TE Connectivity (TEL) 24 Jan 242024 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity First Quarter Results Call for Fiscal Year 2024. [Operator Instructions] 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 first quarter 2024 results and outlook for our second quarter. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts.

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

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

our and Investor presentation, release press of at can Relations related the found on with slide The tables, the be portion website te.com. along

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

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

we do everybody And a appreciate today. everybody wish and also to New us I Year. Happy joining you, Thank want Sujal,

what we As into quarter, a to I discuss get our to days markets ago. call the XX slides, with seeing do like this take to do want versus our moment we're normally performance last in our before I along

in our guidance be quarter continue expectations economic backdrop, this and Against with our slow resulted largely performance a of of it flat in We revenue environment. the markets being our our global sales is in line to with consistent first growth.

once our and Communications Industrial by segment content declines in saw growth again driven transportation grew year-over-year the segments. Our we and this that offset

year-over-year by share flat adjusted on XX%, Our team's adjusted this to per execution expansion driven in was margin and earnings strong sales. XX% and with operating this quarter growth the was entirely was

segment. leverage half last of resulting the levers margin a on through year and transportation number particularly the across step-up second successfully structural of margin This were expansion performance further performance, our our Those segments. margin demonstrates in improvement are margin in drove executing of

deliver markets. communications seeing transportation margin what be expect by based that We will segments currently in year expansion and our driven this strong on to our we're

you cash the and we continue. $XXX our first our year important on quality that last record flow as from the as see And quarter strong this free performance of will earnings, builds just of which expect and cash in million,

we billion $X included to our Schaffner factory as to the of $XXX acquire During product capital returning approximately and Schaffner automation. million $XXX well as portfolio expands quarter, that shareholders in million deployed

Our give cash continues generation ongoing opportunities bolt-on shareholders to activities. supporting to both us capital model and confidence while return M&A to

now seeing our ago. me let market our share So since what we're call XX in days

was on out X% already, an mentioned I of expected. are also we And year-over-year, As and markets across as this we growth X basis, all segments. playing had orders overall

across We to businesses, units a impacted call. are and are the we'll business continuing but have be we seeing sales growth during destocking by that our our customers, inventory majority highlight these by few the of do

our expected weakness unchanged markets some and with production North this auto grow Our in from prior And adoption global takes transportation slightly remain by in America. view is production to the China stronger, and EV and end is production we're this puts region, in and seeing year. offsetting Europe of some view while

out to of go we businesses continue growth we to see and momentum, X continue forward. our segment, Solutions X X as expect in Industrial growth our In these of sequential businesses each to have

aisle and increases from is for our energy production wind in business single medical benefiting and see both sales interventional as both in procedures. grow renewable in platforms, continue You positioning solar increases twin Commercial strong to our applications. air and

growth this second And in and programs. artificial by industrial weakness Communications continue a into truly in quarters our nice. in XX compare occurring fiscal where Destocking days pockets now expect When ago in in seen we've year. few began half to to we It's our business. market of in driven half equipment this second is now this business we is you X in which lastly, destocking, the the intelligence the just see of versus wins our segment, ago, to and see incremental continue our do segment, year we Communications expect it

look model is and creation remains forward, unchanged X around pillars. our long-term we As value centered

positioned first applications The our secular cloud trends, renewable around intelligence, of vehicles, artificial name and in is a to electric growth growth energy portfolio few. is strategically adoption and including for just

enable environment. economic a Second, we margin slow have operational levers to despite expansion

higher benefits input The price drivers footprint portfolio implement to in consolidation, execution, bolt-on model we third, M&A cash while including to operational established return to that a generation we've and investing strong opportunities. costs. optimization encompass strong And capital shareholders actions offset

as the Slide to first an discuss I'd will then ask details the additional that for some quarter and second highlights I'll his into section. you with for outlook me overview, the slides, and X, quarter Heath and turn and the our get in more provide let So to of

industrial we about Medical are in driven and in quarter growth was with mentioned. but Energy X% equipment. I expected, growth by industrial, offset which first which was Our were billion, sales In communications, Aerospace, by and In we more applications. business. well auto in expansion as for we Marine, driven positioned it AI second saw content finally, in line $X.XX our in organic And was Defense our transportation, we saw in guidance, weakness the by growth I than talked half down as

