q4 2016 earnings call final - s22.q4cdn.com
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Forward-looking statements
This presentation, as well as other statements made by Delphi Automotive PLC (the “Company”), contain
forward-looking statements that reflect, when made, the Company’s current views with respect to current
events, certain investments and acquisitions and financial performance. Such forward-looking statements are
subject to many risks, uncertainties and factors relating to the Company’s operations and business environment,
which may cause the actual results of the Company to be materially different from any future results. All
statements that address future operating, financial or business performance or the Company’s strategies or
expectations are forward-looking statements. Factors that could cause actual results to differ materially from
these forward-looking statements are discussed under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s filings with the
Securities and Exchange Commission. New risks and uncertainties arise from time to time, and it is impossible
for us to predict these events or how they may affect the Company. It should be remembered that the price of
the ordinary shares and any income from them can go down as well as up. The Company disclaims any
intention or obligation to update or revise any forward-looking statements, whether as a result of new
information, future events and/or otherwise, except as may be required by law.
2
Agenda
3
Operations overview
• Q4 2016 summary
• Strategic update
Financial overview
• Q4 2016 results
• 2017 guidance
Q&A
Kevin Clark Chief Executive Officer
Joe Massaro Chief Financial Officer
Kevin Clark / Joe Massaro
Q4 and 2016 highlights
Well positioned for 2017
5 Note: Revenue growth excludes impact of FX, commodities, the E&S divestitures and HellermannTyton acquisition;
EPS and operating income adjusted for restructuring and other special items; see Appendix for detail and reconciliation to US GAAP
$4.3B Q4 Up 10%
$16.7B 2016 Up 8%
$0.6B Q4 Up 20%
$2.2B 2016 Up 13%
$1.83 Q4 Up 32%
$6.28 2016 Up 20%
• Advanced technologies drive higher growth across the portfolio
• New business bookings of $26B for the year driven by large conquest wins
• Confident in 2017 outlook – strong growth in sales, earnings and cash flow
Operating income Earnings per share Revenue growth
CES highlights
Showcased industry-leading innovation and expertise
6
Over 1,800 customers from over 60 companies
3,000 total
visitors including
8 VIP events
8 demo vehicles:
4 Automated
2 V2X
2 48V
over 230 drives
150 pavilion tours
“The best
automated drive
we’ve ever
experienced.” – Automotive News
“If CES gave an award
for the best in show,
Delphi would win it.”
– Major US OEM Customer
• Scalable vehicle software enhances
Services business revenues via
expanding usage with global OEMs
• Continued organic and inorganic
investment in software and service
Power of data analytics
Validating applications in the real world
7
• Provider of telematics, analytics and
OTA update technologies
• Opportunity to drive market adoption
• Leverages real-time data and the cloud
to identify and solve issues
• Broadens our “Big Data” capabilities
Foundation
Real w
orld a
pplic
ation
~99% miles traveled in
Automated mode
~1,400 miles traveled in
live Las Vegas
conditions
fuel economy
improvement
4 x 7 4 vehicles over
7 days at CES real time vehicle
performance
tracking
$20
$22
$24 $24
$26
$17
$20 $21 $21
$25 $26
2011 2012 2013 2014 2015 2016
Reported bookings Adjusted bookings1
Bookings growth
New bookings accelerating in high-growth segments
2011 - 2016 cumulative bookings Continued bookings growth
($ billions)
GDi & Valve Train
Infotainment &
User Experience
Vehicle Electrification
Active Safety
8
~$5B ~$13B
~$7B ~$5B
$1.4B 2016
bookings
$2.9B 2016
bookings
$2.1B 2016
bookings
$1.9B 2016
bookings
1 Adjusted for divestitures, foreign exchange, and commodities
Note: Bookings represent lifetime gross program revenues awarded, based upon expected volumes and pricing
Select fourth quarter bookings
Strong wins in every business
9
E&S Powertrain E/EA
DEEDS Infotainment GDi
>$1B
lifetime
revenue
>$1B
lifetime
revenue
>$0.5B
lifetime
revenue
North American
OEM
