Aptiv PLC (APTV) Earnings Call Transcript & Summary

Okay. Good morning, everybody. We're going to get started with our next session. I'm Itay Michaeli, Citi's U.S. auto analyst. And we're delighted to have Aptiv back with us at the conference. The company recently reported their Q4 results. There's plenty to talk about, and so we really look forward to the conversation. From Aptiv, we're very pleased to have Kevin Clark, Chairman and CEO; as well as Joe Massaro, our CFO and Senior Vice President of Business Operations. We'll keep this to a fireside chat. If you do have questions throughout the session, just feel free to raise your hand, and we'll get a mic over to you. Kevin, Joe, thank you so much for being here. Great to see you both.

I thought just because we're, I think, 3 weeks since earnings, we'll start with some financial follow-ups, then we'll get into tech and other kind of key topics. But maybe just first, I guess we're halfway through Q1. Just curious how are things going thus far? Any key industry observations to share versus expectations?

No, I'll start. Obviously, Joe should chime in. No. I think things are in line with what our expectations were when we announced earnings. So as we look at -- to your point, we're only weeks into the quarter, but things look like they're playing out exactly as we expected them to. So no major updates there.

Sometimes, that's good. And so stick on the financials, I see a lot of inbounds we had on the revenue guidance, as I'm sure you have as well. And the primary question we've been getting is what Aptiv's degree of confidence in the 2024 revenue bridge, particularly in areas like customer mix and backlog and launch timing, even trim mix. Maybe if you could just address, starting with the top line, just the overall degree of confidence and how you're kind of looking at some of these drivers.

Yes. I think when it comes to our adjusted growth forecast of 7% for 2024, I think we have as much confidence, probably a little bit more than we've had in the last couple of years, just given the supply chain disruptions have subsided significantly. We really don't see customers being disrupted by chip availability or supply constraints. As always, we've got a fairly robust forecasting process for the current year. So we're on our customer schedules. We're sort of a rolling 12-week production schedule with their full production forecast for the year. So we're tied out with customers. The supply chain is effectively back relative to where it was over the last couple of years. So I feel good. I do know we get a lot of questions, and I think you've heard us start to distinguish between growth and growth over market. Clearly, our 7% growth in a flat vehicle production environment, we feel good about. I think growth over market, SUV production stays flat, it should be right around that 7% as well. Obviously, saw some impacts last year as it related to the UAW strike impacting growth over market in North America and some China OEM customer mix impact as well. So what we can control, what we can drive in terms of revenue growth, feel very good about. Dynamics in the market, assuming they normalize back out, we believe we'll grow about 6% to 8% above vehicle production as well.

Terrific. And I know that you don't disclose annual net backlog, and you disclose bookings, we'll come back to that. But roughly, how should we think about backlog contribution in the $1.2 billion of sales growth this year or at least maybe backlog contribution this year relative to last year?

Yes. We've got -- I mean, listen, we're continuing to grow, obviously, and we'll have customer launches of new programs that were in prior bookings. The way I would think about it, we tend to book revenues in a given period that turn into -- bookings in a given period that turn into revenues over a 2- to 3-year time frame, depending on what business depending on the programs. And if you look back just historically, you can see '17, '18, '19, when we're $15 billion, $16 billion, $17 billion of revenue, and we're booking $20 billion, $22 billion, $23 plus billion of revenue, you can sort of follow that through and we'll do about $22 billion of revenue this year. So the bookings tend to manifest themselves as revenue 2 to 3 years out, and the programs run from anywhere from 5 to 7 years.

I think the only thing I'd add to Joe, is when you look at program launches, so 2022 roughly 1,700 or 1,800 program launches last year, just a bit over 2,000 this year, north of 2,000. So to Joe's point, when you talk about bookings revenue, bookings, bookings turning into revenue, that's reflected in the pace of new program launches that we have throughout 2024.

Got it. That's helpful. So more launches this year for sure. And then one more as to top line outlook for the year. What are some of the sources of the -- biggest sources of downside risk or upside surprise, kind of what you think can go right wrong in the outlook in the top 1 or 2.

