Joseph Massaro
Chief Financial Officer and Senior Vice President, Business Operations at Aptiv
Thanks Kevin, and good morning, everyone. Starting with a recap of the quarter on slide 10. Revenues were $4.9 billion in line with our expectations, including the impact of the UAW strike in October. Adjusted growth in the quarter was 2% over the prior year, representing negative growth over market of 5% in the quarter. As Kevin noted, and I will discuss in more detail, the growth over market primarily resulted from the impact of the UAW strike and North American OEM production mix, as well as customer mix in China and slower high voltage growth.
Adjusted EBITDA and operating income of $772 million and $600 million respectively, in line with our expectations. Operating income margins expanded 90 basis points versus prior year, reflecting strong flowthrough on incremental volumes, the benefit of customer recoveries of direct material increases and strong operating performance, including the benefit of cost saving actions taken in the second half of 2023, offsetting the impact of the strike which totaled approximately $50 million in the quarter, and foreign exchange was a 20-basis point headwind in the quarter.
EPS was $1.40, an increase of 10%, driven by higher operating income partially offset by interest and tax expense. Operating cash flow totaled $624 million and capital expenditures were approximately $200 million for the quarter. During the fourth quarter, we repurchased $300 million of stock, bringing full year repurchases to approximately $400 million.
Looking at revenue in more detail on slide 11, as noted, revenue in the fourth quarter was $4.9 billion, reflecting sales growth of $188 million, a favorable $62 million contribution from net price downs and commodities and foreign exchange tailwinds of approximately $29 million.
From a regional perspective, North American revenues were down 7% or 11% below market, driven in part by the UAW strike impact, which totaled $100 million in October. In addition, as we cautioned during the fourth quarter, foreign manufacturers, primarily the Japanese OEMs with whom we do not have significant content, experienced very strong year-over-year production growth in the quarter, further impacting the relative production mix in the North American market.
In Europe, adjusted growth was 6%, in line with vehicle production, driven by active safety growth of 18%, partially offset by slower high-voltage growth in the region and in China, revenues were up 12%, driven by SPS growth with local OEMs. China growth over market was 8 points below vehicle production, primarily impacted by lower production at multinational joint venture customers, as well as slower high voltage growth of 4% in the quarter. As I will discuss in more detail shortly, we do expect growth over market to increase in 2024 from the second half 2023 levels.
Moving to the AS&UX segment on the next slide, revenue growth was flat in the quarter. Active safety growth was 11% despite the UAW strike, which primarily impacted the active safety product line in North America. User experience was down 16% in the quarter, driven in large part by the previously noted China customer mix shift, impacting our user experience volumes with multinational joint venture OEMs in China.
For the full year, adjusted revenue growth was 17% with strong active safety growth of 29% and user experience growth of 4%. Segment adjusted operating in the quarter was $141 million up 83% over prior year, despite the negative strike impact of $10 million in the quarter.
Operating income margins expanded 440 basis points to 10.4% as performance and cost savings initiatives offset higher labor costs. Full year operating income and margins were in line with our original expectations, as margins improved by almost 40 basis points, inclusive of a full year strike impact of $15 million.
As we have previously discussed, given the nature of the AS&UX business and the timing of certain customer reimbursements and engineering credits, the quarterly profitability of the business is cyclical and weighted to the fourth quarter. We would expect this trend to continue in 2024.
Turning the Signal and Power on slide 13, revenue in the fourth quarter was $3.6 billion, an increase of 3% or 4% below vehicle production. As anticipated, overall SPS growth over market was impacted in North America by the UAW strike and OEM mix, representing approximately 5 points of growth in the quarter. Lower high voltage growth, which primarily impacted the European region, was lower by two points.
For the full year, adjusted revenue growth was 11% despite the impact of the strike. High voltage growth was approximately 20% for the year and segment growth in China was 13%.
Segment adjusted operating income was $459 million in the quarter, up 3% from prior year, despite a $40 million or 90 basis point strike impact.