Delivering technology innovation
Innovation creates value through best-in-class technologies
10
Leader in centralized computing platforms
• Scalable domain integration
• More efficient architectures
• Automated driving and cockpit
• First to market
Industry-leading autonomous capabilities
• CSLP platform partnership with MBLY
• Commercialization on track for 2019
• Unprecedented interest following CES
• First to market
Intelligent electrification 48V solutions
• Builds on HV E/EA competency
• Integration with full Delphi product suite
• Better functionality, performance, efficiency
• Uniquely positioned
Autonomous capabilities Intelligent electrification Centralized computing
Better positioned for the long-term
Driving sustainable long-term revenue, earnings and cash flow growth
11
Continuing
footprint rotation
Rightsizing and
transitioning Western
European footprint
Cost structure
optimization
Investing for
growth
>100bps material cost
improvement
Continued headcount
rationalization
~95% flawless
execution on
record launches
Material
cost improvement
Maintain flexible
workforce Flawless execution
Strategic acquisitions
and divestitures
align with industry
megatrends
25% increase in
software engineers
Portfolio
evolution
Strategic
partnerships
Software and
services
CSLP collaboration
with Mobileye and Intel
Advanced
engineering
Increasing to ~20% of
total engineering
Q4 2016 vs. Q4 2015 ($ millions, except per share amounts)
13
Focused execution drives strong results
Reported revenue Adjusted Growth %1
Earnings per share2
Growth %
Operating cash flow
Q4 2016 Q4 2015 B/(W)
$4,313 $3,879 $434 10%
$777 18.0%
$639 16.5%
$138 150 bps
$1.83 $1.39 $0.44 32%
$683 $638 $45
EBITDA2
EBITDA margin %
$606 14.1%
$503 13.0%
$103 110 bps
Operating income2
Operating margin %
1 At constant foreign exchange and commodity rates; excludes impact of the E&S divestitures and HellermannTyton acquisition
2 Adjusted for restructuring and other special items; see Appendix for detail and reconciliation to US GAAP
Year-over-year growth by region Q4 2016 vs. Q4 2015
14
Revenue growth
Strong growth in every region
$3,879
($106) ($57)
$407 $190 $4,313
Q4 2015 FX/
commodities
Sales
growth
Acquisitions/
divestitures
Q4 2016
Reported
Q4 2016
Adjusted1
Q4 2016
Europe 8% 5%
N. America 10% 9%
Asia 16% 16%
S. America 34% 7%
Total 11% 10%
($ millions)
Price
1 Growth rates at constant foreign exchange and commodity rates; excludes impact of the E&S divestitures and HellermannTyton acquisition
$503
($57) ($15)
$136 $33 $6 $606
Highlights Q4 2016 vs. Q4 2015
15
Operating income growth
Organic growth drives 110bps margin expansion
Price Sales
growth
Acq/div
($ millions)
Performance/
D&A
Note: Operating income adjusted for restructuring and other special items; see Appendix for detail and reconciliation to US GAAP
• Strong volume flow through
• 1.5% annual price downs
• Accretive M&A activity
• Improved performance
• Ongoing restructuring benefits Q4 2015 Q4 2016 FX/
commodities
13.0%
14.1%
$1.39
$0.35 $0.06 $0.02 $0.01 $1.83
Q4 20151 Operating2 Share FX/ Taxes/ Q4 20161
income repurchases commodities other
Earnings per share
1 Adjusted for restructuring and other special items; see Appendix for detail and reconciliation to US GAAP
2 Adjusted for restructuring and other special items and at constant foreign exchange and commodity rates; see Appendix for detail and reconciliation to US GAAP 16
Q4 2016 vs. Q4 2015
Strong EPS growth driven primarily by operational performance
17
Segment financials
Robust revenue growth across all segments
Powertrain E&S E/EA
($ millions) Q4 2015 Q4 2016
Operating income2 $276 $380
Operating margin 13.0% 15.8%
Q4 2015 Q4 2016
Operating income2 $147 $133
Operating margin 13.2% 11.6%
Q4 2015 Q4 2016
Operating income2 $80 $93
Operating margin 11.7% 11.5%
$2,117
$2,400
Q4 2015 Q4 2016
Revenue
$1,114 $1,146
Q4 2015 Q4 2016
$613
$743 $686
$806
Q4 2015 Q4 2016
Mechatronics revenue
7% Q4 2016
adjusted
growth1
6% Q4 2016
adjusted
growth1
23% Q4 2016
adjusted
growth1
1 At constant foreign exchange and commodity rates; excludes impact of the E&S divestitures and HellermannTyton acquisition
2 Adjusted for restructuring and other special items; margin calculations based on reported revenue. See Appendix for detail and reconciliation to US GAAP