$X.XX, margin prior and Adjusted the share points year-over-year versus at basis guidance operating up Adjusted being this XX%, performance our our strong year. XX% driven was was driver the by operational per were ahead these and earnings the XXX and performance of EPS up margins was of of guidance. were ahead

year-over-year decline in transportation. adjusted with this approximately margin prior the operating basis the expansion share a quarter first Adjusted around we're to second earnings sequential will points growth with expecting be is expected Industrial in billion, the the to to XXX by forward $X.XX quarter being the increase sales by segment, and slight partially driven to offset XX% look the over we quarter, per be up year. versus second $X.XX, our As quarter, second of

demonstrate and move Index that before Dow to a highlight I do So the get orders, into the consecutive to designation to This are quarter to TE's to customers continues that for our included to business practices year. XXth provide aligned our be sustainable to and owners. were our want expect this the with for pleased they away I from we and commitment value Jones that second financials in do Sustainability dedication

up talk seen time have $X.X let's since XXXX, COVID X ask all now was you of had And about and and At turn and after X% expectations. this we really X. segments the I'd growth. the this year-over-year Slide order what year-over-year So orders, the is company nice, consistent orders to we've with first level, total In our billion, was crisis. to

near We see overall in in the record confidence order in growth second gives us continue backlog outlook. stability this levels, each of with and to our quarter year-over-year levels and our remaining segments, at with

vehicle first Transportation in XX orders bit quarter, Europe in came North auto In stronger the weakness units, global and China some grew million over the of that America. X% overall production a and and in production. reflect production offset in stability year-over-year little saw we

segment, Going fiscal sequentially. forward, orders move well be to year-over-year through in we per as our expect global as In units auto this million both as saw Industrial growth we quarter roughly year. production we XX

regions weakness like only applications. and The we segment, the our our said order businesses, And of AD&M see world. by our markets. in year-over-year. do in strength orders end and is Communications we driven in and customers industrial the Energy equipment in X% across grew destocking saw our this now And Medical by pockets I all was occurring earlier, certain

X year-over-year into overview, an with you see me that as quarter, the those X through slide the in can saw get on your on let orders Slides deck, segment the that's now details of that we So results slides. and and

up organically business. and sales year-over-year driven the segment So was transportation. starting X% auto by it with Overall, had growth, our

a business X% organically decline auto this growth Our America. more Europe, growth and than with XX% in in North in and grew Asia X% offset

by to growth electronification continues from our vehicle. electric in global Our leading performance position vehicles as well content driven the within as trends be

over global in note unchanged, of vehicle is EV electric important production and growth outlook to it's occur for Asia. Our will that X/X

growth growth to that by continue be in position on the positioned global driven capitalize in market. our auto our well leverages outperformance is content content our by to that innovation. platforms OEM will strong We driven are leading to Chinese share and this very our Overall, local due

we've commercial it about was the the and by portfolio and X% been saw sensors talking offset exit we partially half business, lower-growth business, was of you transportation sales In continuingly organic to that where the efforts declines optimization you in organically Asia, see was driven growth, sales North about here to this in by by and decline driven on slide our lower-margin And we're products. the America.

by sensor automotive growth was sensors driven of industrial rest The decline markets, offset by applications in in the partially applications. weakness in in

were the adjusted XX%. segment, For Transportation nearly margins operating

our margins expect to target the of XX% margins year. at We for segment rest transportation approximately run this

been actions improvement As in driving operations. you several we've our know,

We our restructuring have been cost and these factory able to footprint through actions. optimize are getting from savings programs our

input successfully manage offset results and with the seeing actions business, you portfolio earlier. you strong are these to continually executing to all the been them through see. sensors talking mentioned increase. team expansion We've optimization, our I'm higher like we also that have margin highlight are EV our on effectively I you and our is costs. improvement about pricing that margins We been in product teams pleased to delivering as And to in Also, improvement volumes driving which I'd that