Operating performance was strong, including the benefit of lower supply chain disruption costs, offsetting the impact of higher labor and other costs. Customer recoveries offset the impact of material inflation and commodities in the quarter, and foreign exchange continued to present a headwind equal to 60 basis points on a year-over-year basis. Full year operating margins were up 50 basis points despite the significant headwinds related to foreign exchange and the strike.
Turning now to slide 14 and 2024 macro expectations, we are forecasting global vehicle production to be flat for the year, reflecting approximately 93 million units. Regionally, we expect North America to be up approximately 1% at 16.5 million units, Europe down 2% or approximately 18 million units, and China flat at approximately 30 million units.
While we remain cautious about the impact of macroeconomic and geopolitical factors, we do believe that supply chain constraints have improved significantly, and based on what we see today, should not have a significant impact on overall customer production levels. Our macro assumptions also assume copper at $4, Mexican peso at 18.25, the Euro at 110 and the RMB at 7.
Moving to slide 15, in our 2024 full year outlook, we expect revenue in the range of $21.3 billion to $21.9 billion, up 7% of the midpoint compared to 2023, reflecting 7 points of growth over market. EBITDA and operating income are expected to be approximately $3.28 billion and $2.55 billion at the midpoint, reflecting strong flow through on volume growth, continued margin expansion and higher growth product lines and operating performance and cost reduction initiatives to offset increasing labor headwinds, including higher than expected labor inflation in Mexico, as well as the stronger peso.
Adjusted earnings per share is estimated to be between $5.55 and $6.05. EPS growth of 19% is primarily driven by strong earnings and lower interest expense, partially offset by an increase in the expected tax rate to 17.5%.
As I will discuss further, we are targeting share repurchases of $750 million in 2024 and have reflected a full-year benefit estimate of $0.05 per share at the midpoint of our guidance.
As it relates to Motional, as Kevin mentioned earlier, Aptiv will not participate in future funding rounds despite the continued progress made by the Motional team on their technology roadmap, given the pushout of the commercialization of the level four or five robo-taxi business model, we no longer believe capital allocation to Motional is appropriate for Aptiv. In addition, we are also exploring steps to reduce a significant portion of our common equity holdings.
Working within the construct of the joint venture agreement, we will look to sell or otherwise reduce our holdings during 2024, reducing the dilutive earnings per share impact of the Motional losses on Aptiv's earnings.
Given that the exact timing of the reduction in shareholdings is not yet known, we have included the expected full year impact of Motional's losses in our current outlook, a non cash equity loss of approximately $340 million or $1.20 of earnings per share.
Moving to cash flow, we expect 2024 operating cash flow of $2.3 billion, driven by higher earnings. Capital expenditures are expected to be approximately 5% of revenues.
Finally, although we are not providing quarterly guidance in 2024, we did want to provide some perspective on calendarization during the year as both revenue growth and earnings are weighted towards the second half.
Our full year guidance assumes adjusted revenue growth in the first half of the year of 3% to 5%. Adjusted growth in the second half of the year accelerates to 9% to 10% and is weighted towards the 4th-quarter.
With respect to earnings, consistent with the higher level of revenue growth and the previously noted cyclicality in the business, margins will expand throughout the year similar to 2023.
On slide 16, we provide a bridge of 2024 revenue and operating income guidance as compared to 2023. Starting with revenue, our growth over market combined with flat global vehicle production results in a net contribution of revenues of $1.2 billion. The full year benefit of material cost recoveries will effectively offset changes in commodity prices and price downs, and FX is estimated at a positive $100 million.
Turning to adjusted operating income, we expect margin expansion of 120 basis points in the midpoint of our guide, driven by continued strong flow through on incremental volumes net price and commodities will offset, and we expect our strong operating performance in 2023 to continue into '24, as manufacturing and material performance as well as additional cost reduction actions are expected to offset incremental labor costs and non-material inflation.
In summary, we remain focused on driving disciplined revenue growth while balancing investment in the business with increased levels of performance and expanding operating margins.
