TE Connectivity (TEL) 26 Jul 232023 Q3 Earnings call transcript

Ladies and gentlemen, good morning, and thank you for standing by. Welcome to the TE Connectivity Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded and I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead.

Good morning, and thank you for joining our conference call to discuss TE Connectivity's Third Quarter 2023 results and outlook for our fourth quarter. Chief Mitts. Terrence are Financial and today Heath Officer, me Executive Curtin; Officer, Chief With

call, will forward-looking this ask in During we press you and forward-looking today's to we information, review the release. cautionary included be statements providing certain

of measures accompanying will we this address slide to the presentation non-GAAP you press our use our sections discussion that In addition, of certain these release in we review use items. morning, ask and the the

presentation, related excluding at XXXX The our found along quarter want tables, can press this fiscal slide portion website be in included are the the our to extra and In fourth week. te.com. and XXXX call, Relations Investor fiscal this release extra QX results that on week. comparisons with year-over-year the also made an remind of you I for

Finally, everyone Q&A may have asking today's to question, call, the limit a queue during we're you portion X you if question. rejoin to the of second themselves

me over let the call for to turn opening Now comments. Terrence

Thanks, thank joining for Sujal, us you, and today. everyone,

ahead along versus into get the I a what we segments. all the our take to our I the ago. to do, market across as seeing revenues call I discuss want the was environment am this and of guidance of days we're performance with moment XX quarter, slides, backdrop in our due performance within last typically strong X pleased execution of and third with line teams Before that EPS quarter with to the our that in were

declines segments which in segment. Communications the Industrial offset year-over-year expected and Transportation grew Our our essentially

We been on of points we ensure basis expansion driving the through occurred year. any XXX actions expanded volume without sequentially margins we've fiscal operating the this adjusted move margin as to that benefit delivered growth. Our

around energy, applications vehicles, going production and to for of the renewable artificial intelligence. including growth of strategic the positioning you're benefits and our adoption Also global of see to electric from secular continue portfolio trends, important, as increased cloud

in to In industrial well. positive, be billion also reinforce our into trends more supply our improving in and $X quarter in stability and transportation the orders get indicating as only guidance, fourth the but reflecting quarter, which a segment the chains of a real our details I view they're and order are I'll moment. not Communications

this As with capital we've as of been performance sharing been one chain key year working focus of the areas supply has you improves. management

our business important quarter flow Our strong year-to-date. you see year. model free our is XX% performance well generation the versus year-to-date part as reflects of free and an last focus, cash as in flow up cash it both Cash was

returned Also, to remain $X.X strategy we've and owners capital continues this far our to roughly year. of disciplined, our capital billion so

Let our updates call. me now some color other last and on since markets provide our additional

we our basis, overall an out playing on So as expected. are markets

most markets with have few key to we growth end continue discussed and of previously We cycle have a in markets these our we a and trajectory, or recovery you. that

at approximately and auto continue flat million per to Our with XX view end markets prior consistent of we remain remain globally. to our units quarter expect production view, roughly transportation

will continue electric in by the global leading in to growth our Our position driven area and outperformance vehicles. transportation content be

segment. Industrial our to Turning

We X continue strong businesses momentum. have that have growth to

positioning as medical is in with commercial air, this from continue our see and business market both applications. and to continue procedures. wind interventional grow In from solar strong increases You benefiting in our renewable sales energy recovers growth to

cash way creation reinforce our year's long-term communications cyclical think markets this year while are do of margin peak, versus we at on pillars where remains move to generation sales levels. current flow content down about forward. discipline the as finally, drive with last leverage that will expansion capital we and Strong in enable trends In our free deploy that built are increased how I the value we indicating to around TE. growth trends secular the order stabilization significantly And the we It's position segment, unchanged. want

are opportunities we per strong to continue orders margins see move and earnings stability, sales, indicating our expand we forward. to share While as

at to into some And So I'd slides, discuss to you additional and want we'll this highlights. appreciate time, I it. if X, turn could get Slide

saw were on with line Our was down a our $X organic year-over-year reported in basis. third in of quarter this in and and X% X% our slightly Industrial guidance Transportation and We sales billion, organic our growth an segment and segment.

to market talking you Our expected weakness about. that declined communications we've the due been segment to

was of I to margins first X Industrial our by segments are delivering basis we X as already second $X.XX expand quarter Adjusted to from improvement the margin half commitment driven guidance ahead share Transportation our margins earnings year. as half of The on this was to and our at XX.X% margins and were these points sequentially, quarter mentioned. operating of per XXX from with adjusted up the

Our ahead performance. earnings performance share guidance margin by stronger primarily per the was was of driven that

As around we adjusted both $X our which quarter earnings look $X.XX, and be sales approximately to are per to our similar expecting forward, X we share fourth levels. quarter billion are to be

