Aptiv PLC (APTV) Earnings Call Transcript & Summary

Okay. Great. So it looks like the webcast has begun. Once again, I'm Ryan Brinkman, the automotive equity research analyst at JPMorgan. Very excited to get going with our first presentation of the day, which is with Aptiv, some big news recently. We have Kevin Clark, their Chairman and CEO, to my left; and Joe Massaro, Vice Chairman, Business Operations and Chief Financial Officer. Kevin will start with some opening remarks, and I'll start with some questions and save time for yours at the end. Kevin?

Great. Ryan, thanks for inviting us. It's a great conference that you've been sponsoring. I was mentioning to Ryan, I think I've been to all 13 of Ryan's conferences. So it's a great opportunity to interact with investors. Thanks for dinner last night, had a great discussion. I'll start with a few comments and then we can go into Q&A. So we announced earnings last week on Thursday. I'll hit a few highlights for those of you that haven't been following as closely. Very strong quarter from an earnings standpoint, from a cash flow standpoint. To put it into context, from an operating income standpoint, ROI increased 15%, 180 basis points of margin expansion, up to 12%. And that performance really reflected 2 things: just strong operational execution, especially within our manufacturing function as well as within our engineering. Finally, after the last few years with COVID with supply chain disruption, a much more stable supply chain. So the benefits of all those costs moving through our system, which it's taken a couple of years to do. Revenue actually declined 2% in the quarter on a year-over-year basis. And we would characterize that really as a customer/mix issue. So there are really 4 customers that impacted our year-over-year revenue growth. One, a global North American battery electric vehicle company; second, a globally European-based OEM with a strong truck franchise in North America; and then 2 of the multinationals in China being impacted by share shift of Chinese local OEMs. To put that in perspective, China local OEM's revenue growth for us was 16% year-over-year in the quarter. So we're seeing significant growth amongst that customer/mix, but we're slightly underweighted relative to market, which, effectively based on our bookings profile, will be addressed over the next year or 2 years. So for us, really a customer/mix issue. We brought down the revenue outlook for the back half of the year, all related to these 4 OEMs. On the flip side, we actually increased our margin outlook for the back half of the year as well, just given the strong operating performance that we're experiencing, that we're confident, that we'll continue to deliver on in the balance of the year. We also announced a new $5 billion share reauthorization -- share repurchase authorization from our Board. A $3 billion ASR is a part of that, which really reflects a couple of things. One, our strong belief in terms of the mega trends continuing in automotive: electrification, ADAS adoption, software adoption and where we sit competitively to benefit from that. And then secondly, just the strength of our operational machine. How well we're operating now, the fact that we've been able to get those COVID costs, all those items out of our system and really generate strong incremental margins on flat revenues or incremental revenues. So those were the highlights from the call, and now we can open up for questions.

Great. Thank you, Kevin. My first question is, I plan to ask of all the suppliers at the conferences here, but I think it's especially relevant for Aptiv and that is about the changing expectations for battery electric vehicles. For years, it seemed that the pace of EV adoption could only surprise to the upside. More recently, though, there's been a reversal of this trend with S&P Global Mobilities forecast for growth in 2024, battery electric vehicle production declining from 32% at the start of the year to 10% only now. What, in your view, accounts for this significant reset of expectations? Has the slower near-term growth caused you to think any differently about the medium or ultimate long-term trajectory? And what do you think are the implications for your firm?

So we -- and I'll let Joe give some specifics on the numbers. So our perspective on electrification has always been more conservative than SPS or IHS, significantly more conservative. Our perspective on electrification, it really varies by region. It's tough to talk about electrification globally. When you look at what's going on in China and the rapid adoption of EVs and introduction of EVs. A strong view that Europe, just given political, social pressure, you'll continue to see adoption of electrification. The slope of the curve near term maybe a little bit less, but 2035 targets likely remain in place. So you're going to continue to see a big push for electrification. North America, we've always had a fairly conservative outlook, given the nature of the vehicle park principally and consumer demand. So most of our exposure from an electrification standpoint, booking standpoint has really been Europe and China. As you look at maybe how our outlook has changed, probably our view is you're going to see more hybrid, plug-in hybrid versus BEV in Europe and in North America from an overall mix standpoint. Fortunately, we have a product portfolio that whether it's BEV or hybrid, it fits, so it's incremental revenue opportunity. Put it in perspective for us, content on a full BEV is 2.5x to 3x for us from an opportunity standpoint versus internal combustion engine. On a plug-in hybrid, it's roughly 2x. So there's a tremendous amount of revenue opportunity right now. Again, as I mentioned, what we're facing right now is less of an industry issue, we're facing a customer/mix issue. So we're overweighted a couple of customers, including that large global BEV company that all of you are aware of, and you've certainly been -- my guess is you've been filing fairly closely and what they've been doing from a production standpoint. Joe, do you want to add anything?

