Aptiv PLC (APTV) Earnings Call Transcript & Summary

All right. Good afternoon, and good morning, everyone, and thanks for joining us at the Spring Autos Conference. My name is David Kelley. For those who don't know me, I'm Jefferies' auto tech supplier analyst. And next up, we have a fireside chat with Aptiv, and joining me today from Aptiv, CFO, Joe Massaro. And just quickly before we get started, I wanted to remind everyone to feel free to submit questions via the chat box. It's a fireside chat, so we will be addressing investor questions later in the discussion. But thanks again, Joe. Really appreciate the time today.

No. Thanks for hosting, David.

Yes, absolutely. And just maybe starting with the near-term unfortunate and terrible situation in Ukraine. Could you update us on Aptiv's Ukraine exposure? And I believe you had pulled some high-volume platforms out of the region prior to the conflict. So could you talk about that and maybe how sizable your exposure is today?

Sure. No, that's -- unfortunately, it's a good -- it's the right place to start, just given what's going on. So I'll start because we do have a manufacturing facility in Russia as well. So Russia and Ukraine, they're all electrical architecture plants, so within the SPS segment effectively, I think it was the wire harness facility. So heavy labor, low -- relatively low capital equipment. One -- and total business between Russia and Ukraine is about $300 million in revenue, call it, on average, 10% EBIT margin for those businesses. The Russian facility is shut down at this point. Our customers have shut down. So we're not producing. And again, that's about 75 of the roughly 300. The balance of the -- and Russia is entirely for Russian vehicle production. So it serves in-country. Ukraine is a larger operation. Ukraine represents about 10% of our manufacturing footprint for wire harness in Europe. So an important part but not a particularly large part. And it was a newer -- as a country, we were just starting to move into. So we were still ramping. So even though it is even 10%, it wasn't necessarily operating at the 10% level yet. Those plants are effectively closed. We -- one of the plants that's in the far western part of the country, we were able to -- folks showed up, and we're able to get some shifts completed last week. Obviously, people are dealing with a lot over there. I would say, effectively, at this point, that country is not open for any type of normal commercial activity. We are moving our customer programs out of the Ukraine. We're putting them into our facilities in Poland, Romania, Serbia. We'd have some capacity in Morocco as well if we need it, working closely with customers. Customers are paying for the moves at this point. And again, just given the nature of the wire harness manufacturing, it tends to be heavy labor. So there's very little equipment to move. It's not one of our electronics plants. It's not one of our connector plants. There's very little equipment to move. In reality, at this point, we're really not able to schedule moves. So we're really standing up the capability in the newer plants as opposed to sort of moving it. To your point, we did have a very large program in the Ukraine. It's a global SUV platform that we'd all recognize for a large German OE. We proactively moved that ahead of the conflict. There was just enough concern, and no one really wanted to disrupt production of that particular program. So coincidentally, our last day of production of that program in the Ukraine was the first day of the conflict. So that has been moved and is up and running in another facility. So move time is about 4 to 6 weeks on this type of stuff, which seems our customers are -- seem satisfied with that time range. And like I said, we've started it. So we're in the 4- to 6-week window now. And then obviously, long term, we'll have to assess if and when it makes sense to go back to the Ukraine, unfortunately, and what happens longer term with Russian vehicle production. So I don't think, David, as we get through the first quarter, and I don't think the direct impact on these manufacturing facilities is going to be a -- I think it will be a very manageable event for us. I think just the broader impacts of what the conflict has -- what the conflict does to European economic growth and consumer sentiment and new vehicle sales and then obviously, some of the inflationary pressures and then any other supply chain disruptions that impact our customers, maybe not from us, but they affect our customers, to me, that's -- we're going to be talking, I think, more about those over the coming months than we are about the impact of these 4 plants.

Okay. Got it. That's helpful. And maybe on that last point, curious what you're seeing and hearing from your European customers today. We all see the headlines with some of the shutdowns. So could you talk a bit about those conversations? And then secondarily, I think some of the wiring disruptions are more impactful for some of your peers and competitors. So is there some -- whether it's market share opportunity or sharing of the load, so to speak, where you're thinking on incremental volumes from some others that are being disrupted.