Industrial our and in our Also similarly segment. do to growth sales expect in we a quarter, our and Communications year-over-year segments third Transportation decline

from our as internally, I we connecting are There call report our this that away issued number a initiatives we our want moving driving we're line corporate a financials report, our customers. we've for are goals to the which moment. decade. a and do of highlight responsibility for world, as and with from our issued in over expectations that well Just purpose

absolute communicated want that I year greenhouse the sources. reduction our renewable Scope gas note highlight we of highlights target X commitment in emissions. emissions in I targets are from currently, report comes reduction X enhanced which and over by to science-based that also XX% an Scope that and want initiative to X prior the for XXXX inclusive our the of to versus gas electricity greenhouse includes Key XX% in TE

let's quick I X, and Slide a order with move on trends. So X, Slide to to as want about our talk that background

I On nice is orders after X And details see reflecting And our think say to can pieces, key couple the that of of and segments. some years. reinforce our all moving do are the but our the in patterns stability orders reflect these slide, takeaway past you had the the for of fourth the we've order is over this quarter. guidance on the

second first is increase orders transportation sequential see our Communications quarter sequentially. the X% quarter. segment and orders orders, look where both third where the roughly from since our to When fiscal our real industrial flat XXXX. highlight communications The segment the is you increased in you in at in our changes the first And this they're of

that results points. laid that X out and talk of about with quick Slides you discuss I'll see the can on overview So through the let the year-over-year me X, now just details, high orders, are segment and

remained segment, In and up Transportation X% organically of growth growth sales businesses. organic our strong, was with year-over-year all it our across

organically, Our well cars had business strong from the be all world. grew as pricing. auto in position in positive the our electric electronification The regions we growth impact vehicles, performance X% in leading as of and trends to driven and by continues

million grow production in XX global and are While at XX% electric auto right fiscal about to production of now production our 'XX. vehicles and is auto per about of units continuing flat staying quarter, reflect hybrid total

Xx versus generate combustion vehicle approximately we you the vehicle. a content As in platforms electric know,

the organic growth we to we applications electric and per we and the margins XX.X% driven points So the this transportation as X% volumes from segment, the content Sensors expand move was third year-over-year automotive increased as the in vehicle we quarter, was XXX of benefit saw of increases. expect in of performance Elsewhere price points design And operational by as increased margin our business, wins. in our a At to this up XXX continue see level, organic adjusted segment, and growth in adoption in basis new result X% operating sequentially quarter. were forward our the commercial basis vehicles. business, our including

had increased X organic Industrial X of year-over-year me Now the move strong over the sales in growth At let the businesses segment organically out quarter. to but X% level, third we in segment. the

up air Our commercial XX% and our up quarter increases driven sales in interventional procedures. the in ongoing improvement AD&M were from ongoing organically, were the by medical, XX% sales In in the organically, benefiting market. business, we're

Turning to our energy business.

growth momentum an We is this digits continue The product Through applications. quarter and we CAGR that growth renewable TE up driven as are maintenance we've costs with applications again our has organic delivering we portfolio, and by utility to organic current we're market renewable been broad be scale, to see as farm from sales CAGR wind X% installation the double-digit has this helping customers nice reduce helping to demonstrate had this deployments. renewable well addressable applications business and to XXXX. the for our continues and momentum since X% a in solar our of which sales business double year. What's really in that expect enable

highlight the sales distribution And improvements by were this finally, chain the inventory organically. And driven achieving In being volume supply high-teen margins business, we're down feeling. of Industrial that our In decline business. to in that were Industrial our segment. And and the sales Industrial impact the Equipment by target the in our was these for committed XX.X%, remain broader adjusted Equipment in Industrial the XX% in is operating this to driven segment. declines want channel expected all the margins margins segment, reflect digestion we and I

was about the than market last businesses were Data and supply quarter the you. XX.X%. upon organically we Now we consumption peak, believe segment. mid-teens appliances be this Device our communications in let will and operating it cyclical in margins segment, Despite the I weakness and our revenue roughly with ongoing range me we in being expected adjusted previously inventory and adjusted our XX% the by quarter order of trends at customer chain remaining down in lower impacted discussed we margins are the that turn to And slightly with in versus maintained sales across to weakness year's million, the flat X to earlier, $XXX Communications fourth operating talked sales, levels this mid-teens. Based

to our Now term strong momentum and talk continues really we about segment, with moment win have in in business design do for about, as especially near want the look next-generation what a excited get communications it platforms. AI beyond the I D&D to

high-speed, for to for about to you meet grow. think next-generation mentioned these applications. this that focus on and connectivity AI certainly billion we design you Last in we quarter, where centers. latency wins want just of data to $X needs we highlight providing continues server I play, And When related the secured number the low we

