[Operator Instructions] We'll now go to your first question. It will come from the line of Itay Michaeli with TD Cowen.

Great. I know it's a little bit early to talk about 2027, but I'm just curious kind of how some of the changes you're seeing in the second half of the year kind of inform you in terms of just the prior 4% to 7% growth framework into 2027 and beyond and kind of how we should think about that just given some of these changes here in the second half?

Yes, sure. Thanks, Itay. Listen, our long-term view of what the business is capable of remains intact. Now clearly, drivers of growth are constantly changing, especially in an environment that is dynamic as this environment is. When you look at the automotive sector, IHS has brought down the growth outlook for future vehicle production. Clearly, material cost inflation is increasing in light of various macroeconomic factors. However, having said that, within the automotive sector for the second straight year, we're running with very strong bookings across both of our businesses with the leading automotive OEMs inside and outside of China. On the non-auto side, opportunities are materializing much faster than we had initially expected. And that's across both of our business segments. And we've had a tremendous amount of success leveraging our automotive portfolio into these new markets. So that's an area that we're very optimistic but the environment certainly is dynamic. I won't get in specifically into 2027 at this point in time. As we move later into the year, that's something that we'll certainly provide incremental information about and updates on.

Great. That's helpful, Kevin. And as a quick follow-up, good to hear a little bit more conservatism in the second half guidance. I think the Q4 revenue guide still implies a pretty healthy uptick versus Q3. Maybe just talk about some of the drivers and puts and takes and degree of visibility kind of into that Q4 ramp.

Itay, it's Varun Laroyia out here. Listen, yes, in terms of when you think about the year-over-year second half and also Q4 in particular, essentially, it's a couple of points, right? The first is the year-over-year uptick in the production with the North America customer, which had a fire at their supplier a year ago. So that unwinds from a comp perspective. The second is growth in our software and services business. As I mentioned, the $50 million reduction in software enterprise bookings is from a timing perspective. So we expect Q3 to be softer, but again, return to high single double-digit levels in the fourth quarter and then just growth in our Engineered Components business.

Your next question will come from the line of Mark Delaney with Goldman Sachs.

Kevin, you mentioned that even though Aptiv has been making good progress with its bookings for the Chinese domestic OEMs, not enough of those were on the export vehicles. Maybe you could talk a bit more on that. I mean I would have thought Aptiv was very well positioned for exports given the global nature of Aptiv and your strength in other regions. So maybe talk a little bit more on what's happening and what Aptiv is going to do on that front going forward?

Yes. So Mark, that's a great question and a very fair one. So we are very well positioned. I would say, over the last couple of years, the real focus was on how do we get stronger mix with the leading local OEMs. When you take a look at our revenues today in China on export platforms, it's about 10% of total revenues. So the mix is more heavily weighted for the domestic platforms. As you look at our bookings over the last 2 years, that percentage has significantly increased. So the benefit of our product portfolio and our capabilities outside of the China market are certainly coming into play. But right now, our revenues don't match the bookings mix over the last 2 years. And that's something we're working on, and that's something, quite frankly, we've been making progress on over the last the last year or so.

Okay. I also wanted to ask about the nonautomotive opportunities and nice to see the solid growth the last couple of quarters there. You mentioned specific progress in drones and robotics. I think you said that business could approach $300 million of revenue in the next few years. What does that mean in terms of profitability? I don't know non-auto can be higher margin, but maybe there's also a number of investments you're making. So if you could speak a bit more on what you're seeing there and how to think about the profit implications.

Yes. So from a run rate standpoint, margin profile, as you can imagine, is much higher than what's in automotive. We're investing in non-automotive capabilities today from a product and go-to-market standpoint that we talked about. There's minimal capital investment because we're using existing facilities, existing machinery and equipment. So from a capital standpoint, that's less of an upfront cost and initial drag. But it is a -- both markets are much higher margin profiles than what we experienced in the automotive industry.

Next question will come from the line of Emmanuel Rosner with Wolfe Research.

Great. One quick question on the change in guidance. It seems like -- so I understand some of the revenue drivers, but it seems that the EBITDA line, maybe the implied decremental would be pretty high, like around maybe 40%, which seems maybe a little bit above the normal. So can you maybe just talk about the change in the EBITDA guidance?

Yes. Emmanuel, it's Varun Laroyia out here. Listen, the specific one really is the software timing item that I mentioned. So that really has to do with the product mix. So that's the one which kind of leads to the second half, the $50 million reduction that I'm talking about, that really is what impacts that.

Okay. So this is a very, very high decremental. And so therefore, on average, the total is around that 40%.