I'll start with that one. We have gotten requests from customers to look at taking programs for other suppliers that either can't move as effectively or maybe don't have the capacity. We will work to be constructive, obviously, with our customers there. We'll need to make sure we're fulfilling our contractual obligations and get our projects moved first. But certainly, if there's a way for us to be helpful and constructive to a customer and it makes obviously financial sense for us, we will do that. But still somewhat early days from that perspective. Like I said, we have gotten the requests. I think we do have a bit of an advantage. Obviously, our Signal and Power Solutions business has a lot of scale. We've got a very robust manufacturing footprint. The team is very good at executing. So -- and again, the Ukraine being a smaller part of our footprint there, I think we're in a pretty good position to deal with this maybe better than others at the moment. Listen, I think what we're seeing from the customers, obviously, a lot of concern about what's happening there. It is -- we have 5,000 employees there. We effectively have lost touch with them. So it's a very serious matter. So there's a lot of concern for employee well-being and obviously just concerns around any potential that this spreads. But with that said, I mean, we have not seen customers sort of redoing full year production schedules at this point. They're very much focused on how to get back up and running and how to build the vehicles as quickly as possible. So -- and adjusting for this issue within the overall supply chain. And I may have mentioned, I mean, this is very regionalized production, right? The kind of parts we're talking about are really just for European production. So I don't see the part production disruption, at least certainly from where we sit, impacting production in other regions. It's very much for European vehicle production.

Okay. That's helpful. And maybe shifting to your supply chain and some of the impacts you're seeing. A, can you just confirm, you're not seeing any raw material shortages or lack of component availability there? And how should we think about some of the impacts of the raw material inflation? Any thoughts on, I believe, the $265 million kind of net number, or it's FX [ material ] inflation that you were embedding for full year guidance?

No specific update to the number now at this point. We're obviously working through that. It's still somewhat early days. But certainly, if oil was to stay at or above sort of this $130 barrel price, you'd certainly see impacts moving through the supply chain around transportation costs. Some of the things like resins, you would see increased pressure on. But again, have not -- still somewhat early days. Have not seen enough yet to sort of add that up, but we are preparing for that eventuality and started to focus on cost offsets and what we can do to prepare. Like I said, we were fairly direct with customers around the Ukraine move costs and making sure those were agreed to be paid by our customers ahead of standing up the production in other countries. No constraints at this point, David, coming from this other than obviously the disruption in the Ukraine. We're mindful. We've talked to our semiconductor suppliers. We've obviously -- I think many have heard the things like neon gas coming from the semiconductor industry, getting a large portion of their neon gas from some gas terminals in the Odessa area in Ukraine. At this point, our suppliers are telling us that they don't view that as a risk to production, but we're obviously mindful of those things. And this is going to be a big disruption, I think, when you add on not just what's happening on the ground there but sanction impacts and future sanction impacts, it's something that certainly bears watching.

Okay. And then maybe one more, and then we'll move on to some of the longer-term discussions. Curious if you're seeing any changes in customers' approach to mix here and specifically European EVs. And one, are you seeing any disruptions in EV builds today or maybe the reverse of that, where there's increased protection of the EV production, given the magnitude of the oil price increases we're seeing here?

And again, I'm sorry to keep going back to the same answer. I think it's somewhat -- it's a little too soon to see that. There's certainly discussions about it. Near term, more EVs, longer midterm sort of post 2025, just what does the market look like if Russian nickel or some of the base metals that come out of Russia were to stay sort of off limits for that long? So there's some discussions but haven't seen it translate yet into specific activity or specific schedule changes. High-voltage business continues to be very robust. We finished last year at just under $1 billion of revenue. We have very, very strong growth, and we've talked about that business growing sort of having a 40% CAGR on it for the next few years and continue to see everything -- all indications from our customers are that, that will continue.

Okay. Got it. That's understandable. It's still very early days, but I appreciate your thoughts around the situation. Maybe if we could shift gears a bit to some of the longer-term stories. And I wanted to start with AS & UX bookings, $2.8 billion in 2021. I wanted to chat about the opportunities you see around hardware, software, sensor fusion. And specifically, how is Aptiv's role changing now that we're starting to shift from legacy Level 1 ADAS to adoption to some of the more advanced Level 2, Level 2+ and even some sprinkling in of semi-autonomous now?