platform AI versus as meaningful XX% traditional with AI We we more of compute 'XX, expect server. content a fiscal compute ramps through an in programs move accelerated

key other customers closely companies we're Cloud The solutions. well to reference highlight as out our as semiconductor TE call leading with with is working design connectivity

a turn expectations So more with well the get me Heath, as as to forward. will wrap over it who financials let that, our details as up, on going

of I Please we $X improve was taken $XXX where thank the expect $X.XX. details good as other and of income Well, $X.XX included and charges, to restructuring million Terrence, Adjusted will optimize to and be the other the margin we $XXX morning, EPS organization. continue and continue cost quarter XX.X%. million restructuring for restructuring charges included restructuring X, year an provide acquisition of income and and was was turn financials. to manufacturing charges million operating acquisition-related approximately to operating more charges you, our Year-to-date, adjusted was and operating million quarter $XXX GAAP $XXX charges. Slide structure million we of everyone. and $XX third of and and with Adjusted footprint EPS GAAP $X.XX have of on the million full

effective was XX.X% QX. in adjusted The rate tax

our full For expect year, XX%. effective be to rate approximately tax adjusted quarter the for the fourth and now we

ETR to our Importantly, stay we expect for our full below tax continue well the rate to cash adjusted year.

our impacted negatively Slide Adjusted million EPS by points X% industrial of X% basis operating can the transportation margins year-over-year. reported by an exchange and XX.X% were billion, and were X. Sales $X despite down sequentially prior third and you on get $X.XX to sales to year. sales Currency expanding in We XXX driven $XX adjusted lower the turn rates quarter, expansion segments. by organic versus basis in margin

and have price that in calls. We initiatives increases we cost have and to prior implemented drive continued discussed the productivity

impact of the Our pricing is fully now offsetting input costs. higher

year, was cash once flow. approximately the the cash billion up million. business $XXX demonstrated to a again of through quarter the $X.X and return In cash from million, And of Free cash X flow generation year-over-year shareholders strong and to $XXX first through is dividends. cash $XXX free Turning of which quarter, with the flow quarters share buybacks was operations model million. we for roughly approximately our XX%

look indicated may own we lower you I our saw recall, our supply As as levels in that improving inventory performance to we would chain. drive

improvements free our able working to capital, which this flow year. cash contributed We performance have to deliver been to has

conversion a of profitability, strong year. our this flow free XXX% result to cash As actions we and expect approach

use We in disciplined use long-term capital which flow return continue our over remain for of X/X our remains approximately free about acquisitions to and X/X to consistent, our to is shareholders and of strategy time. cash

year. single-digit Transportation we strategic high we reinforce to I to X it enabling deliver in to Before the of turn organic Communications positioning growth segment, results In segment, revenue our for secular our year. want us Cloud our AI that double-digit this strong I In to and from In segment, the momentum expect strong of is questions, expect design deliver portfolio growth over to in we continue Industrial businesses X applications. organic growth revenue win our the generate trends.

including we enabling improvement inflation done price as we second work cost our first have half to the on We structure to expected. strong operational offset delivering margin expansion and are our half EPS and actions performance,

growth, fiscal have to 'XX, us remain opportunities point and stakeholders. sets which to enter expansion year We long-term in us a for finish drive about the begins October. you fiscal up know, a step-off value all excited margin this of good Overall, as as we creation strong the ahead for and we

questions. So for now up open let's it

], Abbie can session? Q&A you the for please the [ give instructions

[Operator Snyder question Instructions] We from with first will take our Chris UBS.

and -- of but So despite guide, the can Obviously, QX really at a higher what more was top QX auto or any drove a end up just segment the margins. line this offsetting some then but step takes was talk then also And level the of you what only there? lastly, on color strong the more headwinds puts and step-up much in expected, just about production, significant met levels. some market into

Chris, Thanks, question. the and Sure. thanks for

quarters you're as a on our to thought And in a first weakness the $XXX be for market really We've bit $XXX but be which range, your top weaker. about, been our off, guide line. and we million. And our this the cloud, revenue, that. correction right. we'd little of of the on the communications and were we for overall now go million stronger, thought came transportation, little part segment through question, met made little $XXX around quarter, stronger, and we was In hey, in we First chain bit below we past many we'd was that a that talking some closer up Communications transportation supply to

year. we So up opportunity your as of front, basis. going that on on we it through really margin we on was to element, get margin had your be first place. We to move part to had the We in march those as just a in a question, about automotive, talked bit. We cost knew -- lag that the little the did do let's price

think you're in and benefit we could transportation we accomplished. segment I today it's and that's to get up that, as the get year, later where said of seeing been we back the at our

our in industrial business in of profitability occurring. has been also biggest good light equipment and higher our there's performance Industrial their destocking operating I think segment, some even unit,