Note: Financial details of the Mechatronics business and details of the reclassification of Power Electronics product line from E&S to Powertrain are provided in the appendix
18
Full year segment financials
Funding investments for growth and productivity
Powertrain E&S E/EA
($ millions) 2015 2016
Operating income2 $1,095 $1,344
Operating margin 13.4% 14.4%
2015 2016
Operating income2 $524 $511
Operating margin 11.9% 11.4%
2015 2016
Operating income2 $352 $368
Operating margin 12.8% 12.2%
$8,180
$9,316
2015 2016
Revenue
$4,407 $4,486
2015 2016
$2,449
$2,729
$2,744
$3,014
2015 2016
8% CY 2016
adjusted
growth1
Mechatronics revenue
5% CY 2016
adjusted
growth1
16% CY 2016
adjusted
growth1
1 At constant foreign exchange and commodity rates; excludes impact of the E&S divestitures and HellermannTyton acquisition
2 Adjusted for restructuring and other special items; margin calculations based on reported revenue. See Appendix for detail and reconciliation to US GAAP
Note: Financial details of the Mechatronics business and details of the reclassification of Power Electronics product line from E&S to Powertrain are provided in the appendix
2016 vs. 2015 ($ millions, except per share amounts)
19
Outstanding performance consistent with outlook
Reported revenue Adjusted Growth %1
Earnings per share2
Growth %
Operating cash flow
2016 2015 B/(W)
$16,661 $15,165 $1,496
8%
$2,897 17.4%
$2,495 16.5%
$402 90 bps
$6.28 $5.22 $1.06 20%
$1,941 $1,667 $274
EBITDA2
EBITDA margin %
$2,223 13.3%
$1,971 13.0%
$252 30 bps
Operating income2
Operating margin %
1 At constant foreign exchange and commodity rates; excludes impact of the E&S divestitures and HellermannTyton acquisition
2 Adjusted for restructuring and other special items; see Appendix for detail and reconciliation to US GAAP
2017 Q1 2017
2017 guidance
20
Compelling 2017 outlook
$4,050 - $4,150
5% - 7%
$490 - $520
~12.3%
~16%
$1.40 - $1.50
9% - 16%
$16,500 - $16,900
4% - 6%
$2,185 - $2,285
13.3% - 13.5%
~16%
$6.40 - $6.70
7% - 11%
$2,100
$850
Reported revenue
Adjusted growth2
Operating income3
Operating margin
Tax rate3
EPS3
Growth
Operating cash flow
Capex
($ millions, except per share amounts)
2016 pro forma1
$16,376
$2,136
13.0%
$6.01
1 Pro forma data excludes the results of Mechatronics; See appendix for detail
2 Average actual 2016 exchange rates; revenue growth is adjusted for FX, commodities, the Mechatronics divestiture
3 Adjusted for restructuring and other special items
Wrap up
21
• Delivered continued outperformance in 2016 – Strong sales growth above market and 30 bps of margin expansion yielding 20% EPS growth
– Continued traction on portfolio rotation, strengthening position to leverage secular growth trends
• Confident in 2017 outlook – Mid-single digit organic revenue growth driven by portfolio of advanced technologies
– Solid operating margin expansion while continuing investments for growth
• Strong, sustainable competitive advantages – Industry-leading technology portfolio driving record new business wins
– Attractive cost structure and flexible business model
– Efficient capital structure drives more cash yielding industry-leading shareholder returns
21
Creating shareholder value remains highest priority
($ millions) Q4 2016 Q4 2015 2016 2015
Net income attributable to Delphi $281 $192 $1,257 $1,450
Interest expense $33 $35 $156 $127
Other expense, net $302 $21 $366 $88
Income tax expense $26 $61 $242 $263
Equity income, net of tax ($12) ($6) ($35) ($16)
Loss (income) from discontinued operations, net of tax - $3 ($108) ($274)
Net income attributable to noncontrolling interest $25 $29 $69 $85
Operating income $655 $335 $1,947 $1,723
Restructuring $76 $108 $328 $177
Other acquisition and portfolio project costs $9 $17 $59 $47
Asset impairments $7 $10 $30 $16
(Gain) loss on business divestitures, net ($141) $33 ($141) $8
Adjusted operating income $606 $503 $2,223 $1,971
The company’s guidance was determined using a consistent manner and methodology
Non-US GAAP financial metrics
24
Non-US GAAP financial metrics ($ millions) Q4 2016 Q4 2015 2016 2015
Net income attributable to Delphi $281 $192 $1,257 $1,450
Interest expense $33 $35 $156 $127
Other expense, net $302 $21 $366 $88