Yes. No, just to put it into context, our high-voltage business right around $1.5 billion of revenue on our total of $20 billion, so it's an important product line, and it had seen much more significant growth over the last couple of years. We do expect that to be down sort of low single digits. Total exposure to electrified powertrains is about $4 billion, when you look at $1.5 billion of sort of high voltage-only product lines and then broader content on electrified vehicles of about $4 billion in revenue.

And my second question relates to another big theme in the industry currently, which is the strong rise of domestic Chinese automakers. They were quick to embrace electrification. Their quality and design have significantly improved. And because many of them are introducing new models at essentially twice the rate of global peers, their portfolios increasingly incorporate many of the latest innovations. Five years ago, BYD was the 13th largest automaker in China. Now it's the biggest. Together, their share of the domestic market has grown from 35% prepandemic to perhaps 55% this year. They're still small outside of China, but with big ambitions. How do you see this trend evolving inside and outside China? And many global suppliers remain underexposed to these quickly growing automakers, what is your exposure to Chinese OEMs? And can you describe any actions you may be taking to position the company to benefit from the growth of Chinese OEMs?

Sure. That's a great question. So we've been in China for north of 3 decades focused on the China market. So our China business is fully localized from a product standpoint, manufacturing standpoint, engineering standpoint. We certainly have seen the shift. So if you would have asked us 5 or 6 years ago, mix of revenues and quite frankly, mix of production, it was basically 70% multinationals, 30% local and the quality of the locals, quite frankly, wasn't where it needed to be. You look at over the last few years, tremendous share gains with the local OEMs. That's reflected in -- has been reflected in our increasing bookings with the local OEMs. So today, we're booking between 60% and 70% of our bookings in China are with the China locals. And that's my comment about that mix impact of those 2 multinationals gets addressed over the next year to 2 years. Ryan made the comment about product cycles in China. To give you some context, if we're awarded an ADAS or a user experience or a vehicle architecture program, between award and launch, it's typically 12 to 15 months, could be as short as 9 months. In North America or Europe, that's typically 2 to 3 years. So in terms of product refresh, product cycles, just the pace at which they move is really incredible. So we've been winning a significant amount of business in China. So our mix has been changing. Between 55% and 60% of our revenues today are with the China locals; and as I said, that will increase. We have a big opportunity, we believe, with those China local OEMs who are exporting or plan on manufacturing outside of China just given our global capabilities, our global footprint, our global supply chain, our recognition or knowledge of the regulations as it relates to those countries which they're either exporting in or plan to manufacturing in. So we view that as a huge opportunity. Now we reinforce this. There's 100 OEMs in China, 100. So we're really focused on the top 10, top 12 OEMs, not the balance of the China market, just based on our view on ultimate resiliency, size, scale and their ultimate success.

And another question that I plan to ask of all the suppliers at the conference and collate the responses in my wrap-up note relates to the outlook for suppliers from the expected interplay of new vehicle prices and quantity demanded. We saw during the pandemic that automakers can do just fine, even great in a low-volume, high-price environment because while automakers are hurt by lower volume, they are also helped by the higher price. Suppliers though got the short end of that stick being levered to the lower volume, but not the higher vehicle price. Vehicle sales in the U.S. remain 8% lower than before the pandemic, hurt by prices that have risen 9 points more than CPI. Now automakers will say that they're going to remain disciplined, intent to hold on to their relative pricing gains. Others expect sales to benefit from a return to historical discounting. It seems we could be approaching a crossroad with inventory recently returning pre-chip shortage, albeit not prepandemic levels. What do you think happens next with vehicle prices and volume? And is normalized demand now lower than where it was before the pandemic?