think on businesses, is maintain here to lighter as very the performance the been revenue. communications we've mid-teens there. margin element cycling down a that So even in I other And both good was is able

the year we comments, in teed execution we do that prepared think, I earlier I you all to through. am for the know came up pleased with So my

similar margin to where to expect similar we we expect go order right we're revenue with it the be similar. IS transportation very quarter. Now were to the X, when be now quarter, to be patterns, order similar will the like we where trends that and see quarter next look seeing, production next this is and to flat, going really, segments with look Auto CS, they to quarter does we

and the about. So the And bit tax guide lower due to very stabilization and able that we as did, a nice be quarter X, to and what quarter X show of some EPS little on FX, just that's of X. that's really it's to and talked the consistent into stabilization wrap side, we're go up so some quarter we in with the is just I

next line Our the Mohan comes America. of of from with Wamsi question Bank

here on guys earlier. much could, of It's left wondering you you how double-click industrial I equipment digestion do Terrence, was operating really that the to in of How us, inventory is transportation Devices? see nice if alluded improvement your margin But think Data to also more in and especially much some production ahead comments. more you is you inventory think do in maybe

supply the and the Wamsi, I cash and driving our not bubble in better. for but Thanks, it We're are where a are in only talked the chains Yes. flow is the are same question. customer in CS we're thanks gets first chain and as X X our the in X benefit chains is, getting we not destocking most. I about where important. think feel it And better, really know thing better. business see guess supply I supply It where results have, you IS, we units is getting in broader our we

of channel things a involved much and really relationship. that's aren't direct-direct certainly, And have where we as distribution

X businesses. as off. to destocking don't performance don't see in of In do the you So in all XX% to our of you the mentioned, and appliance XX% their feel revenue there's they other do distribution, in we impacts that the in about see transportation, well and as you through chain does through XX% while its supply and of revenue We CS D&D, distribution. any as business, growth work industrial, businesses, see TE about

And supply we partners seeing what chains do more a improve, see is distribution broader get demand. normal channel adjusting their inventory we've to been see to levels our we

If face lead a do times have of to let's people And don't complete to [ people and ] they lead won't build, to filing it. to hitting are something go that. need times, distribution

but a supply in realize have have when So good to this, think sign a are it we is you that natural it our business improving. effect I is chains

little has industrial a certainly, are, bit we where think gotten to it I later.

point think I businesses I work or best building a is and these where those But is our time in we X demand. get there'll now, distribution, in a in a businesses, have we're works what, less our demand guess. we to is But revenue be closer guess still than that to through need what go quarter guess down. inventory do especially as that think through right

comes of the Our from next Steven Fox question Advisors. Fox line with

cash It I in mean rate allocation? see be environment, you capital seems sustainable bit it they're you How a right not was and terms numbers. flow lot. environment M&A now, wondering forward? influence could you you touch that you the flow more of if cash changing Like rising but dig in could that, would in does helpful into on And said, up does it a also. just what maybe like your little a the how going if it's then within

this Heath. this Steve, I'll Sure, question. is take

question a each just and performance of on answer is had we've billion, Year-to-date, the I our your mentioned stability. of our Terrence little consistent which, free this that earlier, sustainability to year-over-year, builds talked First quarter flow what of flow type pretty and of as performance cash -- as chunk year. through as we results we -- pleased A that XX% is that's $X.X work about, year. all, about big cash up we're with

a years, think we've the there various our from of our particularly we're well had up. differing going particularly customers. And from the the about volatility our in thing And suppliers our hold position when if last uncertainty order that's handle customers in the times, supply are past is you chains, as over as to all flex to both of there capital, out to be to do patterns working -- couple inventory,

to had inventory. we've So flex

back now out bit ability our reduce the some this bring year to of for more place. a we've a to tied There's line. So first of part, visibility that's improvement half with do supply in improving of this the little through chain of had to But the particularly there, on better levels, year work the and days in most getting a the our we're hand couple to businesses. inventory

our And cash ability that working free flow improvement to capital management has year-over-year. driven drive really

to feel we going about We feel in ability So good that. our forward. that sustain general good about

was we're was allocation, In second the of funding of which capital your fully part terms capital overall expenditures. question,

towards on or not that is of that's have Most within new our CapEx We cut and EV and things segment. new whether the applications. goes products And some our still demonstrably. or opportunities that the back real, of AI Industrial still that is happening, side

strategically dynamic given And in quarter. reason feel time, unchanged. a But M&A that we're across when that's don't one we market So that's do owner just what's always be well of And every always been line the about another, out most to going we we that or for approach say bit active then fully right but the at the about what's work. things. get start is opportunities funded. investing in fits financials there half And for something take I a any And around finish dozen available. looking That like for are and us coming the of process. outside I the terms the environment, ourselves, and we're listen, that thinking at then about in to it's

about X/X to of that's how some that linearity it's not things It's time, will flow. straight a still take cash our that that, you'll And in of line free lumpy. over there's us continue hear believe But I talk deployed. M&A of up about been terms

it we allows to change offense strategy. feel good about no capital forward. are allocation in our where from going sheet a answer, us perspective short play So and We balance