Well, like I said, we're on customer schedules for the immediate year. So -- and particularly within that near sort of rolling 12 weeks, particularly absent the supply chain disruptions, don't typically see moves in those near-term forecasts. Our active safety business, which finished last year at $2.5 billion of revenue, continues to be a strong contributor that will grow well above 20% this year. There's -- active safety is highly sought after by both our OEM customers as well as end consumer vehicles. So expect that to continue to be strong. High voltage, as we've talked a lot about this. High voltage has certainly come in a bit. We're now forecasting high voltage growth of around 20%. That was almost 30% over the last couple of years. We've seen customers -- and I think this is sort of well known at this point, we've seen customers pull in their schedules, particularly in North America, a little bit in Europe, while EV remains very strong in China. So our high voltage business finished last year at about $1.7 billion of revenue. And again, I would expect that to grow right around 20% this year. So listen, I think in a stable vehicle production environment, all of our drivers are in place from a revenue growth perspective. We've got an engineered components business. So think connectors, cable management and fasteners, that business is well above $6 billion of revenue at this point, growing, call it, 5% to 6% per year. So everything is growing in line with our expectations. And I don't think -- maybe you won't see the upside to vehicle production you saw over the last couple of years, but very comfortable with the 7% in a flat environment.

And to think about the broader revenue margin bridge for the year, how consequential are commercial recoveries from OEMs at this stage? Are we pretty much set in piece price and it's kind of not a sure thing, but reasonably assured or there's still a lot of potential moving factors tied to those outcomes?

Yes, there's some in there. The team has done a great job working with customers over the last couple of years. We've talked about that and doing that while at the same time booking record levels of bookings. So there's some amount -- it's somewhat dependent upon what we see from a material inflation standpoint, what actually transpires what we see from a labor inflation standpoint. The bulk of that is in piece price today, but there's a few customers that we're working with at this point in time to push more of that -- to put more of that inflation into piece price.

A few for financials and again, if everybody has a question, feel free to raise your hands. On the Q4 call, you provide sort of an update on where you are on the 2025 margins relative to the initial CMD targets. But I was hoping you can touch upon where you think you stand on a dollar basis for revenue and OI, just given the margin rates can move around on a lot of different factors. Do you think you're sort of tracking to the revenue in OI and maybe just the revenue? How do you feel about the dollar amounts you put out there?

Yes. I think from a dollar value perspective, 2025, this was the targets we provided at Investor Day last year. I think the dollar, revenue dollar OI we're basically right on within sort of a reasonable sort of guidance range. I think what we cautioned on the fourth quarter earnings call was actually the margin rate. So we've seen really strong growth. Some areas growing above our original expectations, stronger vehicle production than the original forecast model from Investor Day, are seeing some margin rate headwinds which we call it about 100 to 150 basis points for 2025. So we had forecasted roughly 14% operating income margins. We're asked a question about where we stood on that on the earnings call and said basically, if we had to call it today, we said 100 to 150 basis points of headwind on that 14%. Certainly not giving up at this point, 2025 is a -- obviously, a couple of years out, primarily driven by a couple of things that we had in the Investor Day model but are coming in higher than expected. So primarily around Mexico inflation. We're seeing a tremendous amount of inflation in our Mexican workforce. We had an estimate of 15% to 20% increases when we gave the Investor Day guidance. That's coming in 25%, 30%, in some cases, some locations, north of 30%. So obviously, the team is taking actions to deal with those. Kevin, on the earnings call talked about increased focus, which we've been doing a lot of, but actually accelerating and increasing our focus on automation in the factories to actually take labor out since a big driver of that labor -- that increase is labor inflation and looking at other alternatives with that footprint. The other driver really is a strengthening of the peso beyond sort of what we had expected. Peso strengthened significantly in early 2023, 20%, 25% appreciation over the Investor Day model. So again, working on it, not giving up, but wanted to just provide an update on where we stood. But again, I think from a dollar perspective, we'll be there. It's really a margin rate that we're working through.