Yes. Let me start. So I think, a, we viewed it as a good bookings year. Bookings, as you know, in this business -- and this isn't just as Aptiv, this is the industry, they tend to be lumpy. So it was a lower bookings number than we've had in prior years but still had more than our fair share of wins. And our win percentage on -- in terms of total awards available to be won was very consistent with the prior years. And we expect the award opportunities to go up this year and next. So the dollar number will come up, and we obviously expect to remain competitive from that perspective. Listen, I think one of the big changes we're seeing, which is something you don't necessarily see it in the bookings number at this point, but you certainly see it in the revenue number is take rates continue to be strong -- continue to run very strong in active safety. More vehicles are being built with active safety systems. We've had a couple of our satellite architecture programs launch on the original platform. These are the systems that we've worked within -- we sold 5 of them. We've worked within OEs to make sure the system can be taken across their various platforms in a very efficient and cost-effective manner. So we tend to launch on a high runner platform and then in successive years taken across other platforms, and that -- we're doing that now in North America with 2 large OEs and deploying those active safety systems. So the take rate, the penetration continues to be very strong. And the other thing, and we may have talked about this before, the one other benefit of the high -- increase in high-voltage vehicles is a high-voltage vehicle tends to have a lot of content. We're obviously benefiting from the -- directly from the high-voltage content when we sell that system. But what we're seeing is if somebody is buying an electric vehicle, the end consumer is buying an electric vehicle. They're buying the car of the future. They're benchmarking against the Model S or the Model 3 depending on the level of car they're buying. So you don't -- we don't really see low-contented EVs, right? They tend to have Level 2 active safety systems. They tend to have a fairly robust digital cockpit experience. We're in a situation now where we've had a Level 2 active safety system that we've deployed with a customer for years. We originally launched it in the 2015, 2016 time frame. That active safety system has actually been put on some of their higher-end EV platforms. So giving that product line a next leg up in terms of platforms that's on. And so it continues to be a very strong story, and we expect that to continue. Our role, I -- listen, I think it's our -- as the systems become more complicated, our software and hardware capabilities, our integration capabilities and our cumulative experience at this point become very important to the customers and obviously very good from a competitive position. We really see only one -- really think of only Bosch as a real strong competitor at this point in that space.

And is that the same in sensor fusion as we think about some of these more advanced offerings that you're starting to implement? It's a question we get asked about pretty often, and we're hearing more from the sensor and chip suppliers that would like to get a piece of the sensor fusion pie. So maybe you could walk us through, a, I'm assuming you're doing most of the sensor fusion. Are you collaborating with some of these sensor suppliers on the back end? Are they potential competitors longer term and more advanced systems? Just maybe walk us through that opportunity and how it's changing.

Yes, we -- they tend to be -- it depends a little bit how you cut it. Like we're one of -- it depends on how you define a sensor, which I would define radar as a sensor. We are one of the biggest sensor providers to the active safety space as well, right? So just with the number of -- we'll do north of -- we'll manufacture north of 40 million radar on an annual basis beginning this year into next, right? So very strong presence in the radar space, to your point, very good at sensor fusion, which is really the software programs that take the signals from the vision system from the radar and certainly in the Motional case in the robotaxis, we're bringing in LiDAR signals as well and allowing the car to interpret those signals and decide on how best how to respond. And in real time, that's obviously a system that has to act and operate very effectively. So very strong position there. It is one of the cornerstones of just our active safety expertise. Listen, given where you see active safety going, there are a lot of other folks that one, do participate in the space; and two, want to talk about participating more. And I think they tend to be the Tier 2s, whether they're a vision algorithm provider, whether or not they're a chip provider or, in some cases, the other sensors. They're obviously -- they want to get in there looking to get in. From our perspective, there's going to be a couple of things that happen, right? There's going to be more of the compute, more of the software is going to go into the large domain controller. So you're actually going to see some of that compute, some of the horsepower -- the software capabilities come off of these sensors and decentralize into the large domain controller. It's more efficient, it's more cost effective and then really enables higher levels of functionality. So from that perspective, I think that trend actually benefits us, right? We own -- we have a strong leadership position in those large domain controllers. And as more software and more capability come away from the periphery and go into that centralized domain controller, that really accrues to our benefit. And that's clearly a trend we're seeing. To the extent it's happening in radar, we're able to keep that benefit. Our -- the content shifts a little bit from the radar to the domain controller, but we keep that. And as you start to think through large domain controllers eventually moving into SVA, that is the trend. That's where customers want it. They want larger, more capable compute platforms that do the work. They want to pull all of these various smaller controllers or these smaller processors into a central hub. So I think it's hard for a -- going to be hard for a pure sensor provider to want to do more compute on the sensor. They may be very good at it. The sensors are maybe very capable. But the trend really is again, from domain centralization to ultimately to SVA, to pull the software, to abstract the software from all of those individual devices and really concentrate it in the large domain controller. And I think that plays very well to our strength. And in a lot of ways, we've been leading and pushing the industry in that direction.