Stifel. Sheerin the from comes question next of with line Matt Our

to your the the It over a landscape also comments. cloud And relationships drill could got down the could and revenue? a opportunities as opportunities AI a But customers wanted perhaps edge strong with in you on market you've sounds in like more semiconductor competitors? bit key talk competitive and you of up your I size the suppliers. for us little about percentage you have overall Terrence,

question. for face it, let's Thanks like Matt. you Sure, anywhere And we data connection occur. need typically, the a because to

there's of one you when And from So When what of that whether data, an where or to extension talking as but about the when of data, perspective. signal is what need, anywhere about move opportunities. about some think goes low is well we think you we think latency data see core we've it's do, that's about at power sort the cloud a been an high us. it's this though, you really speeds opportunity thing AI, for the as you

you that is people well There's design is well chips one very these because next-generation are excited have in as be that to thing about. sure architecture, only There's also off world the to to all are the semi make as And to really making cutting do companies and a build these that have you of data also edge thing need technology, you throwing sync. all number and that to us of at what to not the high connector. to with move another store very that's have everybody data, the the can have GPUs need close to you that handle -- does you only data speed that there have how in compute, that not the a that you're stay a the

So and certainly, a we're of went, when speed us. all cloud the that the AI it's with sort about, you where taking step view next we it of up just look for of at and it, of it's exciting level adoption hear I

from you sockets do, into. go product that look the GPUs and set, we we what at actually the CPUs a when So have

around. signal semiconductor our products need it how do make moves into something connects backplane sure You actually that takes the high-speed the that that and Board,

and And cloud. of get to on sure forth opportunities our that And things the then those cloud and so similar working as And with cables is team over actually the They has DAC on that had of well the built that probably I will you both boxes in our we different out guys position like as have into customers what talked I all the we've you're architecture, wins. and well. parts are $X us said, rack to the really that ramp. connecting together, we really like X- billion like as which has semi is they X-year over period ones of are go also positioned a make

still the win and building So -- momentum the is on side.

the So visible once you. market like through see will fiscal of continue we're we that these work to of some be working probably ramp you're more place our more a in correction, through to middle to think going of the programs I 'XX D&D, be in the

have do. revenue which it's what already. the with customers, is to will schedules of really trying based in in our and we're problems about and through our customers be launch excited the 'XX upon engineers essence, the we're more in build-out. solve architecture of the the our And really, But we also launches Some our wins

Sachs. Our Goldman from Mark question comes next Delaney of the with line

fiscal I a the hoping company guides and I'm realize XXXX given by formally time. on trends X we're about fiscal currently only quarter, you're thoughts early provide year? your how end next at you fourth for thinking can quarter But some now market that in

only for X that I you caveat And giving quarter. we a also Mark. appreciate Thanks, guide

about we give think qualitative Heath to some be I'm I insight and because, what some already. some and going will I about anything So here about see talked probably talked

communications see little start be businesses, all, off, of I we work some into we're the those businesses. I of something specifically, transportation of has our in also starting and going important we've tailwind a think now, production growth a and backbone. is that talked that the low that the always will on first transportation, the the this when of will by you to be material is in nice growth you think driven -- have stability to that automotive, while will of is But talk in year is starts do off. top price It it pretty production next at can't on on won't a So a tell that's that our look we X% you really, expect it so more. that with would that to tick of double you about unless content date the get about see headwind year low to that I digits. sort orders go up that some That's next the year what is bit up, that, to then as because additional exact that in top X% will we'll and be be as we for destocking auto of increases done. be price will comments should

still so we see being driver content And year. in transportation, next the into

we're thing some slower. North only time the think commercial in we China business, bit I signs real little watching a in is, see that transportation our that and being America,

aerospace about, when we're recovery, that market still and area talked to an And growth up. there. momentum we about about the growth to units a be then seeing applications, there. continue in And it's catch into down would interventional you slowing the good the feel X the Medical procedures, Industrial on. going on strong and we we're playing eye prepared expect renewable you're that's comments, So one segment, get to not Commercial think is one keep you I going that strong

is we've through back once equipment, industrial segment, of then the we in Communications been the the and we'll some showing AI destocking to kicking in. destock and get then work around the And you. the really programs it growth that And

see the secular slow when I think, get the economy. will still content But that into really, talking you the about, these winds inventory the look we drivers, expect levers it So and stability, you down. be global be as we destocking a we've having year will at hopefully been drivers next really content