Got it. That's very helpful. Given the inflation, Joe, you just described, and I think Kevin, you mentioned on the call -- on the Q4 call, the automation to get SMPS. Historically, automation was not a big part of that business, I think, just because it didn't make a lot of sense. Is that now changing? And how big could this be in the next 5 to 8 years for you?

Yes. It's -- there's an element of -- in response to labor inflation in Mexico and elsewhere, and increased demand for an increased need for automation. There's also, as you think about the complexity of a harness going from where it is to more standardized from an OEM standpoint. Actually, product design enables the opportunity to do more automation, right? Historically, the wire harness was literally the last product that was designed by an OEM or by Aptiv for an OEM and put into the car. Now it's been brought up. It's been pulled forward. There's a lot more focus on how do you take copper content out, weight content out, mass content out. So how do you simplify, how do you standardize. We've talked about -- you've heard us in the past talk about zonal controllers or central vehicle controllers, things like that, which gives you the opportunity to kind of rethink and take a portion of that harness and actually standardize which enables you to automate. I think by 2030, end of the decade, our target -- our internal target at this point in time is to have more than half of that activity automated. Again, part of that is to drive towards smart vehicle architecture that we've been talking about over the last several years. Part of that is, quite frankly, in response to what we see from a labor inflation standpoint.

Got it. So it's somewhat tied to the move to SVA where you get the benefit of the content, but also...

Again, going back, there's a real focus. When you think about SVA, when we talked about smart vehicle architecture, when we talk about simplifying, standardizing vehicle architectures so that you can take out weight mass and you can separate software from hardware, that drives standardization. More standardization, easier to automate.

Perfect. And then one more financial question, and we'll kind of shift gears to tech. How are you feeling about the 2030 target at this point? Obviously, EV adoption is slower, but your bookings have been very strong, the $40 billion, 17%. Should we assume maybe a year or 2 behind? Can you kind of still get there? How are you feeling about those targets?

No, again, I think from a dollar perspective, we're lining up pretty well, right? We've talked about having a $40 billion business in 2030. You've seen us over the last couple of years with $34-plus billion worth of bookings. As I said, those will start to convert to revenue over the next couple of years and expect that to continue to grow. Listen, there's obviously been a lot of focus on EV and EV numbers. We had historically been fairly conservative. So our long-term EV forecast was for EV penetration to be between 30% and 35% globally in 2030. At the time we gave that Investor Day guidance, we got a lot of criticism for being far too conservative. I think a lot of the benchmarks were 50% plus. So that's -- I do think that's sort of 50% certainly coming in. When we sort of look at the numbers and what our customers are planning, sort of where the world is going, still see that between that 30% and 35%. So -- and as I said earlier, the rest of the business continues to grow in line with expectations and continue to do a really nice job on our adjacent market growth where we've taken the business now to almost 20% non-light passenger vehicle revenues, adding revenues in from commercial vehicle, aerospace, defense, telecom. So we're starting to get a good mix of revenue in end markets as well.

I think qualitatively, Itay, we'd say -- and obviously, it all needs to translate into the financials, we, the -- managing it, we've never felt better about the business in terms of our product portfolio where we sit, in terms of what we enable, in terms of our capabilities, in and around vehicle architecture, in and around software, in and around compute, it's certainly reflected in our bookings. When you look at our customer mix, there are some areas that we'd like to continue to see improvements, like Japanese OEMs, yes, but that's been a focus area. And we've talked about our more recent bookings in areas like ADAS. When you look at the China market and the China locals, a significant ramp-up in bookings with meaningful Chinese locals. We have confidence in other sustainability and profitability. Those locals looking for us to support them as they try to export out of China or move production out of China. So from our standpoint, the business from a competitive standpoint has never been better positioned.

Perfect. On EVs, you read what we all read and I'm curious kind of what are your thoughts on the current investor sentiment around EV. You've been right on your EV call, certainly on 2030. We now think maybe some people may even be below that. How would you compare what you're seeing out there in broader investor sentiment in EV versus, a, what do you think, and b, what your customers are telling you, what you're seeing in forward plans?