Income tax expense $26 $61 $242 $263
Equity income, net of tax ($12) ($6) ($35) ($16)
Loss (income) from discontinued operations, net of tax - $3 ($108) ($274)
Net income attributable to noncontrolling interest $25 $29 $69 $85
Operating income $655 $335 $1,947 $1,723
Depreciation and amortization $178 $146 $704 $540
EBITDA $833 $481 $2,651 $2,263
Restructuring $76 $108 $328 $177
Other acquisition and portfolio project costs $9 $17 $59 $47
(Gain) loss on business divestitures, net ($141) $33 ($141) $8
Adjusted EBITDA $777 $639 $2,897 $2,495
25
($ millions, except per share amounts) Q4 2016 Q4 2015 2016 2015
Net income attributable to Delphi $281 $192 $1,257 $1,450
Loss (income) from discontinued operations attributable to Delphi, net of tax - $7 ($105) ($262)
Income from continuing operations attributable to Delphi $281 $199 $1,152 $1,188
Adjusting items:
Restructuring $76 $108 $328 $177
Other acquisition and portfolio project costs $9 $17 $59 $47
Asset impairments $7 $10 $30 $16
(Gain) loss on business divestitures, net ($141) $33 ($141) $8
Debt extinguishment costs - $6 $73 $58
Reserve for unsecured creditors litigation $300 - $300 -
Transaction and related costs associated with acquisitions - $30 - $43
Contingent consideration liability fair value adjustments $3 ($7) $3 ($7)
Tax impact of adjusting items (a) ($37) ($5) ($85) ($35)
Adjusted net income attributable to Delphi $498 $391 $1,719 $1,495
Weighted average number of diluted shares outstanding 271.64 281.64 273.70 286.64
Diluted net income per share from continuing operations attributable to Delphi $1.03 $0.70 $4.21 $4.14
Adjusted net income per share $1.83 $1.39 $6.28 $5.22
(a) Represents the income tax impacts of the adjustments made for restructuring and other special items by calculating the income
tax impact of these items using the appropriate tax rate for the jurisdiction where charges were incurred.
The company’s guidance was determined using a consistent manner and methodology
Non-US GAAP financial metrics
26
Shares outstanding
27
(millions) Q4 2016 Q4 2015 2016 2015
Weighted average ordinary shares outstanding, basic 270.38 279.29 273.02 285.20
Dilutive shares related to RSUs 1.26 2.35 0.68 1.44
Weighted average ordinary shares outstanding, including dilutive shares 271.64 281.64 273.70 286.64
27
Mechatronics financial detail
28 28
Delphi – Reported Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 2016
Revenue $4,051 $4,206 $4,091 $4,313 $15,165 $16,661
Adjusted operating income1 $509 $577 $531 $606 $1,971 $2,223
Adjusted operating margin 12.6% 13.7% 13.0% 14.1% 13.0% 13.3%
Earnings per share1 $1.36 $1.59 $1.50 $1.83 $5.22 $6.28
($ millions, except per share amounts)
Less Mechatronics divestiture Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 2016
Revenue $75 $78 $69 $63 $295 $285
Adjusted operating income1 $23 $25 $19 $20 $93 $87
Earnings per share1 $0.07 $0.07 $0.06 $0.07 $0.27 $0.27
Delphi – Pro forma Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 2016
Revenue $3,976 $4,128 $4,022 $4,250 $14,870 $16,376
Adjusted operating income1 $486 $552 $512 $586 $1,878 $2,136
Adjusted operating margin 12.2% 13.4% 12.7% 13.8% 12.6% 13.0%
Earnings per share1 $1.29 $1.52 $1.44 $1.76 $4.95 $6.01
1 Adjusted for restructuring and other special items
Power Electronics change in segment reporting
29 29
Power Electronics Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 2016
Revenue $23 $28 $33 $35 $30 $119
Adjusted operating (loss) income1 ($6) ($4) ($7) $4 ($29) ($13)
Note: Power Electronics reclassified for all prior periods from Electronics & Safety segment to Powertrain segment to align with updated management reporting
structure, no impact to consolidated financial statements or amounts
($ millions)
Electronics & Safety segment excluding Power Electronics Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 2016
Revenue $697 $748 $763 $806 $2,744 $3,014
Adjusted operating income1 $80 $100 $95 $93 $352 $368
Powertrain segment including Power Electronics Q1 2016 Q2 2016 Q3 2016 Q4 2016 2015 2016
Revenue $1,117 $1,146 $1,077 $1,146 $4,407 $4,486
Adjusted operating income1 $124 $134 $120 $133 $524 $511
1 Adjusted for restructuring and other special items
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