We're not sure if normalized demand is below where it was prepandemic. It's important that OEMs produce cars for our model to work. Having said that, when we plan, as an example, we tend to plan with vehicle production being flat to slightly down. That's an internal discipline that we have. We're very focused on our operational initiatives. Our performance needs to offset price downs to customers as well as inflation that comes into our system. So when we talk about manufacturing performance, material performance, engineering performance, that's what we're very much focused on. As it relates to our product portfolio for us, it's very important that we participate in areas where content is growing faster than vehicle production, that we're bringing solutions to our customers that, in fact, lower their costs versus increase their cost because we understand the pressure they're under and the amount of content that's going into a car when you think about electrification, when you think about rearchitecture of the vehicle, when you think about advanced ADAS systems, bringing that into the vehicle is costly, and we need to make sure that we can do that as seamlessly as possible and as low cost as possible. So I'd say that. The last thing, and then I'll turn it over to Joe and he can give you some perspective on the numbers. For us, from COVID through supply disruption, when you -- if you follow us closely and you look at our numbers, it was very difficult to assess performance transparently. We had hundreds of millions of dollars of costs come into our system, COVID-related costs associated with keeping our employees safe across our 130 manufacturing facilities across the globe. Premium transportation, costs associated with supply chain disruption and temporary layoffs, material cost inflation that literally was hundreds of millions of dollars, hundreds of million, which, as I mentioned in my comments about Q2, we've actually, late last year, early this year, all of that is out of our system now. And you can see the strength of our operating model and what I mentioned in terms of how we plan and how we execute. Joe, you should add...

No, I think it's an important part of the operating performance story over the past 4 or 5 quarters. To Kevin's point, just by example, in 2022, we had over $315 million of what we referred to as disruption costs. Could be premium freight, could be plant shutdown costs. We were shut down. We were seldom, if ever, the reason for a major OEM plant closure during the supply chain constraints. We spent a lot of money and a lot of effort to keep customers connected. But we were often shut down due to problems that our customers are having with other suppliers not being able to get parts. So when you look at that, you've got a situation where you're incurring $300-plus million worth of cost. But we run 100 -- over 130 manufacturing facilities globally, right? And if you think about running a plant, one of your objectives is to make the plant better every year, right? You lean out processes, you take out costs, you become more efficient. Very hard to do that in a disrupted environment. So we had the impact of not only the direct costs of the disruption, but also really got knocked off our cadence of regular performance improvement, regular initiatives that could make the plants more profitable, make them operate better. The benefit we're now seeing, and again, it's really been over the last 3 or 4 quarters, as disruption has settled down, as production schedule have normalized, as the supply chain has gotten back to, probably not the level of inventory, particularly in some semiconductors that we had pre-COVID, but there is enough now to run the business in a normalized fashion. We get rid of the direct costs, but we're also seeing the benefits of being able to run the business better, being able to run the plants better. And that's really where you see the manufacturing and supply chain performance come in and take the margin levels back up to effectively pre-COVID levels. We're very close to those levels now. We talked at our Capital Markets Day in February of 2023 about the plan to do this and fully appreciate it needed to be sort of seen in the prints before folks like yourself completely bought into the fact that they were sort of transitory costs and not structural changes in the cost structure of the business. But where I think we're definitely back to that point now. And then to Kevin's point, we've done a really good job over the last few years while dealing with all the disruptions of really looking at our key product portfolios and effectively productizing things like our active safety systems, some of our high voltage, some of our connection system, offerings such that we sell more of a product now than somewhat of a bespoke sort of customer-influenced product or system. That's allowed us to reduce our engineering costs in line with that, right? So as we're running low double-digit engineering as a percent of sales, we're now down to our target of, call it, 6% to 7%, and I think that's maintainable. So the operating performance is really starting to come through from a results perspective.

And maybe just a follow-up on that. You mentioned how the investors didn't immediately buy into, maybe still not have fully bought into the expected margin delivery. I think the highest that The Street got was maybe 100, 150 bps below your year forecast. And I wonder if -- well, it's great, you want to take credit because this is execution you're delivering. I wonder if there might be a natural and expected uplift to your margin, which is really just the unwinding of the pressure that you saw during the pandemic, which might have been misconstrued by investors as softer execution than when in reality, which is kind of how the inflation cookie crumbled because more of your costs are noncommodity supply chain costs or the software engineer salaries, they're not covered by pass-through arrangements in the way that American Axle with their steel buy is. And I wonder too if maybe you were at the end of the line for receiving those handouts in the third quarter [indiscernible] $1 billion. If you didn't pay Aptiv more, what's the worst that's going to happen? You're going to howl with them on the phone. But if you didn't pay a noninvestment-grade levered low-margin supplier, they might have gone bankrupt and you wouldn't gotten your seat or your hood. So just curious as -- are you maybe still receiving on a lag to other suppliers some of these compensations for premium costs? Or even if you're not just as -- if the average contract last 5 years, 20% roll off the books, naturally, as you renegotiate contracts to reflect the higher cost environment, your margins will rise.