Yes, it's -- I think, typically, the mix would be -- the decremental would be less than that. I think just given the size of the software revenue reduction was roughly $50 million in the back half. The flow-through on that tends to be higher. Therefore, the overall decremental in that particular period is higher.

Understood. And then I understand the software revenue changes timing. Can you maybe just give a little bit more color around what's going on the ground and just sort of like how do you think about growth in the software on a go-forward basis?

Yes. So growth in software. So we've been growing kind of low double digits over the high single-digit, low -- high single, low double digits over the last several quarters in the software business. Our software businesses is kind of twofold when you break it down, Embedded Solutions, which I would say, tend to be less lumpy and then enterprise solutions that go into markets like telco and industrial markets, which tend to be larger in terms of their overall size, Emmanuel. And at times, they can shift for various reasons. And when they shift, it has a more pronounced impact on a particular quarter's growth rate.

Okay. But on a go-forward basis, the -- what sort of less growth rate would you expect?

Yes. I think our growth rate will continue in the double-digit sort of growth rate with the target of getting to that mid-teens sort of growth rate. We've been a bit below that over the last few quarters.

Next question will come from the line of Joe Spak with UBS.

Look, I appreciate sort of the coming clean on not being conservative enough and you think you've built in more a cushion going forward. But we've been here before. So maybe you could just sort of walk through how or what you're doing to sort of changing your planning process for some of this uncertainty? Because like I know it's schedule changes and ramps, but really, it's all sort of the same, right? It's all one and the same, it's volume. So how are you thinking about one, planning the business? And two, sort of communicating that on a go-forward basis, like what's changing from here?

Yes. Yes. I think -- no, Joe, that's a fair question. So I think as it relates to as China becomes a bigger part of our overall revenue base is the China local OEMs become a bigger part of our overall mix. As well as I do, China OEMs have a number of different nameplates or a higher mix of nameplates relative to the Western OEMs. Just a more significant haircut from an overall conservatism standpoint. I think that is the major change in terms of our process in terms of how we operate internally and how we forecast externally. So to date, we've had a process where we've discounted those schedules, obviously, have not discounted them enough. I would say the China domestic market is significantly weaker at this point in time than what it's been over a number of years with domestic retail sales down 20%. I think most people in our industry would have expected that the China government would have stepped in to provide some element of support as it relates to the industry. It hasn't yet. And assuming that they would provide some support, obviously, near term was a mistake. So I think it's just an overlay of significantly more conservatism.

Okay. And then maybe just some quick hitters on some of the non-auto things. One, like how quick can sort of the drone business come into sales. I noticed you said you're collaborating on 800V DC. Can you just describe that a little more? Is that something you're licensing and building? Or are you creating your own solution? And then the optical M&A, is that a tech buy and something you need to commercialize? Or is there a book of business there?

Yes. So there's a couple of layers to that. So as it relates to whether it's drone robotics, or energy storage depending on the customer. The path to market is much faster on the robotics and drone awards this year, we'll have revenues in 2027. So I would expect typically roughly 6 months path to revenue. On the energy storage/data center side, most of our product portfolio is in and around power side, transition to 800-volt given our portfolio -- existing portfolio in 800-volt present incremental opportunities. We're working with several players. We'll be talking about more commercial awards, I'm sure, over the next couple of months. Today in that space, we have under $50 million in revenues. We expect that to grow at a very rapid rate, Joe, over the next 3 years. And again, most of that is in and around power both to the rack and now with some capabilities in the rack and the M&A acquisition is just building out our portfolio as it relates to products that we can take quite frankly, across multiple markets.

Your next question will come from the line of Colin Langan with Wells Fargo.

We've talked a lot about China being weak, and I'm not sure if I'm looking at Slide 8 wrong, but you actually -- it looks like you outperformed in China according to that slide, you were up 5% and the market down 3%, and it was pretty weak in Europe. So is that really the bigger issue or -- because I think you mentioned also in comments about European exports to China weakening. Is that the bigger factor that's causing a headwind here? And is that possibly why we've seen other suppliers haven't cut guidance do you have like higher exposure to some of those players, and that's having a bigger impact?

No. So there's a couple of aspects. So we talked about traction in commercial awards in China with the local OEMs. So we have made significant progress and that is what's reflected in our overall year-over-year growth. Having said that, that year-over-year growth was not as strong as we had initially forecasted and included in our guidance. So yes, it's strong -- we showed strong growth, strong outgrowth, but not where we expected it to be. As it relates to the impact of China, the domestic market, the decline in the domestic market, the reduction in schedules impacted the local OEMs, impacting both our EC business as well as our IS business. Our IS business was disproportionately impacted by the #2 player in the China market who we were launching several active safety programs with. From a European standpoint, it really is principally the export of vehicles into the China market from 2 luxury European OEMs that we saw a significant reduction in their schedules depending on the OEM late June or July, I think they are the OEMs that have been the most public about their challenges in the China market. So you can identify who those are. So that's where the biggest impact, quite frankly, is.