Stein of Truist Our comes next Securities. from with question line the William

of sort First, a question. chain supply

bit And those as learned didn't the about a that? they was so very I problem. bit effective situation think an suppliers pretty cycle know information this where to the opportunity they this a delivering that guys, business taking that going in up constrain like opportunity potential in into But destocking us of is situation. you the such. lessons ship to what time lead I the semiconductor about to little draw different. given wind seeing You've what don't if forward, to at channel run there a is extended constrain cycle you any wonder into you're to as that the so are this from who were into of comparison and you But good some every already improve

it as you, lead was So when and I Semiconductors tell we at would I that lead extending we a had lead challenges, to average, semi-LAN Will. I time you some our chain an what bigger contrast times, lead think couple while And think supply of challenge weeks want look a were what X do, give weeks. over we typically meeting could is year. just difference. not had well times to important was be on things, times. XX between there the do do a because out I

levels the today, think levels are pre-COVID our at levels to in than back I direct our about which we're customers market, other to request shift when element. service aerospace And feel from maybe a service the

certainly is may is process. do there's disconnect same very times a shorter. connector But difference semiconductor we stocking think than and the much trends have between a think I semiconductor time and do and different very I destocking on is connector are big the while fab lead effects, ours So lead and around and the a we the different, process

We knew rate. we we our at billion areas did to a clients capacity business through not permanently we add you channels. business, our $X certain clients ahead, our where be take in various run We to for were constrain trying demand did were manage

to bit So destock stock I and think of more little have have elements where channel activity. always of you're a going you

really cyclical substantially what is I profitability running how maybe their their about back improved we is in on order. talked we someplace, a for XX%. this the where when Let's getting to also fake much the segment feel actually Every I'm you order pretty margin us build the also all, at for proud segment is is communications gets proves through a When margin to because it. that and face look there it we've we're we I a it, pretty low, how when a we the target this with more revenue think orders, orders. back is is so that real something we can that's we asking say, customer we're where our good don't up well, like take at when manage order real segment

manufacture. relates semiconductor are sure as think not it there we about. the as processes much we how So lessons I'm to

from Our Oppenheimer. the Glynn with of comes Christopher next question line

had margins. the I TS question a about

called the into for operational have talk have curious So next you as could TS a if of out year. some you And the improvements X realize I'm fundamental of view margin some or incremental price expectations next year over kind about you segment. fully also well. wraparound the

Heath. in TS also particularly done this that's of in to the on sensors benefit following many production lifting lot cost -- as heavy also well but Listen, we that's think piece has In trend. starting a a that general, done has cases, the moving are is chain segment locations we're following this the of Chris, way of supply largely from part meaningful of the a jurisdictions. I lower-cost this structure. of transportation into -- that. piece the away lot And And we're a see automotive as higher-cost

on think that of in, what go the to I certainly about, with is some auto as cost thing done catching to to of quarters us year, that we've up on been is And be we be. need that over necessarily the us. on increases our unique to customers couple past number something we price not next our to inflation the where call into going benefited as gradually has them. The following difficult is So of production support that that impact to layering structure has

in terribly more the massively, guess, ramp is that I year years on again, globally of shown the know and going content do the expect that to not past by on into and we smarter as all you But just region. of very couple that. grow auto to our and get hybrid it's bullish EV We're production category go we content next as story, to come we nicely, as

feel I target lead think about as incrementals, kind the we've and good to When will outperform that ability some market of get more in about margin So we'll to always our wraparound done, times you opportunity us. as next I we that price we into a normalized as some the Obviously, next for half of year. mentioned, XX% have first on roughly incremental. to And year. through come for

So I appreciate the question.

comes Our Giordano the from with Joe line next question of TD Cowen.

like I right have -- think today, the like basis a the business, have AI $X that one AI, a about meddling? a whole think as follow-up about there. it was of rating been on you would does the for is now? billion billion, stuff in it's appreciate your that I if like all replacement that now device data been business I at did run where Like look business do and the a of color but How business I absence where doing business kind normalized what $X.X on higher,

things. Yes, I couple think of there's a

the area talked know inventory the still a say destocking. is I certainly, lot about of planet I have a one semiconductor You would where the work And to distribution needs on through. that I there server lot and do

just as that of just mean and different have cloud the every I So AI us because but do still I think benefits is level right out. that would obsolete. It you're going you're now happening application is below to server being get going is architecture, those. clears realize also to doesn't say,

it supply the then will to It means. element. is normalization you AI. seeing in cannibalization next shouldn't early a have and AI as And know going in the not on is we're So we I cannibalization. year... back chain, wins still add of think start I any but talked see driving cloud I are we've you'll which innings, on strong, it. the think to full we're had, by the about get And you about to And engagements really them the very some

line the Evercore. Daryanani Our Amit with comes question next of from

industrial. is Amit. I for just This to [ speaking on ] focus Abdullah And wanted