of In see quarter, that with sales and see organically we Medical Energy air to both organically this first we production continued quarter the first did were our backdrop increased as So our segment. and sequential X into the a quarter, down And with Industrial in we single businesses segment, platforms in XX% up in move X X. commercial the transportation, sales market. growth and were let's to AD&M go in of X% but as in aisle AD&M, twin growth the of expect

the Europe. little began in business, the applications, business, in this were organically. our organically, we're And ongoing up And finally, XX% the slower utility And saw cycle. Medical, were slide, destocking by in growth sales were offset partially you driven increases on procedures. sales by a can demand these in later interventional that in the seeing renewable equipment Energy XX% In in our see we down the in industrial business, in bit and quarter

similar is a that to continue, from to So we other hearing expect what inventory been this companies. is you've this and trend digestion

a from volume segment, with decline expect we improves. margins equipment. perspective, Industrial margins operating industrial environment segment until see to running continue From the destocking And adjusted mid-teens were to in the XX%, this margin the for the impact in

me expect sales let communications. we similar Organic to down turn the be quarter XX% year-over-year, and to second level. first quarter to sales So were the

will quarter, segment. favorable growth to begin third you our see year-on-year this in Starting in

of artificial contribution AI million connectivity to fiscal We $XXX providing it, meet positioned these artificial in let's for high grow 'XX speed, And are now well applications needs from intelligence low in intelligence, of on intelligence the programs artificial and the latency focused workloads. in expecting face to we're applications.

And mentioned to continue designs that platform work generate with call you as leading we've we servers. out to reference as compute as in XX% more an we content customers semiconductor to versus solutions. ensure well traditional cloud compute AI Also, closely the accelerated before, companies our

the front, margin margins segment, adjusted sales. were the decline despite for XX.X% points were and XXX the up On they in basis operating

are this we to maintain high we'll margin we now able teams extremely year. Our executing in move this through teens be and well, believe as segment the

the get overview forward. as into to me an and that of let our financials turn performance, expectations with on going Heath over it more details So to

to I financials. Well, details will X, on good thank provide the and turn everyone. Slide Terrence, more quarter Please morning, first you, where

margin million million charges. $X operating million adjusted was operating Adjusted XX.X%. and income $XXX of and of of an operating $XX and $XXX other was million included income acquisition-related GAAP restructuring charges with

which For unchanged, million expectations continue approximately levels I'm have charges sorry, sales well the well we 'XX full been -- expect be below and fiscal is we years. the the to restructuring year, running in below our are to $XXX prior

for $X.XX efficiency included driven a the EPS will of improve around change rate noncash and $X bolt-on quarter, forward, EPS a $X.XX non-U.S. we in restructuring expect charges and actions to be acquisitions. to a related by Going intercompany impact transactions. Adjusted the GAAP future nearly which benefit tax the Swiss of benefit, onetime was was that tax

mentioned. adjusted XX.X% QX, guidance that had rate to and due $X.XX. tax higher Additionally, just Swiss our slightly The we in the tax of increase other restructuring, an was acquisition in than rate I charges effective

for stay adjusted the adjusted the importantly, full full we For well for tax year, our to approximately second quarter our ETR the below our expect cash XX%. effective rate as expect we and to rate continue be year. always, to tax And now

first Now And X% this expanding year-over-year. basis margin on an let's in organic flat year-over-year operating driven in Transportation the of XXX turn to Slide were mentioned $X.XX on billion Terrence down and XX.X% X. points as Adjusted margins reported basis were expansion despite sales. Sales by and Communications basis a was flat our earlier, segments. quarter

up expansion. margin share XX% roughly year-over-year driven the Adjusted earnings was $X.XX, per strong by

to operations through the roughly million. $XXX first Also Turning we cash was and $XXX flow. cash million buybacks share of Cash a to quarter, quarter $XXX million and utilize also record deployed free million. $XXX from shareholders in the dividends for roughly Schaffner acquisition. was

over strategy which X/X for X/X and use approximately cash return of unchanged, remains flow to Our to is long-term capital acquisitions free shareholders time.

what how and we reinforce we key some to turn thinking of that environment. Before be discussed the our slow share today a expect about we I it let performance and are macro to points questions, over me

to improve our as strong control results going we performance, our you well are in action as this the We on and reflected to continuing can for expectations financial see take things our QX forward.