Got it. And then just to follow up on earlier questions. The margins seem to kind of -- the quarterly cadence here is a little odd. It's like there's a pretty negative decremental sequentially and then a big incremental into Q4. Is this all recovery driven? Is there some cost headwinds in Q3?

So there are 3 things. So here's how I would look at it. One is just volume flow through Q2 to Q3. The incremental impact of a piece of that being software, so higher margin going from Q3 to Q4 bounce back in software, higher margin, volume pick up, just underlying volume and flow through on that volume. And third, as you know, engineering credits, recoveries, things like that tend to be stronger in the fourth quarter than they are in other quarters. So that's the walk. There is an element of Q3 margin that's impacted by Varun mentioned in his comments, timing on recovery. So normally, that would have shown up in Q3. So Q3 is a little bit, let's call it, artificially lower than what we would have expected that has some general impact. But my comments about the walk as it relates to volume, software recoveries, that's the biggest piece.

Your next question will come from the line of James Picariello with BNP Paribas.

Kevin, can you share some thoughts behind the portfolio changes you had indicated at the tail end of your prepared remarks?

Listen, I don't have any specific comments I would make at this point in time. Clearly, we're operating in a very dynamic market, right? And that's across regions and across technologies. And as we always do, we're evaluating that mix of products, that portfolio and how we optimize and drive shareholder value. So I would just leave it at that.

Yes. Understood. And then just can you share segment level color on the updated guide here for the full year? What's embedded for each segment's non-auto growth in the outlook?

Yes. I think non-auto growth for both for the full year are relatively strong. On third quarter in the Intelligent Systems segment. It will be weaker, given that software adjustment that I talked about. But we see a strong bounce back in the fourth quarter. Non-automotive revenue growth across both of the businesses has been very strong and in line with our 8% to 10% sort of framework that we've provided previously.

And then just like revenue, core growth in margins by segment or just directionally would be great.

Yes. Just to be sure, are you asking that for the full year or...

Yes, yes, full year.

Yes. Listen, in terms of both businesses, based on the latest update that we've mentioned, as I mentioned, the revision in guidance is largely impacting the Intelligent Systems business, right? And we kind of gave you the puts and takes associated with that. So from an Intelligent Systems perspective, we would expect the business at this point of time to be approximately flat on a year-over-year basis on a revenue basis with Engineered Components growing in the low to mid-single digits. So that's point number one. And then with regards to margins, margins essentially what we've kind of talked about previously, solid margins coming through both businesses with EBITDA margins in Intelligent Systems, call it, at the mid-teens level. And then with regards to -- on a full year basis. And then on our Engineered Components business, in the, call it, low 20s, so call it about roughly about 22 points of margin for the full year.

Your next question will come from the line of Tom Narayan with RBC.

Just one more question on the 3 buckets after its change, if that's okay. So it looks like -- yes, look, the schedule change, you have the, I think the European OEMs and the Chinese market the delayed programs and the timing one coming back in Q4. The timing one is fairly obvious. But just curious on the other 2, I guess, do you have any level of confidence that those other 2 buckets, you clearly gave those buckets distinctly for a reason, potentially coming back in 2027, is this what's reliant on the Chinese government coming back with stimulus? Or are some of those like you know you're getting back? And then I have a follow-up.

And Tom, you talk -- you're speaking to all 3 buckets? Or are you speaking to the reduction in H2 customer schedules?

Just the non -- the timing one we already know it's going back in Q4, but then you had 2 other items, right? Schedule changing and delay program. So just curious of those 2 buckets potentially coming back in '27.

Yes. So it's -- there's 2 aspects to the China local market. Aspect one is domestic China market with domestic local OEMs and how that plays out during 2027. It's at least for us, difficult to envision another year where the China local market is down 20% and production schedules are, therefore, adjusted to that point. So it's difficult. It's difficult to envision that, but those are some of the things that we're working through. There's a second piece as it relates to within that. So the bulk of that $150 million that Varun talked about is China local OEMs. And then there's a part that is effectively European exports into China. I think it's possible that those European exports into China, we don't see a bounce back during 2027 in light of the competitiveness of the China market. As it relates to the program delays and launch ramps. Listen, the local China OEMs, I'm confident that you'll continue to see their launches ramp at a lower slope than what was originally forecasted. There's one program from a BYD that we're confident will be launched, just was shifted and that's an export vehicle program. And then there is the program that Varun talked about that was a European OEM that was a delayed launch from European OEM that had initially, the view was it was going to be rolled across multiple programs. That program is launching as we speak. So that will be a tailwind from a revenue standpoint as we head into 2027.