Yes, from a -- let's start from a customer standpoint. North American customers are obviously struggling with EVs. But at least the 3 primary -- the D3 are all committed to electrification. And part of that is whether EPA targets are pushed out or not to hit those targets over the medium and long term, they need to move towards electrification. They have to -- they don't have a choice. Second piece that we lose sight of if they're not investing in the EVs, then they need to be investing in internal combustion engine technology. That's an expensive calculus. So at the end of the day, they would rather go down 1 path versus another path. Now obviously, there's a bit of a transition there. But when you say there's broad-based -- a commitment to electrification maybe near term, more adoption of plug-in hybrids than what was originally estimated. But commitment to electrification, North America will be the slowest as we've always thought. Europe commitment will remain there. Maybe there's a slight push out of CO2 targets. Our general view is though that will not be an extended period of time, all the European OEMs are focused on their electrification platforms. And then China is doubling down, right? We see what China is doing for the China market, which tends to be more of a national security sort of mandate as well as a desire to lead in the technology mandate and we see what they're doing in terms of exporting to European and South American countries. So we would say, in general, the U.S. investment community is probably more cynical about electrification. Our view is probably overly cynical but these things evolve. And so we think there's -- Joe talked about our historical targets, roughly 30% growth in our EV high-voltage portfolio. We scaled that back to 20%, 21% sort of growth which is still really strong growth. We have platform solutions that save our customers somewhere between 10% and 30% if they adopt our full platform solution and when you think about the cost headwind that's referenced in terms of adopting EVs, that's why we're seeing such a significant demand. And we're on the path of enabling it.

Kevin, terrific new business wins, nice outlook for '24. I'm trying to kind of align those numbers $34 billion, $35 billion with the overall pace of adoption for next-generation platform, whether it's ADAS, SVA. There still seems to be some OEMs trying to in-source some of these things. And so could we still see that potentially accelerate, a, if we have more OEM outsourcing and some have visibly struggled with in-sourcing? Or b, as we just get more rapid adoption, what do you see -- how do you relate this number of bookings to the overall pace of adoption and opportunities from potential outsourcing going forward?

Yes. Listen, more technologies going into the car, software and hardware and OEMs are in need of more support from a strategic supply base, folks that bring kind of integrated platforms it can do systems integration. That's something that we do and we do very well. As you know, we've always said this whole concern about OEMs in-sourcing everything with overstated. While that was -- while that mirror was taking place, we were booking north of $30 billion in new business awards. I think -- we think what's going on is, hey, there is more content going into the car. Some of that with OEMs that have capability, it's certainly an opportunity for them to do more if they see value in that. If they're thinking about their business from an economic and return standpoint, there are things that obviously they shouldn't be focused on, in our view, in designing and in-sourcing. And what's incumbent upon us is providing them with solutions that, again, lower their costs that enable them, whether it's electrification or it's ADAS or it's user experience, enable them to achieve the targets that they want from an overall vehicle performance standpoint and do it with quality. And we have experience in those areas that are most relevant in the vehicle, like active safety. And those are the areas that we continue to win. Our general view is you're going to see more dependence upon strategic suppliers. Players like ourselves that play across multiple aspects of the vehicle, others that are very niche are focused on a single area, whether it's just user experience or it's just ADAS, they'll be more challenged because we're seeing domains consolidate, right? We're seeing sensor fusion, and we're seeing chips basically now moving towards a situation we're using the same silicon to basically operate the in-cabin activity as well as the active safety cap activity. Those are all things that we're leading on that we're investing in. So we're enabling that.

Kevin, to what extent is Wind River also enabling that and giving you a competitive advantage over some of these other more focused suppliers in 1 or 2 domains? Maybe just an update on Wind River that as well.