Well, we didn't get any handouts -- it doesn't feel like any handouts. Listen, we've been successful negotiating customer recoveries for costs that we've incurred on their behalf. And our commercial team, business team has done a great job while at the same time delivering on record bookings. I think, Ryan, to the point you made, though, and it was -- what I tried to say, we had a massive amount of costs come into our system, a large portion of which was completely unpredictable on a day-to-day basis. So going through COVID, going through supply chain disruption, production schedules from our OEMs were changing on a day-to-day basis. We didn't shut down any of our OEM customers. We didn't impact any production. It cost us to do that, premium freight. Individuals hand-carrying semiconductor chips to manufacturing facilities of OEMs. So we went out of our way to make sure that we kept them connected. And we did it, quite frankly, at all costs. And then beginning in 2022, our focus was on we've have connected, the situation is improving and went back to our customers with we need recoveries, while at the same time, supply started to balance out and we operated more efficiently. A big piece of our buy when you look at, especially our ASUX segment, are semiconductor chips, right? When you think about advanced ADAS systems, user experience systems, you're fully aware of how that industry was disrupted. I'm sure you're aware of the levels of material inflation, pricing that we had to absorb for a period of time. And that's something that we absorbed, we digested and we've been able to push through customers in terms of recoveries and then do several things that enabled us to get more leverage within the supply chain and present higher margin, lower cost solutions to our customers.

I wanted to ask on the February 2023 Investor Day. You mentioned then that your expectation was that battery electric vehicle penetration of global light vehicle production in 2030 would be 35%. Now at the time, S&P forecast 45%. Even today, they forecast 42%. My experience is that S&P is always pretty much directionally accurate, but kind of slow to reflect when things are changing quickly. So maybe it falls to 38% or 37%, there could still possibly even be some upside there. Can you confirm that the 35% assumption you shared that, that also gets embedded into the lifetime gross bookings numbers that you put out? And could there maybe be less downside than the market imagines to your growth over market through 2030 or your lifetime bookings, and that could have been, I'm curious, a motivating factor behind the big ASR?

Yes. I think there's a couple of things there. I mean, certainly, when you look -- that was a view of what revenue and vehicle production looked like 7 years out. So it wasn't directly tied to bookings, right? Our bookings would tend to -- at least not all of the revenue in 2030 would be -- would have been currently booked in 2023. So there is an extrapolation from what we see out there, what we have won and where we see things going as to how we came up with that 35%. I think your question around the ASR though, and I think Kevin mentioned this, I mean, clearly, we have a view that EV, although maybe slower in the near term, is happening. It's clearly happening in China. It's going to -- it's happening maybe at a slower pace in Europe. North America is challenged, obviously, at the moment from -- and it's more of a product and consumer issue. Is there a vehicle, an EV vehicle that consumers are interested in? And given the nature of the big truck and SUV market in the U.S., it could be a little slower to develop. Now there's also an opportunity there perhaps for some hybrid, which we'd be very well positioned for. So I think just as you take a step back, we clearly view the long-term trajectory of the revenue growth of the operating performance, Kevin mentioned, to be very strong. We have a high confidence in it. We don't necessarily believe it's reflected in the share price today, which is why when we evaluated sort of capital deployment over the last couple of quarters, we really thought that purchasing Aptiv stock at these levels was the best investment we could make, and we felt it was important to do it in an accelerated fashion via the ASR.

I got a lot of questions from investors after the announced Volkswagen-Rivian tie-up about what that means for electrical architecture and what -- reminded me of when Elon Musk said on a conference call that they had something like 5 miles of wiring in the Model S and 3 miles in the Model X and when the Model Y would come out that there won't be a mile and your stock fell about 5% or 6%, and then [indiscernible] at the time. And then we called up your IR, and you were like, "Actually, we're doing that for them, moving to the CAN bus approach, [indiscernible] cost more money." It was a great for -- I wonder if there's any misunderstanding out there in the market? Maybe there is some negative if the automakers are more heavily involved in the design and the engineering. But I've never heard anybody suggest that they're going to be manufacturing their connectors or their harnesses and wiring, so what are the implications when the automakers maybe drive the bus a little bit more? And do you expect other automakers to follow this pattern or what do you think about that announcement?

