin-off, expected to be completed by March 31, 2026[30][230] - In Q1 2025, Aptiv realigned its business into three new reportable segments: Electrical Distribution Systems, Engineered Components Group, and Advanced Safety and User Experience[31][182] - Restructuring charges of $52 million and $89 million were recorded for the three and six months ended June 30, 2025, respectively, mainly for global workforce optimization and downsizing European manufacturing[75] - The company fully repaid the remaining $250 million balance of its Term Loan A in Q1 2025[92] - Final settlement of the $3.0 billion Accelerated Share Repurchase (ASR) program occurred in H1 2025, with a total of 48.5 million shares repurchased at an average price of $61.84[134] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Aptiv's financial performance, strategic initiatives, and segment results, highlighting revenue growth, the planned spin-off, and liquidity Executive Overview Aptiv reported a 3% increase in Q2 2025 net sales, driven by strategic focus on electrification and software-defined vehicles, and a planned spin-off - Announced intention to pursue a tax-free spin-off of the Electrical Distribution Systems business, expected to complete by March 31, 2026, incurring $28 million and $47 million in related separation costs in Q2 and H1 2025, respectively[241] - Restructured its Motional JV with Hyundai, reducing its common equity interest from 50% to approximately 13% and eliminating future funding obligations from Aptiv[259] - Q2 2025 net sales grew 3% to $5.2 billion, with volumes up 2%, reflecting growth in Asia Pacific and North America, partially offset by declines in Europe[243] - The company is focused on maintaining a low fixed cost structure, with approximately 97% of its hourly workforce in best-cost countries and 30% being contingent workers, providing operational flexibility[276] Consolidated Results of Operations Q2 2025 net sales increased 3% to $5.2 billion, but net income dropped significantly due to lower equity method gains and higher H1 2025 tax expense Net Sales Variance Analysis - Q2 2025 vs Q2 2024 | Variance Driver | Amount (in millions) | | :--- | :--- | | Volume, net of contractual price reductions | $96 | | FX | $38 | | Commodity pass-through | $23 | | Total Favorable Variance | $157 | Net Sales Variance Analysis - H1 2025 vs H1 2024 | Variance Driver | Amount (in millions) | | :--- | :--- | | Volume, net of contractual price reductions | $54 | | FX | ($26) | | Commodity pass-through | $53 | | Total Favorable Variance | $81 | - Restructuring costs decreased to $52 million in Q2 2025 from $70 million in Q2 2024[297] - Net gain on equity method transactions was $46 million in Q2 2025, compared to $641 million in Q2 2024, which included large gains from the Motional JV restructuring[306][307] - H1 2025 income tax expense surged to $401 million from $127 million, primarily due to a $294 million increase in valuation allowance against a Swiss tax incentive, following new OECD Pillar Two guidance[309][312] Results of Operations by Segment Electrical Distribution Systems and Engineered Components Group saw sales growth in Q2 2025, while Advanced Safety and User Experience sales declined Net Sales by Segment - Q2 2025 vs Q2 2024 | Segment | Q2 2025 Net Sales | Q2 2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Electrical Distribution Systems | $2,206M | $2,065M | +7% | | Engineered Components Group | $1,723M | $1,626M | +6% | | Advanced Safety and User Experience | $1,507M | $1,554M | -3% | Adjusted Operating Income by Segment - Q2 2025 vs Q2 2024 | Segment | Q2 2025 Adj. Op. Income | Q2 2024 Adj. Op. Income | Change | | :--- | :--- | :--- | :--- | | Electrical Distribution Systems | $163M | $138M | +$25M | | Engineered Components Group | $287M | $298M | -$11M | | Advanced Safety and User Experience | $178M | $170M | +$8M | Liquidity and Capital Resources Aptiv maintains approximately $4.0 billion in liquidity, having completed its ASR program and repaid Term Loan A in H1 2025 Available Liquidity as of June 30, 2025 | Source | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $1,448 | | Revolving Credit Facility, unutilized portion | $1,999 | | Committed European accounts receivable factoring facility, unutilized portion | $527 | | Total available liquidity | $3,974 | - Completed the final settlement of the $3.0 billion Accelerated Share Repurchase (ASR) program during H1 2025[332] - Fully repaid the remaining $250 million outstanding principal balance on the Term Loan A in Q1 2025[356] - Net cash provided by operating activities was $783 million for the six months ended June 30, 2025, down from $887 million in the prior year period[372] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk exposures were reported, with the company continuing to hedge foreign currency risks using derivative and non-derivative instruments - There have been no material changes to market risk exposures from the 2024 year-end report[379] - The company continues to use derivative and non-derivative instruments to hedge foreign currency risks related to its net investments in non-U.S. subsidiaries[379] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal controls - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[382] - No material changes in internal controls over financial reporting were identified during the quarter[383] Part II - Other Information This section covers legal proceedings, risk factors, equity security sales, and other disclosures for Aptiv PLC Legal Proceedings Aptiv is subject to various legal actions and claims incidental to its business, with details available in its 2024 Form 10-K and Note 10 - Aptiv is subject to various legal actions and claims incidental to its business, including those related to defects, contracts, warranties, and intellectual property[385] Risk Factors No material changes to the company's risk factors were reported for this quarter, beyond those previously disclosed in the Q1 2025 Form 10-Q - No material changes to risk factors are reported for this quarter, beyond what was disclosed in the Q1 2025 10-Q[386] Unregistered Sales of Equity Securities and Use of Proceeds The company received a final settlement of shares under its ASR agreements in Q2 2025, with approximately $2.515 billion remaining for future repurchases - In Q2 2025, the company received 6,075,290 shares as part of the final settlement of its Accelerated Share Repurchase (ASR) agreements[387] - As of June 30, 2025, approximately $2.515 billion remained available under the company's share repurchase program[387][388] Other Information Two executive officers adopted Rule 10b5-1 trading plans for potential share sales during Q2 2025, with no other trading arrangement changes - Executive Vice President Obed D. Louissaint adopted a Rule 10b5-1 trading plan on May 9, 2025, for the sale of up to 12,000 ordinary shares[391] - Vice Chairman Joseph R. Massaro adopted a Rule 10b5-1 trading plan on May 22, 2025, for the sale of up to 35,000 ordinary shares[391]