Yes. So Wind River for us, when you think about -- Wind River is at that layer between the hardware and software where it really allows you to extract hardware from software, right? So it's real-time operating systems historically for Aerospace and Defense Solutions, for telecommunication solutions for Industrial Solutions. A&D and telco have gone through the -- that separation of hardware and software over the last decade, and Wind River has been very instrumental in that. They provide Linux and hypervisor solutions as well for that space. They also have an engineering tool chain called Wind River Studio that optimizes software development and allows full life cycle management. We're now using it on a number of our programs at Aptiv, and we're seeing from a productivity standpoint, 20% to 30% productivity in our software solution. So when you think about the OEM, we have a customer who's responsible for ultimately designing the car, delivering the car, but we also have a customer that's the engineering organization that whether we have a significant portion of that program or not, they're involved in that activity. And to the extent, we can give them line of sight. They can be involved in the development, the deployment and the operation of the software -- in the vehicle they can get full visibility, that's critically important. And then when you think about architecture, a lot of -- again, going back to your question about in-sourcing of activity. In-source or outsource, really, at the end of the day, it doesn't matter if you really have a monolithic architecture. If you don't have the ability to upgrade, enhance, address issues in the vehicle software architecture because of the way it's architected. Wind River Studio is fully containerized, can go across multiple domains versus having unique domains where software is integrated into the middleware into the real-time operating system, provides the OEMs with flexibility to use whatever chip provider they'd like to use, whatever cloud provider they'd like to use. And then we have the software that sits above that, right? The ADAS software, the user experience software, the battery management systems software that's designed or architected in a containerized way as well that, again, allows them to do regular updates or OTA on the vehicle versus 3 or 4 times a year.

Terrific. And you mentioned before the strong bookings is occurred even with some of the in-sourcing efforts and of course, some of the automakers who've been in-sourcing have had some more publicized issues. If we were hypothetically to see some of those automakers begin to shift more back towards outsourcing, is that potential upside to bookings over the next couple of years?

Yes, it could be. Listen, again, I think what we -- what Joe and I would tell you is that push towards we need to vertically integrate, which -- we would say that -- we don't hear that. And I think part of it is because what you read about in the newspapers, some of the challenges that some of the OEMs are having. There are areas that they consider strategic that they'd like to have some involvement -- more involvement in than what they've had in the past. And again, that's why we've been talking about we're developing an open system that allows choice, allows flexibility. We prefer to do the full platform. We think that's a better value proposition for the customer at lower cost. But if a customer wants flexibility and wants to contribute a portion of that technology, they're positioned to do so.

Maybe switching gears to active safety. You've had some notable wins, including, I think, radar with some Japanese OEMs. How are you thinking about the 25% sales growth CAGR you put out at the CMD? What's quoting activity look like and maybe just an update on Gen 6, what's your goal to achieve with Gen 6 this year?

So our Gen 6 ADAS solution is our next-generation solution. It's a full platform from our hardware to the Wind River RTOS and Linux solution on up the software stack. We've done significant development from a radar technology standpoint, which enhances the overall performance of the platform. The platform is vision agnostic. So you can use Mobileye, you can use other vision providers. We have a partnership with a company called StradVision in Korea, where we're working very closely. We're in active dialogue with, I don't know, roughly a dozen OEMs now about their next-generation ADAS solution. Performance or the design of the system significantly reduces the dependence on compute. So cost and efficiency is significantly lower. Performance is very strong. So when OEMs look at the kind of performance versus overall cost, dependence upon compute, ability to continue to enhance the program with enhanced radar solutions, vision solutions. There's a significant amount of interest. So we'd expect to have announced a few bookings in calendar year 2024.

And on Gen 6, is that generally targeted towards premium segment? Is it more kind of a quasi mass market?

Fully scalable. So we've really focused on how can we develop a solution that meets the needs of an OEM who needs to scale from L1 up to L3 with SOP targets of roughly 2026. So that has been the real focus. So when you go to an OEM that has multiple brands, one of the challenges they wrestle with is how do they bring the cost down of a premium ADAS solution to apply to the mass market. We've really focused on how do we make sure that it applies to mass market, and we can build performance up from that to meet the L2+ or L2++ or L3..

That's great. As we think about the next few years, just remind us how we should be thinking about R&D spending in general? I think you were at 6.5% or so last year. And I know it's in your COGS and so actually gross margin ex R&D, if we were kind of the tech company would be significantly higher. How do you think about that with all the launches you have and the bookings?