Yes. So both VW and Rivian are customers of ours, so we should start with them. Listen, I think it reflects, one, when we started talking about smart vehicle architecture about, I don't know, 7, 8 years ago, right? So I think it validates the fact that our view on where OEMs needed to go is accurate in terms of vehicle architecture, in terms of whether it's hardware architecture or software architecture, that's the path they need to go down. If they truly want life cycle management, they want to be able to do OTA, they want to be able to [indiscernible] vehicle, it's important that they do that. Different OEMs are dealing with things differently. Some are trying to do things more internally. An observation is most that are trying to do that are having significant problems, significant problems. I think there are some that have significant problems that are trying -- casting multiple lines in terms of addressing those challenges to see what works. So I think, quite frankly, VW is one of them with the challenges that they're having with [indiscernible]. We still do a lot of vehicle architecture business with Volkswagen and I'm confident we will continue to do so. When you think about the architecture in and of itself, listen, we've been intentionally focused on how do you take mass weight out? How do you remove copper, which for us is quite frankly, a pass-through to the OEM? So when Elon says let's shrink the wire harness, at the end of the day, we're very supportive of that. It makes complete sense and quite frankly, we can bring more value with high-speed cable assemblies, more advanced connector solutions, things like that and in exchange give up copper, it's a pass-through. So that's the path, the path we're headed down. In terms of content in the car and OEMs doing more. It's a mix. We can tell you every OEM that tells you they're doing everything, we're doing more business with them today on software and advanced compute than we've ever done, okay? So I think there's a desire for a lot of OEMs to be like Tesla, that that's the recipe for success. Getting to where Tesla is today is a long and bumpy road for any legacy OEM, very difficult for them to do. Some will try. Some will try multiple levels. But we view that, that challenge is a real opportunity, and it's where we bring value. So 2 years ago, we had line of sight to 4 customers and roughly $10 billion of SVA opportunities. Today, we have line of sight to 23 OEMs globally and an SVA opportunity that's north of $15 billion. So the opportunity remains. And I know you guys hear a bunch of -- yes, whether it's from OEMs, other suppliers, you hear a lot. There's a lot of noise in the system. But when we look at the tailwinds, just as Joe said, and the reason we did what we -- the decision we made as it related to capital allocation, electrification, smart vehicle architecture, continued penetration of Level 2, Level 2 plus ADAS solutions, software going into the car, all of that is a massive tailwind. And it may be choppy quarter-to-quarter, probably will be, but it's coming, and we're well positioned to benefit from it.

And I've got a number of more questions, but why don't we stop to see if there might be any in the audience? I see 1 over here. Jim Irwin in the front, please. Microphone is headed your way.

Just a follow-up then. The backlog wins that you have and the midterm view, 6% to 8% growth over market, very bumpy 2023-'24. But as you think about '25-'26, once these big customers that have taken a big hit, why don't we kind of go back into that corridor, given that you've always had a pretty conservative view of like BEV and some of those things? Just trying to figure out what's moving. Or are you, in fact, reassessing the market share growth. Like one of those companies had expectations of 30% to 50% growth per year, now they're barely growing. So maybe you're changing your assumptions about those customers' mix 2 years out, 3 years out? Just trying to figure out how that 6% to 8% is not going to be hit?

No, it's a good question, JI'm. Jim is probably the only other guy that's been here for 13 years. Listen, when we look at the framework for our business. And if it's okay, if I use ZIP codes versus [indiscernible]. The business model hasn't changed, right? Where we're -- when you look at the tailwinds, when you look at how we're positioned, you look at strong growth, we're well positioned. When you look at growth over market, at least how we've communicated in the past, which was over global vehicle production, what we're sensitive to is, we've seen 2 multinational OEMs in China virtually shut down in China in the quarter. It impacts our growth over market, right? It impacts our growth over market. Now as we ramp up production with the Chinese local OEMs, obviously, at some point in time, we offset and we lap the impact of those sorts of things. So the precise growth over market with a numerator that we have pretty good control of, a denominator that we have no control over in certain respects, it makes us a little bit reticent. Do we feel like we get through a choppy period and get back to a period where it is very strong growth, driven by electrification, ADAS solutions, SVA, all those things? Absolutely. Is it a quarter from now or 2 quarters from now? We're not really ready to call the ball.

[ Joe ]?

Thanks for sharing the information on the disruption cost. But when I actually do some sort of just kind of rough math on that and considering your 100 locations around the globe, it doesn't actually seem that burdensome on a per location basis. So does it make you think that there's even more there?