On serve. and this versus top our you we some markets we see benefit are from trends, growth the we of continue in outperformance delivering the secular line, key to

like executing our have started. are leadership other on getting earlier the levers, but You successfully in we operational applications position vehicles, line, on discussed just top multiple electric global benefits the call. intelligence seeing which of Below been are this have growth been artificial

forward, growth slow be to As we environment. expansion and our the move continues on earnings margin despite macro focus

the of about we the that, And us have up for for with Finally, drive to creation value ahead opportunities open stakeholders. excited questions. all call remain let's we

the Can instructions for the you please give Q&A session?

[Operator Our line comes Sachs. question of from first Instructions] the from Mark Delaney Goldman

your broader in or that? about better outgrow to are speak from you shifting more auto you'd the percent detail is areas what been your changing the topic still a And by than on auto outlook? impact Can EV of views, respect or to plans worse production auto prior and versus what quarter anticipating previously can mid-single-digit think OEMs production you business with

thanks for Mark, question. the

start with me Let the part. first

little As call, X quarter. overall line, in think we saw, top of on parts that was think in when was expected we pretty as the the you we of that's and better actually a units was was was saw China. worse. the better bit the And much little million one said here we And auto and stronger, a out really things one the little while moving one it first came that production I a driven over really, XX

and all you position know certainly we And have capitalize on it. the great China

which also little bit a deeper channel little destocking. indirectly bit we our Equipment I quarter our got probably incrementally a a partners. it, is started a was that touch to was And worse that bit. We bit So our business. We in see say call we The area where back out some little customers. through saw that that Industrial get Europe, both region that we better. saw September in is worse in a highlighted would little to

on little what better line, a bit top were or worse. the they was So

Heath bottom the was in I talked On line, of know communications. transportation higher And that drove by bit And had that. better. tax talked about performance little our the and it, a that covered it about both I rate the was margin a margin we beat. EPS team And and and

I previous be is outperformance. said production about that content auto do remarks believe up year. we EV around question your of this to part second The on XX% the going

be in largest of are in region X/X That's automotive. made to going really It's EVs Asia. driven, our

and we're capitalize it. revenue, on to continue to For going our

the hear be growth North So while and as won't rates in America there Europe, are maybe high. some you places

X% we'll that get outperformance talk the always making up X% to feel about. for been has you to we that. it about We good and Asia

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

maybe little very saw maybe that to up and really about margins, Can strong footprint, that is right? you think from of just follow have you Terrence, the series a you level. at and to You impact parse that of the margin point year? on. both you on you for standout into operating a what of had I do margins, segment the sustainability about very rest actions margin so taken? translates gross bit And your think TV, those margins these how alluded and mix restructuring level

going let the for thanks take Wamsi, question. to Heath I'm that.

into not for there's while of that's -- we're translates of pointed we've in and of benefit out, coming that years. you do on here over to And that Wamsi, outsized But gross And lost we've journey past restructuring on. us. starting margins most a of way, about margins. talked consolidation few the a listen, of obviously that, some earnings. Many the meaningful our you in we've see more have to taken footprint been some see charges the some

in terms bit you'll So we've move Terrence, There's execution, ] actions we you optimization that the also the very see of moves place, to continue and mentioned Last those low-margin portfolio jettising on be continue that. include price footprint we put that on which lot year, and we call, in lines talked and a about a that product there. made we forward. diligent stuck, as little of we in to [ have

take we consistently, certainly had part the environment consistently, the years, some see saw stabilize last more last quite order factories bit start it to and creates we've that allows several we've out and chains consistent then that a an you cost volatility we are of starting it's businesses where that. run there over more as our years really patterns more little seeing structures. running to the suppliers, play important And we as candidly, in think when is our about few think supply that in stability versus performing with advantage our us many And of I been of where where where you we lower can operating that

tick units. we The of even at was down level, XX%. first being the million roughly of confident as in the probably margins of transportation still closer production overheated target quarter little that to run But a XX because bring unit quarter transportation in segment, north feel a we margins up for can million the XX we auto that target that

call statement are we here this that making on So today.