Okay. That's helpful. And it makes sense, especially as we think about the EV proliferation and the technology take rates on it as well. It feels like energy efficiency is going to be such a big focus.

Energy efficiency, latency, even within vehicle latency, it starts to become important when you get to the Level 3-type functionality, right? So the quicker you can get the signals, the sensing to the compute platform to analyze, the quicker it can get its response out. So all of that consolidation is very much in line with what we've been talking about for years now in SVA. And again, there's very capable chip manufacturers out there, there's very capable sensor companies. But again, the trend is going to be pulling the compute off those sensors and centralizing it, which really accrues to -- I think that benefit accrues to us.

Okay. Got it. Got it. And you've got active safety software, the Wind River acquisition that you announced recently. How broad -- I guess could you maybe -- a, could you size up your software portfolio today for us? And b, maybe talk a bit about some of the broad capabilities that you're trying to bring to market in software.

Sure. No, Kevin and I are actually out west with the Wind River -- with our leadership team and the Wind River leadership team here working on some of that technology road map and some of that integration this week. If you think of pre-Wind River, where Aptiv was very strong from a software capability perspective is really if you think of a software stack, it's really in that application feature level. It's what I was just talking about, sensor fusion, the radar algorithms, the path or driver policy and planning around things like active safety systems. That's where we're strong, we'll continue to be strong. But ultimately, the industry has to get to a place where there is a consolidated software stack in the vehicle that's containerized, that has cloud connectivity, that sits in that large domain controller I was describing, that large SVA controller and broadly speaking, controls the entire vehicle. And again, if you -- we often -- it's easier sometimes to think about the hardware being consolidated, pulling some of these smaller computes and putting them into a bigger processor or into a bigger centralized domain controller. Effectively, the same thing has to happen with the software. And the way that happens is you've got a software stack that is an edge-enabled operating system, which is what Wind River is excellent at. That is then containerized, which means it has a development environment where the application and feature levels can go into that software stack, be developed for that software stack, reside on top of that software stack. And that's really what gives the full life cycle management and gives the OEs the ability to monitor the software, deploy software, enhance software over the 10- or 15-year life of that vehicle. And that's ultimately what we're talking about. And right now, the software as well as the hardware is incredibly vulcanized in a vehicle, right? There's not a single software stack. All of these domains tend to have their own operating systems. There's no real ability for an OE to manage that [ data set ] software, and it's worked fine to date. But as you talk about moving from 2025 to 2030, you talk about the increased functionality that's going into the vehicles. You want to talk about efficiency of software design and some of the cost savings around warranty. And then you also want to enable the services the OEs are talking about by 2030, right, deriving revenue from software enhancements, having connectivity to the second or third owner of a vehicle vis-a-vis this connectivity of the software. All of that needs a much more robust system. And that's really where we think we're very well positioned with Wind River. We started working with Wind River earlier in 2021 on a collaboration agreement to develop that software, develop that software stack. The more we got to know Wind River and the more we saw, which is a very important part of our strategy, how their knowledge from other industries, industrial automation, aerospace, defense, telecom, actually gave them some insights into how to do this for automotive that we think the industry was really missing. We ultimately came to the conclusion that it was a -- it should be a part of Aptiv, and it became an acquisition target. And ultimately, that software stack sits in the vehicle, controls much like the Motional system controls, the robotaxis. This is an efficient [ system ] that will control the vehicle and enable the next step in vehicle technology that we've been talking about for a number of years and that our customers are talking about in terms of what they -- where they want to be and what they want to do and in that sort of 2028, 2030 time frame.

Okay. Got it. And just a reminder, we've got a little under 15 minutes here. If anybody has any questions, we'll be addressing those in a few minutes. But I just want to remind everyone that's listening in here. Maybe last one on software. Joe, what in your mind does a harsh environment edge software business look like longer term? We see 35% EBITDA margins or higher fairly commonly in software land and even some overlap into kind of pure play automotive software. So curious about the longer-term opportunity you see with the Aptiv software business.