XXX million and you would industrial expansion, be or I a you last I expansion saw in margin bps call, the on to bps nice XX XXX mentioned despite this segment, the so. quarter of second $XX think, think, of being revenues really think down, half, I in

So on. I takes was just [indiscernible] curious what

a very you're distinct mean is have Heath the this IS. this Listen, Yes. going little of and businesses X quarter-to-quarter. on question within margin noise Again, bit for I to always you've got

improved is the think the were the We of make equipment actions of I as our with to certainly well of which with up about downturn talked last some impacted cost component some quarter, the we industrial mix margin business, some in third fiscal ground us. our in segment as highest some here quarter that in businesses. profitability just able other

bit So a of it's a mix.

But with with back dip still revenue XX%. committed As current mix we is we're into segment the probably kind about, here what forward, were piece ] then think this like it's down I And we the I don't think of at [ would think, -- the that segment. think the listen, know are talking this XXs. margins I start the for last margins [ of range you that within in operating forward, this and I ] as think quarter. operating important teens we high XXs this we to necessarily

that past a a value We running opportunity on as create segment Those growth think, already need we've a really, acquisitions of will And margin have but we still digest to so. couple do layered come acquisitions have that opportunities strong lower meaningful average. of in have year margins the I in, taken and or identified with have really those over to we've considerably that implementing and some improvement impact. are the we below get that through also that's

our lower than to trajectory basis we're points no good there's couple hundred be of doubt But want there. longer about we that feel where term. So we running a

of Samik We will JPMorgan. from Chatterjee take question the with next our line

better X like wondering this what do I business you guess as at perspective, about I X does of Industrial X, drivers I margin mix in on understand it looking and look have you how Energy ADM, had look in a same secular want appear from drivers more a Medical industrial it from Solutions it, looks the it because outside sort equipment the like years but you terms to but secular well, mix question years? X just in on and to of whereas Or like sort how the doesn't think growth. the of outside, have to from

think your how this should subsegment as in at is this by or business? of of about focus where a So way mix investment this look there time we be business transitions will you

Well, investment to you've seen when it's look where important you the think first. at our I say I think, business,

have unit. business factory focused on building X, the there. And equipment that automation industrial like not us probably largest been you X unit because You business we trends very if the was the out years, are seen that went always back even

done we We opportunities So have M&A the there. like are that there.

harsh floor to We very customers and getting into solve data in a also to like trying getting are You're that what the are intelligence. challenges compute that there factory that that trying it solve? typically to the environment a turns off back

we to invest, think in see continue thinking in where we do continue you're going not but where also areas spot. to only that M&A can that to about I So continually space

we there see it's we're a don't now. platforms that's build because recovery, aerospace, where small we the continue to space do at changes secular secular really out are of And and one. we've had, top a you areas I I to renewable an there In think that continue driver set area the there, platforms energy has say I more around sit We would right really that become actually on this other content drivers it's M&A how earlier I those that we've year. say big have the did much energy. of is to secular on focused to a than we would there. also In capitalizing say being the the would look

certainly things value. your but really than We create eVTOL ] horizon and [ to that, like out have further they're

see think in we're of think execution continue to to growth I an and interventional. consistent benefiting see it's more medical, really the you I I story. you're as And So think going from

to years but businesses or them than times think going to out couldn't say they that X those nice We of the we out. we'll build other, that's all a have today. bit all segment to us as continue little growth about think we what's options we is I X them the of and ago. where be you're drivers do a And say different So in a what to X margin build I have just has have factor going it bit mix little continue higher a as give

with of the question next line from Baird. comes Luke Junk Our

Terrence, you of AI-related seeing. wondering you're that just awards if comment could on the pace

and the billion-plus book-to-bill just how could could devices get data of side. the appliances or $X to wondering that related and together, some quickly us and between in $X.X is that what in impacting awards data referenced you come communications how Just and have extent overall just terms additional billion? X.XX, you've then how splits that, that on book-to-bill, to devices quickly AI billion $X And color give of

Yes.

of is where and the are is the -- I through below orders let's both On above And devices X. well distribution, certainly, those, below first, the X. would question X. on tell you take go above book-to-bill still data appliances the customers last and direct the X

OEMs the direct of some say and it you of check be, I market seem they where And at to would that our where even sort is. the dynamics. need shows to So market, lower in appliance the in relationships be inventory at

our fast you the to have one was things capitalize dealing go those wins. When as turning, credit and back, of wins how it's with coming I the do an were make we market are the to give a wins we at we that furious. for on sure And look team really and AI

even up the sit over you we're time we $X pipeline well there, when now. talked, since So moved has the last billion

how around be the architecture and size. programs certainly, to ramp going really it's think these I