here the you high segment, us the pick on things to as But rest an able And the in say, yet, year. these to Communications this of we're revenue see communications have of at improve levels. not right There's at which the we and been we're the should at then a the is throughout continue up, margins we play mid-teens lower that margin going to, in committing for a bit XX% little couple into I'll perspective. revenue For target margins there. from is expect the to teens industrial, run operating it mid-teens, industrial would things be

Schaffner into comes for at same bring And and margins not the does the absorb, we it. that to the our that then just opportunity terrific than our and we that's talked deal what equipment opportunity in are elongated and segment, in in generally situation the last stakeholders the acquisitions, have acquisition business, piece Obviously, destocking you that a the a in of that when but layering is most impact. couple profitable time, bringing acquisitions have for quarters. presents piece growth we've of that largest different a that the no that business which also with have start diluted in industrial does impact, And the of about the dilutive it

opportunities operating did [ good all at year, Plus move So ] in margins of have that forward or we that better will as level the an from that in good Wamsi, add TE when handle feel and journey. as move through our minus, be the it. our 'XX we the will to you we about humming continue XXXX we feel front than up,

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

commentary like question right been broader end fair very of stable demand my guess your seeing I -- worry what help December you're and a around think, trends quarter is lot compared on there's I level. look really us semiconductor CIS. bit I'm And understand hoping a understand in what around to is can in transport in But aggregate, and I you sequentially it, the orders are talk and companies, now. especially a of down

you to concern orders understand perhaps derivative sequentially that that brought things . I'd it's Is commentary that to a fairly how a about is negatively second do love are being ship think you stable. starting down versus

Amit. a of Yes. for And couple you Sure, question. Thank things. the

I look First think off, being that's a to in the only about all backlog we $X have you continue billion. segments up year-over-year our not also orders, were And orders but at by have to X%.

think communicated consistently. pretty we've So I

better, We cancellations. expect seeing as will work I'll aren't backlog that you, the environment tell gets down. we

to are semi than COVID products shorter. the companies extend Lead a I lead during couldn't some What we we realize our lot have did about talk really the different are was So times that. element know of our not hit consistently. And times really very We semiconductors. times. lead

coupling get equipment So we're at the they on came where look Otherwise, I the normalized quarter, except industrial work you, going little down call, levels be a I continues backlog. in backlog said they backlog to was the when in service to X more weaker. to thought hey, a improving. And bit probably where expected, they would expect with orders below we as you the we continue the the came with little we think orders for like can be to in

bit think get transportation, million over million expect will the we about think from XX to first do when the XX rest million, year million this for total. XX about for and units come of year it the I quarter quarter production XX in per units to to we we little run at from think backdrop, the units down global a to in auto

see is and really medical by which increase, energy. being order Industrial, AD&M, driven you sequential

there applications, though applications, believe nice pockets increase. supports we're So that you're out slowdown artificial in that but Solutions intelligence continuing segment working going the why Industrial there's end that some the revenue the telecom at communications, are stability and what's light are like to off pockets still even have some in in there tunnel. seeing and telecom a see there enterprise to seeing it cloud, enterprise that, things and around but are we feels pure And is some we aren't we are of

our really both thing the the year. for it's is orders So revenue. $X.X world upon And And last think about plus see. the of quarter out based for the we're I I guide backlog we the how up $X.XX of is the rest going of we've to billion second think laid the thinking billion that

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

a Had question the about of tuning some channels.

So organics, steep. with the equipment pretty industrial

reference in seem You the just And actual world? partners. the you excess juxtapose market certain if auto, inventories Really, I'm the regions curious any in of that to end could channel curious. on they're then specifically?