Moving to slide 17, we wanted to discuss our updated growth over market framework of 6% to 8%, down from our prior range of 8% to 10%. As we have discussed, our growth over market represents Aptiv's relative secular growth expectations above global vehicle production. During the second half of 2023, our growth over market was negatively impacted by several factors, including the UAW strike, stronger Japanese OEM production in North America, as well as a change in Chinese customer mix as local Chinese OEMs grew faster than multinational customers in China. When combined with a direct UAW strike impact, the OEM and customer mix reduced our growth over market in 2023 by approximately 5 points on a full year basis.
In addition, a slowdown in high voltage growth driven by lower EV production and the exiting of a relationship with a smaller North American EV only producer accounted for a 2% decrease in growth over market.
As we look out into 2024, we believe the impact of the UAW strike and the OEM production mix in North America effectively reverses. In addition, improved production schedules at our multinational Chinese OEM customers and our continued growth with local Chinese OEMs will contribute to higher growth over market in China. However, we are forecasting high voltage growth to slow to approximately 20% in 2024, consistent with the 2023 levels, but down from pre-2023 levels of approximately 30%.
Our updated framework of 6% to 8% incorporates these changes as well as the continued contribution from our active safety, engineered components and commercial vehicle product lines.
Slide 18 provides an update on our multiyear margin expansion performance. As noted, we saw very strong margin expansion in 2023, exceeding the expectations we laid out last February. Operating income margin expanded 150 basis points over 2022, despite the strike impact of $80 million and foreign exchange headwinds of over $100 million.
Strong flow through on sales growth was partially offset by net price in commodities as a slight headwind, and we saw significant reductions in supply chain disruption costs and the operating teams drove incremental material and manufacturing performance more than offsetting the impact of higher labor and operating costs. The accomplishments of last year provide a strong jumping off point for 2024, as we target 120 basis point margin expansion at the midpoint of our guide.
In addition to the ongoing performance initiatives during the second half of 2023, we also took several cost reduction actions to help bolster our overall performance and help ensure achievement of the 2024 margin expansion. These additional actions, as well as our continued focus on our overall cost structure and footprint are necessary as we expect to see continued labor and operating cost pressures, particularly in our Mexico operations over the coming years. We are also forecasting the peso to remain at a relatively strong level in 2024.
Before handing the call back to Kevin, I'd like to touch upon our continued strong performance as it relates to cash flow generation and capital allocation. We generated a record $1.9 billion in operating cash flow, allowing us to continue to maintain a disciplined and accretive track record of capital deployment. In 2023, we continue to invest in the business, focusing on longer term growth and innovation.
In addition, we opportunistically de-levered by paying down our $300 million term loan A resulting in a full year earnings per share benefit of $0.05 in 2024. In addition, we purchased $400 million of stock, including $300 million in the fourth quarter.
Looking at 2024, we expect operating cash flow to increase to $2.3 billion, and we will continue to maintain a well-balanced approach to capital allocation.
In addition to both investing in organic and inorganic opportunities, we are forecasting additional share repurchases in 2024, targeting a total of $750 million in the year. While we will continue to maintain our current financial policy, as it relates to our balance sheet and leverage profile.
As we have discussed in the past, our sustainable business model and relentless focus on operating performance enables us to convert more income to cash, allowing Aptiv to maintain a well-balanced approach to capital allocation that we believe helps drive shareholder value.
And with that, I'd like to hand a call back to Kevin for his closing remarks. Thanks Joe. I'll wrap up on slide 20 before opening the line up for questions. As the management team reflects on 2023, we expect the pace of innovation to continue to accelerate and drive ongoing transformation across industries. Aptiv is perfectly positioned to benefit from this change, having identified the safe, green and connected megatrends over a decade ago. We have purpose built our portfolio to provide flexible, high performance and cost-effective solutions that address our customers greatest challenges, all on a global scale. At the same time, we remain committed to flawless execution and operational excellence, enabling us to unlock incremental profitability and deliver value to our shareholders.