That's very helpful. It doesn't sound as bad as it is. And then the non-automotive question I have, you mentioned this is coming in ahead of expectations. And I know you discussed this at the Investor Day, and these are all very different verticals. But just curious what you're seeing on the competitive side here that you're able to win so much here? I would have thought that there'd be incumbents in these verticals. Or is this simply just lack of competitors and like kind of a rising tide lifts all boats? Just how have you guys been so successful in capturing these new business wins here?

Yes. So I think -- so I would put them into 2 buckets. I would put the drone and robotics buckets where we're playing, our principal focus on the drone and robotics here is in and around autonomy. So robotics, it tends to be AMRs, although we have commercial opportunities with a few of the humanoid players. Our view on significant volume will be more -- is likely to more come from players like AMRs. It tends to be more of a nascent industry. I know there's a lot of talk about the size and growth, but it's a bit more nascent. And it's not only our technology where we bring opportunity. But it's also our capability as it relates to systems, systems engineering, the material supply chain and manufacturing that is differentiated from the typical players in a nascent industry. On the drone side, that's even more so the case. There's significant demand for reasons that you're aware of. There is a requirement of a non-China supply chain, a number of different technologies. That's something that we have visibility to and we can provide. Our perception systems and compute and ability to take bill of material costs out is unique relative to what their current supply base, which isn't very mature and isn't quite as organized as what we're accustomed to. So I would say it's a mix of bringing our technical capabilities, but there's an equal part of what we do day in and day out from an automotive standpoint so that there aren't really the traditional competitors, if I could say. It's an area that we're moving very fast in. We've invested in capabilities as Varun talked about. We're going to continue to invest and actually ramp up our investment in this area because the potential opportunity near term is significant. And as I said, the margin profile pricing here is more value-based than cost base. So the nature of those 2 markets are very good. On the -- I should now go to, if I can, just to the energy storage/data center. Listen, our sweet spot is power. That's what it is. We've put a very -- a team very focused on those 2 specific markets based on our backgrounds in power distribution. We are working with players who are well known in the automotive space for energy storage, including now Texas-based global OEM as well as the leading China OEM as it relates to leveraging our automotive relationship. And then we're working with several players that I alluded to who support those markets today for incremental opportunities. And today, again, our revenues are relatively small, but the size of the commercial pursuits and bookings we're confident we'll ramp up revenues certainly much faster than what we experienced in the automotive market.

Your next question will come from the line of Rajat Gupta with JPMorgan.

Great. I just wanted to start with one clarification on the first quarter restatement. If I look at the press release and take the 6-month EBITDA number, it implies a lower 1Q than what was provided in the 1Q deck and like the financials on the website. I just want to make sure like if that is just an accounting nuance that we need to be aware of write off...

Rajat, it's Varun out here. Listen, that's all CODO associated with the Versigent spin. So what you need to look at is the Q1 pro forma on our Investor Relations portal.

Understood. So that's the right number. Okay. Got it.

Yes.

And just a follow-up just on the bookings mix. Within the Intelligent Systems year-to-date bookings or just the second quarter bookings, are you able to share in more detail in terms of how much is like full stack ADAS including software versus modular? And I'm curious like if that mix has changed at all over the last few months, as a lot of manufacturers try to build more internal capability?

Yes. Our -- the trend that we're seeing, and I want to make sure I think you're talking about the Intelligent Systems and tech stack is more of a separation of software and hardware and quite frankly, more software opportunities. And I referenced the full tech stack award board from a Gen 6 ADAS standpoint. We're seeing or experience a significant portion of our bookings in 2026 will be ADAS -- Gen 6 ADAS solutions, the bulk of which will include our hardware and our software. So we're seeing more momentum there. We're seeing more OEMs come to us as they work on their path to software-defined vehicles asking us to do some of that software development in and around areas like middleware and other portions of their software tech stack. So I know there's a -- we often get asked that question about in-sourcing from an OEM standpoint. And it varies a bit by OEM. But we would tell you our experience has been the overall trend. We've not seen that. And in fact, we've seen several OEMs who have attempted to do broad-based software that have decided to go down a different path and be more reliant on suppliers.

And that was our last question. This will now conclude today's question-and-answer session. I will now turn the call back over to Mr. Kevin Clark for any additional or closing remarks.

Thank you, everyone, for joining us today. Have a great day.

This call is now complete, and thank you so much for joining.