Yes, listen, I think -- and maybe I caused confusion. I think when you look at our engineering to sales over the last, I don't know, 3 or 4 years, we're down, I don't know, 200 basis points, significant productivity improvements in engineering to sales. Now what Joe and I have tried to do is -- and it's reflected in the numbers is take some of that performance and reinvest that in productizing our software portfolio, advancing our radar solutions, advancing our SVA solutions, our CVCs, OSPs, zonal controllers, investing in areas like power electronics, all of which we've had significant success in. So as we look at total engineering, we've been purposeful in rotating from 20% of that R&D spend being advanced engineering to last year, it was roughly 30%. Now we go through the normal sort of process of is this going to return, is this going to have an adequate return? And our view is it certainly has, and that's reflected in the $30-plus billion in bookings we've had over the last 3 years. And the north of $34 billion bookings we expect for 2024. So that's all focused in that advanced. We refer to it as advanced development activity.

Maybe shifting gears and if there are any questions, feel free to raise hands. On customer mix, obviously, another topic that came up a lot post the quarter. How do you think about balancing, targeting different customers while balancing maybe the growth of the market, targets and focus that people have versus ROIC in your business as well, obviously, with some of the newer players in China I'm sure that's more of a consideration now than maybe several years ago. How do you go about doing that? Who do you want to work with? Who do you target? How do you balance those 2?

Yes. Listen, we -- well, we start with, we focus on return. It's a big piece of the management compensation plan is return on invested capital, pushed down to our business units. So all the way down business units and regions. What's important for us is that we're partnering with OEMs who are going to build the vehicles and have programs that we're going to make money on. So a great example is China, right? Chinese local OEMs. There are over 125 OEMs in China. And we -- the bulk of our business is with the top 12. From a China local standpoint, that's where we're focused for 2 reasons. One, we have confidence in their sustainability. Two, our view has been that they eventually were going to focus on export, which makes them even more dependent upon Aptiv. When you look at our launches and our bookings in China as an example, I think the last 3 years, we booked $6 billion of customer awards that are now launching 2024, 2025, '26. 60% of that is with local Chinese OEMs. So we talk about how do we see share more in that overall market. We'll see it there. But listen, you get below the top 20 OEMs in China, there's an element of risk you're taking and it's a group of OEMs who, by and large, oftentimes lose money, which likely means their supply base is loosing money. So we try to be selective. On the Japanese OEMs, that has been a challenge to crack for most non-Japanese suppliers. They have a structure in that market that's operated reasonably well over the last few years, over the last several years. We've had a lot of success more recently on a global basis with our ADAS technologies, Japanese OEMs, that's been less of a focus. Our technologies are more advanced. So we've had some significant awards from a radar standpoint, which we think positions us well to continue to penetrate there. And that's an area we focus on. But again, it's ultimately focused on margin and return on capital. And when we look at programs, Joe and I have a meeting with our team on a weekly basis where we go through what are the -- where do we stand from a pursuit standpoint. What's our strategy from a basically pricing standpoint, the big focus is on return and margin rate.

When we see the Chinese OEMs, I think we've talked about before and just a very rapid product development cycle. So sometimes what takes years in the Western market is going to be done in a much shorter time frame. A, do you think other OEMs around the world will have to adopt these much quicker cycles. And if they do, is that a benefit for you? And maybe are you already seeing that benefit with some of your recent ADAS radar awards that you mentioned?

Yes, the Chinese OEMs to put in perspective, what we launched in North America for a more advanced solution is typically, Joe mentioned from award date to actually SOP is 2 to 3 years. In China, including on the ADAS side, that can be less than a year. Now part of that is the pace of work. Part of that is the amount of testing and validation that goes on. It is different. So OEMs are willing to take more risk on the technology that North American and European OEMs are not willing to take. And that's where I mentioned about the opportunity of bringing those OEMs from the China market to Europe or to North America. They will have to operate at standards. They'll be testing and validation requirements that are different than what you see in the China market. As it relates to legacy OEMs in the more mature markets, that's what we're trying to enable when we talk about software architecture and hardware architecture. How do we architect things in a way where on an ongoing basis, improvements can be made, pushed through in an efficient way so that OEMs can be constantly enhancing and upgrading the vehicles that they're putting on the road.