I AI able there's as So platform you to happening that continue some And updates cycle, matter in the had it the accelerating. But to that pause EV in on similar ongoing think we give no what's be me we you. these they surprise to they're the platform. ramp. cases, in In update no calls wouldn't we'll auto,

the Our with of Wolfe line Research. from question Shreyas next Patil comes

to maybe are now So If coming back mentioned Transportation are Solutions. the inflation. increases offsetting where price about material just I think you fully we

generating generating restructuring. -- additional an be and margin, is some some to there you're So going outflow, from about potentially you're XX.X% benefits

think be seem how it does achieved are next be there point year? about should something other target, bridge considering potentially So to we do that, the margin that as that headwinds some that could is we at XX%

anything I of closer we to want for First all, to until commit to 'XX. get 'XX don't

we with the to the we're we've half, the to in So I quarter both pleased third going second results that. half how got our with as about we're to careful Obviously, year feel in improvement think how be our from the well finish mid-XXs. as first reported

for now. to still XX% earlier got on see where for target mentioned to to and margin is TS approaching XX%, I as well. don't Our comes is we unchanged. I next revenue that we Obviously, an be we're year want commit out careful because question, that something as

year, of do too pressure Terrence we next but that earlier the some to which margin expect important today, highest have the talk thing commercial do much component didn't of -- we segment mention that did an on on segment very in question piece we China. transportation, our and about is eye keep is is it particularly there the this And that an close segment. within We a

auto story, about And business. sensors billion the it's not combination is a business also $X it, so as of well as just our which as transportation, we it's commercial think an

to and couple over next the to to feel on closer more come sustainable I that. sure, for comfortable getting goal, So target. But margins years our of

from Guy comes line next with Crédit the of Suisse. Our question Hardwick

original Just between are into question at trends wondering sales equipment if maybe a all? had or different they're distribution follow-up you well. And industrial in sales as manufacturers. equipment sharply How the differentiate I could to not

it's Terrence. Guy, Hey

between add direct equipment you color is X, book-to-bill you to the The look running running through If at like closer is only our distribution our customers, it, to more industrial [indiscernible] X.X. to Japanese some are our I were be as would support their strong. continues certainly But who they inventory in China. backlogs in supply in OEM things protected off you, were automation business, a would makers That factory distribution indirect. equipment the which business Asia, to lot channel. direct. relationship of in China tell includes for we direct from -- the weak, and see making of well as both sure between in trends in do probably as it's direct And XX-XX working different our cases, I are we close the what we're channel and but in seeing to they what chain, some there them customers that and the

very who've us particularly whether Chinese how fully your could year. this on particularly by very auto update Can mean, XX% give of business, be of late. competitors an domestic X growth, update or you're and us versus in participating position X TE's particularly local the strong players done well in you the NEVs on vehicles, you end market Could electric potentially, an give I the

Yes.

for Thanks couple the So things. question. of a

right TE, So to business I I'm EV of really is going we think -- in automotive. the -- Guy you in so about we and are have of just overall, talk, and billion of TE, China about is China around X/X have when about which play $X biggest you that mean on.

with local that our well And OEMs China. tell it. year you thing past fully produced production If to similar. of adopted biggest EV driver to in I XX% adoption local is of vehicles the basically on would XX% is And global Chinese have are or in really of today, are this you have to China -- you are electric want participate the over multinationals share planet that And is OEMs. market you participate battery globally, in versus they're the China the realize in the

story the share pretty the about the old similar positioned not brands honestly, local our And no it's market, talked story, vehicle when really driven being the China, well multinational by position driven X, look of the is only them. OEM in per and that's owning have it's our and we with about you CPV OEMs, between look a we local good growth the a very of the case. Chinese overall we're Chinese with growth is our when with So a and at multinationals or days longer content content multinational the whether you both content it

types planet multinationals. the I'm with has nice growth. So penetrating car say. and really true make been only "Well, of I that's it's in important always And team OEMs essentially what with know not TE". I TE's to they're sometimes every people China, is in say, on sure to very the both Not, our really what's done our

business, as all And automotive in my automotive comments, grew said we'll the China regions. in our all And this regions have also I in growth prepared quarter. year, for

certainly, our outside see strong. starting is We've So of to ramp back positioning there production China we seen actually sluggishness in up again, and automotive. auto very

everybody joining this Guy. Okay. us I'd like for call you, to And Thank thank the morning. on

a morning. please have reach additional you and have out nice If any you, Relations TE. at to Investor questions, Thank

and conclude the will today's on a.m. July today. Connectivity's Eastern beginning Relations portion Ladies That at XX conference TE Investor replay of XX:XX available the gentlemen, call for website. for conference today, be Time will