Chris. Thanks,

So We see our automotive destocking. this all. because destocking about not the do at apart do in we the let's In yes. comments, of space break talk product

results. levels plus see service flowing. And in on XX% to Our are I a our think it you request honestly, ship supply chain

up cover directly. to where digit. TE, low we in we XX% use directly. do, of closed, single talk cover can't revenue was and our products. When what see world, service we we total automotive, come our customers you world at in directly. the do we that have right, the TE's that think our said about, the that of and do world I there's destocking we level, And to this company then there's think our about And quarter we you And not to honestly, So on distribution XX% Chris, just destocking you the partners where we in it

is that in our around stocking. that's our completely So we indicator an is customers. chain to where the at And look supply tied

they truly you Now see quarter. in down -- XX% that the inventory, through down that's that piece working where that And you equipment. biggest industrial the in goes was channel the and are our impacts see partners,

in it appliances. see You

You that see customers. it devices partners and of also those have get in business to through go revenue business XX% to their to distribution our upwards data where their

we where the see really destocking is that occurring. So

the It in One of longer. up, the will we when it's pockets nice do partners. at low off. touch we go customers, party Amit's appliances. that take them And goes of did I was element to talked it's we're in organic that, also a inventory to single-digit bit We levels with D&D, back saw looking leveled directly, industrials quarter, what this and I see we has direct through that about improved. growth, where question But the things later not business our you think exclude destocking. little tied that have our the channel

we're we'll that have I with us point. industrial and growth, especially decline drives that to get at continue but think think us And I some destocking And equipment here, organic this in big we're those about, shows us we electric allowing areas also really content talked it behind that that flat. Heath relatively where is benefiting stay doing from will the business, to absorb drivers from vehicle, of other where benefit and basically destocking

the from UBS. from Snyder line next comes Chris question Our of

the around not while there. auto target like QX outlook of much to and EV sounds despite still levels follow on it came consider in questions wanted penetration we some destocking normalized, outgrowth. in earlier up there's below price I The headwinds supportive

this mix chain just that So Are think Is pressure basis? there just is there -- penetration headwinds? a EV about shouldn't from it softer we on [ some ]? is this X-quarter

to or trying U.S. a to share And than auto [indiscernible] headwind in it that, lower the global I content fair ] Is lastly, know because Europe? production to then outgrowth the [ that's quarter. think a it's

of a Chris. things, So couple

First I'm what quarter basis. I an off, it you appreciate look at on please the going to say, individual content don't on saying outperformance,

we it's between times ahead, where behind, is and getting I it's think over when really when you there times look because and OE. at are see you'll will see You certainly it the a to have to way interplays period time of

It on bit it. will Those types basis platform the every about a are world. does you of XXX quarter. We in get outperformance in net-net, were on of quarter a see going to things the you're into So get being off. points little

for So it X% we below was to year range that said, bit call is to little was important. what what the in expect we also this on be X% a but I said

a been of adoption On and your lot noise other -- there's part production. hey, around EV of

the take know I'm us going year. cars European always, Our made it to up will hear about it sometimes TE. going ask I a going The level car as There's to and about stress, remember, companies, view is XX really to And made planet is to car the be of I'm global this -- in car because Asia. what I of and companies majority production them million be we to just same. U.S. in matters

X/X our of you And when full hybrids that's look vehicles, Prius, I whether XX I EVs is a battery a need electric, you And tell you, those strongest about this where would to hybrid, at electric region plug. EV million a think is. like are also adoption, plug-in Asia. in When also driven don't

and got sit XX U.S. really [ ] in automotive R go, to units the bigger and than United production those States. million You are there

we a us to be needs ask really I So when global lens. it about think EV trends,

And up, revenue and have it see little see share multinationals, OEMs you you growth. similar a is when China, different in that our I than stronger. production normal you, adoption see last the do they're was plate you electric, And just goes you you And that as And week. that see around with they're color that can great in play. what's by And see our the EVs you when is China in also where license license bit we local battery their going. is with only plug-in a full it hybrids. you're not China you color, tell all see you green, is in And

changed. the of X% content So X% hasn't to

or On of vehicle for battery view X.Xx global innovation would hybrid the is adoption a on a hybrid bringing with our about nice changed. a content a And think make on what have we making serving business life, to normal $XX really EV Our really full great it also about we're I sure is that is our what's electric, hasn't it's Xx. our our does our to and plug-in innovation happen. customers