I'd also add the Chinese, I think, have been far more willing to adopt a systems approach with suppliers like Aptiv, whether it's high voltage or full safety systems that allows them to go much further faster, right, versus splitting something like that across 2 or 3 suppliers and then the OEM taking the responsibility to sort of systematize it. And we -- as Kevin mentioned earlier, we've got a lot of system solutions that are very cost effective for an OEM to put onto the vehicle. And I do think that's one of those areas where I think European and U.S. OEMs should go faster.

Maybe 1 more on customer mix. I think the multinationals versus local, 60-40, I think last year, 50-50 this year. Any number target in the next few years? Where do you think that's likely to...

Bookings have been running 50-50 for the last couple of years. We've actually been a little bit ahead a couple of quarters north of 50% on local. So I think that continues to shift. Our Chinese business is fairly good size. It's over $4 billion in revenue. If we're having this conversation in 2018, 2019, we would have been 75-25, multinational versus local. So we've actually moved fairly quickly relative to diversifying that large revenue stream. So I think that continues to go certainly to the 50-50 level. And then we'll see where bookings take us. I think it's possible when you look at the market, when you look at the progress, some of the Chinese OEMs are making, again, that top 12 or 15, Kevin referenced, it's possible you get out a few years and you see 60-40 sort of a complete reversal.

Excellent. Maybe on -- question on the front, I think we could go.

[indiscernible] I think over the last few years, you guys have had higher win rates and kind of wider moats with customers and technology-rich products and systems. How is that trending? Are you seeing -- again, not Chinese, but core customers, are you seeing -- continuing to see higher win rates? Are you starting to see some of your competitors come with more competitive products?

Yes, it's a great question. Listen, I think win rates are kind of consistent with what they've been over the last couple of years. I think part of that is our product portfolio, is the solution we provide. Part of it and it's tough to give you a perfect numbers is. We've been much more purposeful about where we go. We've been much more selective from a pursuit standpoint because that's -- there's an investment required, right? You think of the nature of what we provide before you quote, before business is awarded, you're spending time with an engineering organization, right? You're working with them. Then you're working with their purchasing organization, their manufacturing organization. So we've tried to be just much more selective in terms of, hey, what are the key pursuit opportunities with which customers, where do we need to allocate resources at a senior level, at an operating level and then ultimately at a delivery level from a launch standpoint and go all in and very deep there. And in those situations, obviously, the certainty of award is much higher. For us, those are customers who are -- they're all focused on price, but they're more focused on the holistic value proposition, the systems approach that Joe talked about, evaluating the full platform and the benefit it brings versus how do we separate all this and go out for quote on each piece of this.

We could sneak in 1 quick one here.

And on that, can you just speak a little bit about the price cost for your customers? Are you price competitive? Or how are you pricing?

Yes, we have to be price competitive. I mean, it's table stakes. We really try to focus the value proposition on the solution we provide and how cost effective it is. So for example, I mentioned high-voltage electrification. We've had customer awards where by providing them with a full system solution relative to what they originally envisioned, we've saved them versus their target savings roughly 20% weight in mass, which translates to 10% to 20% from an overall cost standpoint from a full battery electric vehicle. From an ADAS standpoint, Itay asked about that Gen 6 ADAS solution. We're really focused on how do we give them a platform solution, a full system solution, which drives down. Our estimate is our solution versus competitors is roughly delivers, roughly 20% savings a full platform. But how do we provide it to them in a way that they can take all of it or they can take some of it because they want a choice, and we're going to give them choice, not a black box solution. So we spend as much time innovating on the technology and what it enables. We spend as much time on how do we get the cost out of that system so that our customers can ultimately afford the solution.

Great. I think we'll have to leave it there. Please join me in thanking Kevin and Joe, it's been absolutely [indiscernible] for making it out. Thank you very much.

Thanks Itay.