Yes. I certainly think that is a realistic set of expectations for us as you get in -- as you get out past sort of that 2026 -- 2026, 2030 time frame, the back half of the decade. Wind River has seen really strong growth on this new product, this web-enabled, cloud-enabled software stack, this Wind River Studio product. That counts for the majority of its growth that was launched in the beginning of 2021 and accounted for over 11% of revenues by the end of the year. That's where we expect the growth will be. That business currently printing in the mid-low sort of 20% EBITDA, call it, 20%, 22%, 23% EBITDA, just given some of the investment that's being made in the studio product and in what will be the automotive product. But certainly, those EBITDA margins in the 30% range and a business -- we've talked about $1 billion of revenue as we get into 2026 and grow from there. That's certainly our expectations, David. And it will be a revenue subscription model even for automotive. This isn't going to be a content per vehicle, a couple of bucks per copy per vehicle. This is really a development environment. It's a software solution where the OEs and their partners, their tiers will develop in that environment. They'll deploy the software in that environment. And they will monitor and care for that software over the life of the vehicle in that environment. So it's more of a, what I'd call, a revenue subscription-type model.

Okay. Got it. Perfect. And maybe a couple quickly on SMPS. And I want to start with high voltage, your growth expectations this year another 40% to 50% year-over-year. I was hoping you could talk about how you're winning today in high voltage. In other words, is it individually across the component level, whether it's connectors, cable management, distribution systems down to the subsegment? Or are you finding more and more that the OEMs are going for the full systems package, and that's what's driving that growth and some of the building backlog you're seeing in high voltage?

Yes. It's a -- so yes, $1 billion in revenue, a little shy of $1 billion revenue in 2021, accretive to SPS segment margins. So it's just -- it's really been a very strong product line for us. $3-plus billion of bookings last year. So a growth -- a strong trajectory in that business, and we expect that to continue. Listen, there's a large percentage of that business that is the full system, where we're able to offer the customer the complete, what I'll call, high voltage distribution system, connect to the battery, run throughout the vehicle to ultimately to the electric motors. Depending on the particular vehicle, there's obviously some power electronics stops along the way. That's a meaningful part of the business, and that's one where I think we can really distinguish ourselves in terms of our engineering capabilities and our scale. And that, to some extent, is how we started -- to your question about how we really started marketing this business and selling, right? If you think about just how customers -- our customers have come to market and so quickly and very aggressively to launch EV platforms, right? We saw it in Europe. We see it a lot in China. We're going to start to see it, we think, in North America. They needed to be able to scale quickly. And just given the size, scale, capabilities of that SPS segment, we have content on one out of every 3.5 vehicles manufactured globally. We were a very good place for customers to come even at higher volumes as the volume numbers started to tick up. And they were sort of able to take the electrical distribution system off the concern list. They had a supplier that was capable of designing the system, capable of building it, capable of delivering it in relatively short order to help with these production ramps. And I think those core capabilities of that business is really what helped distinguish us so quickly out of the gates. And Kevin quotes a statistic. We're on over the course of 2022, 2023, we have content on 50% of the new high-voltage vehicle launches globally, right? So I think that really speaks to how quickly we were able to meet those customer needs. The benefit we also have, if you think about the HellermannTyton business, the cable management business, if you think about our connection systems business, not only are they providing the components to us for our complete system, but their products have been spec-ed into OE libraries, right? So which gives the customers the ability to standardize on connector platforms regardless of who's doing the wire harness, so regardless of who's doing the electrical distribution system. And those businesses do a great job of working not only with our -- with their sister company in the electrical distribution side, but going directly to customers, designing the high-voltage products, designing the high-voltage capability and really gives us an expanded market opportunity that not only do we have -- can we sell the complete systems, but we can sell those individual components and have those spec-ed into customer library. So the growth is really coming from both of those, both of those areas. And that's exactly how we'd want it. That works well when we're able to do that.

Okay. Really, really appreciate it. I'm starting to see a few investor questions flow in here. So I'm going to turn it over to Giulio from Exane, who's going to handle the audience Q&A here, but thanks again, Joe.

Yes, perfect. Thanks, David. So we have quite a few questions. [Operator Instructions] I'll take the first one. Will high-voltage connectors tomorrow have the same margins as low-voltage connectors today?