Well, it felt like a lot of the time for sure, $300 million. Listen, I think the disruption impacted obviously different places and at different levels, right? So do I think there's more? Certainly, if you look at our operating cadence pre-COVID, we had the ability and with -- to Kevin's point, sort of planning for flat vehicle production, for performance, operating supply chain performance for performance to offset economics and contribute, on average, call it, 10 basis points of margin expansion in a year. That was the model we ran for a long time. That is our goal of what to get back to. So still working through, obviously, some of the larger steps. And again, we've got -- the commitment at Investor Day was about -- ex the disruption cost was about $1.4 billion of improvement between 2022 and 2025 across those 3 years, and we're tracking well towards that.

[ Brian ]?

[indiscernible] Funds. I'm curious what you've learned over the past 3 or 4 years about pace of investment? As we've seen maybe the pace of change for EV stall-out, how are you thinking about capital deployment from a CapEx, from an R&D standpoint? How much more nimble are you now maybe relative to what your thoughts were 4 to 5 years ago about that optimism?

Yes. Listen, I think we were nimble. I think we are nimble. I think we're disciplined in terms of what we invest from an advanced development standpoint. Our view is it's important to be in front of your customers' needs versus behind. If you're behind, you're responding to RFQs and if you're responding to RFQs, you don't have 12% operating margins, you have 6% or 7% operating margins. And I think that's largely what you see from our competitors, right? I think there are areas in and around -- EV adoption, for example, in North America, where we were doing some investing to expand capabilities in certain areas like BMS that we scaled back and we've really focused that sort of investment in the China market where we've seen much more rapid adoption. So it's a great question, and we're constantly reflecting on where we're spending, where we're successful, how do we make sure we go back to the original plan and are we delivering on that plan and course-correcting? But it isn't -- our advanced development is ranged between 20% to 25% of our total engineering spend. And to the comment Joe just has been making, our engineering spend as a percent of revenue has actually been coming down pretty consistently over the last couple of years and then significantly on an absolute basis, back half of last year, this year, and you'll see more next year. A lot of that is just engineering execution from an engineering tool chain standpoint, rotation of footprint, items like that. There's some that is scaling back advanced development, but it's not a big piece of that overall year-over-year performance.

Maybe just in the time that remains, we're kind of over, but I'll slip in 1 more. Where are you on your path to, I think it was earlier, 25% nonautomotive by 2025? You've announced some recent wins with Winchester, with Hellermann Tyton and with Wind River, probably more of a needle-mover around the EBITDA side, right, with their heavy nonautomotive exposure, where do you stand at this point and what are you driving to?

Sure. So what Ryan is referring to is, we had a goal we established a few years back of 25% of revenues by 2025 being nonautomotive, non-light passenger vehicle. And we had a plan or have a plan to do that both organically and inorganically. We're currently tracking to around 20% of revenue. Part of that is actually when we first set that goal, we didn't fully appreciate how quickly the active safety and high-voltage business was going to grow. So our automotive revenue actually grew a little faster than we were planning at the time. So still very comfortable with the progress we've made. A lot of the investment prior to the Wind River acquisition was on the SPS side, our Signal and Power segment, particularly in the interconnect space or the engineered components space, where we've diversified into A&D, industrial automation and telecom. Business is accretive to both growth rate and margin. And really, the thought there is, if you really look at what we're good at within SPS is harsh environment ruggedized electrical systems, right? Now for a long time, we focused primarily on the light passenger vehicle space. But a ton of engineering expertise, a ton of supply chain expertise, ton of manufacturing capabilities around those type of systems. So what are those adjacent markets where we can take our know-how, take our scale and apply them? So organically, we grew our commercial vehicle interconnect business to well over $1 billion of revenue today. Inorganically, we acquired businesses like Winchester Interconnect, which is a nonautomotive interconnect business, gave us some channel access, some additional capabilities. So I see a lot of opportunity, like I said, industrial automation, A&D, telecom. More recently, on the ASUX side, with the addition of Wind River, very significant presence in software operating systems for intelligent edge devices, right, which is a complex way of talking about an airplane, a vehicle -- an automotive vehicle, a telecom 5G installation, where you've got a tremendous amount of compute that needs to happen at the edge. There's no -- for latency reasons, for reliability reasons, the device doesn't have the ability to go back to the cloud, it really needs to make its own decisions. Wind River software is excellent for that. And see continued growth in A&D, telecom and that's really the reason why we thought Wind River was well positioned to bring its software solution into automotive.

Very helpful. Thank you. And we are out of time, so please join me in thanking Kevin and Joe for all the great color and insight they shared today.

Thank you.

Thank you. Appreciate it.