Yes. The margin structure in the connector business, actually, the margin structure on the high-voltage system overall is stronger than low voltage. So if you think of a low-voltage system, the system itself is about 70% cabling, 30% connector. High-voltage system is 50-50. That's in part because there's less cabling, you're not running throughout the vehicle multiple times, but you also wind up with more complicated connectors. They're higher voltage, they're carrying what's a lethal charge. So you wind up with more robust connection systems. There's various, what I'll call, safety disconnect systems that allow technicians or first responders to quickly take -- de-charge the parts of the vehicle or the entire vehicle. So the systems overall are more accretive from a margin perspective. And the connectors themselves are more expensive and have higher margins just given there is an added level of complexity dealing with the high-voltage charge.

Perfect. And then the second question on active safety. Over the next 3 years, can active safety on its own carry 15%-plus outgrowth in AS & UX given growing take rates of Level 2 and Level 2+ active safety systems?

Yes, that's certainly possible. I think growth -- outgrowth is going to be a little lumpy just given the launches and timing of new launches and lapping prior launches. But yes, strong -- we see strong double-digit outgrowth continuing in that business for an extended period of time. There's still relatively low penetration, particularly in the Level 2 systems. And we're seeing customers also as you get out over the next couple of years have interest -- and we've got some advanced development programs have interest in at least initial early entry-level Level 3 systems as well.

And then a question on M&A. I mean, we are seeing a step-up in M&A activity in the high-voltage connector space. And the question is how does Aptiv make sure that we're staying on top of M&A for critical components needed for the future of EVs and avoid missing opportunities in the market.

No, listen, we have a very robust M&A process. I know there's been a lot of attention over the last 1.5 months on Wind River. But our M&A strategy is very balanced across both segments. I think to date prior to Wind River, a lot of the M&A activity was actually within SPS. And we're -- I would say we're viewed as a leading acquirer candidate for a lot of those assets that come to market. We've got really good relationships, obviously, with -- a lot of those assets tend to be owned by PE. We've got good relationships with the PE firms that participate in that space. And I think we're very well positioned. We try to obviously be smart, disciplined buyers. And I think there is a little bit of -- you've got to be mindful of some of that technology and just make sure we got a clear line of sight to its applications and how it gets used. But I think we've got a really good track record of acquiring and then doing well with the businesses after the fact. And high-voltage connection systems or high-voltage technologies, there's no exception to that.

Okay. Perfect. And following up on high voltage, should one think about revenue growth to be in line as take-up rates of PHEV and BEV? Or can this segment grow in excess of unit growth for high-voltage applications over the next 3 years? So I guess it's a question about outperformance in this segment.

Yes. There will be -- there'll be content growth within high voltage as well that will take it above strictly just the unit growth. We're looking at new technologies. We're looking to expand that portfolio, both organically and inorganically. And we've got some opportunities here around things like flat busbar technology, which is incremental to the portfolio. And so you'll see content growth and new product offerings within that high-voltage portfolio that contributes to the overall outgrowth.

Okay. Perfect. And I think we have time for one last question. Can you maybe update us on the status of your JV partnership with Hyundai Motional? And can you remind us of your customer wins so far? And what is the time line in terms of commercialization of your generation 1 and 2 platforms?

Yes. The technology continues to develop on track. They are drivers -- Motional is driverless in Nevada, which will be the location for their first commercial deployment in about a year running driverless vehicles within Vegas on the Lyft network. So all of that is happening. They've also announced in Southern California a robotaxi offering with Uber Eats. That will start later next year as well. So that continues. I'd say the partnership with Hyundai has been as strong and as successful as we could have hoped for, if not even a little more so. That next-generation technology is going to get rolled out on the [indiscernible] 5. Those cars are out driving the road now in a driverless fashion, driverless capabilities. And that's given us access to a -- very quickly to put that -- put Motional's technology on a fully electric brand-new platform. That platform is going to be manufactured all over the world. These cars, the robotaxi fleet can come off the normal production line substantially complete, which obviously makes it a -- from a cost perspective, makes it an attractive offering for ultimately who the customers will be. There's going to be cases where I think the network operators, the ride-hailing operators themselves want to own some vehicles. We're getting a lot of inquiry from what, I'll say, are traditional fleet operators whether those are rental car companies or others like that, who see the potential of owning these robotaxis, deploying them on networks that sort of fits their existing financial model of where they own vehicles and sweat those vehicles for returns. So I would expect to see a lot of commercial developments really over the next 12 to 15 months coming out of Motional along those lines.

Okay. Great. Really appreciate the time today, Joe. It looks like we're out of time. Giulio, thanks for handling audience Q&A. And thanks to everyone for joining us this afternoon, this morning. Thank you.