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

going expect and to into if we it? adds profile acquisition terms the more industrial from was I of kind dig a what wondering forward you could what in of bit it sales Schaffner the portfolio should margin and just little

and ] Yes. and Thanks, this I Steve, one. [ Heath will hang

is that Schaffner. talk to but on about around owners. acquire we you our us view can from off, as value M&A for we things drive really be also areas can first that value we drive an bolt-on customers, We want application. are here, we focused for When for where So

Schaffner filters that do, it. have It into to a automation is keep do and you simple, company. already you're be great to bringing global leaders a Swiss really drives, very this. of a space. things And And was in it they interference. factory much when the of through filter the example did they're of the one had that the electromagnetic going solutions. And factory it automation is It one Schaffner really is line. you keep power pure product motors was a line product applications the We how from U.S. that in

know a The strong into that $XX will revenue deeper together had of say. Schaffner, It that nice want it factory brings the it in something don't of it we you automation. more we presence, to us about million a were quarter. to up that if profitability improve Heath, add they gets age I With Europe And to levels is and really it. the is

our think, unit this at we is in the deals, -- compare of earning industrial down of I segment. to of it XXXX, that business similar was right another how No, through I we middle kind business the Steve, in industrial -- within fairway that another the terms which bolt-on that acquisition equipment look did is rolled and

really margin -- or where similar but strategy different focusing on and structure to line going things going our the expansion within our of the be obviously focus to here. earning that's And cash-on-cash returns cost a to did, we in on would not It's our it's contributing really quarter is gate, well ability first million a driving getting think shareholders. create our value year, the world does From in than is. EPS much where the $XX for so it in contribute fit TE trajectory early, about creation to opportunity the with cash-on-cash no well return following although a to as out as a

to dilution absorb to things nice and fragmented add some of space -- we even So a opportunity to do, -- do deals these we at still so in in I'd are it's in level. say, there's have the still, the it's like size space that general, margins segment the if

TD from the comes question Next Giordano Joe from line Cowen. of

the to want AI on ask just I side communications. within

So you applications. a like content mentioned XX% you have lift these in type AI

what's stuff like like just in would million you're before older content year? of last otherwise built Is AI for how AI? $XXX world Now doing essentially curious I'm what have of would So million that a of built type that XXXX. been have replacing of like if AI-related been content like replacing of $XXX is being much in stuff simply

into cannibalization. things, there what workload. support what capital to talking of deployed increased couple about deployed. get would more Joe. way goes that I a you're still we're going where to So the support The is content you're will see say to the That servers out gets really is trying is

you when So completely that sit cannibalizes it assume to there, everything. want I

and second we really in this build And we half. XX-plus TPUs, in the that our have will of on ramp. growth our year. nice continues think probably our be you Communications a revenue year. get year, percent of we'll the bring on year as throughout occur, continue and creates $XXX I will AI up as the the AI these about and revenue. the versus half in on, with said first million It But the level segment how program to the really the expect in launches the second set what's about half And think workloads GPUs it when that call it And we innovation we early what's higher are

from Chatterjee comes line question JPMorgan. the of Samik from Next

now up book expand driver And actually on and through? going that. implications AI segment? AI. the capacity and $X the come or How the billion the is revenue order million, on million He has a XX in about the previous more then you've to of you past. complications indicating to I demand? was you're question business, talked mean, I see are what's it that communication that margins pipeline Is the follow as on for What continue the a raising the raise? from piece of contribution $XXX

thanks question. the for Samik, So

To meaning increased the is of the $X when your off, you demand excess -- billion in First at the $X.X second it is look wins. question, and billion. part that, of element

So about we we continue high to have momentum teens said, on that to in that. for in, think comes segment. And as of going margins we're as he the that be when sort

be than going before, in the in high Communications said teens a revenue year on that even little the this we we're bit as So in. to lower comes segment

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

Sorry, Luke you are and next we'll Luke, rejoin. there? go question, have the we Why don't to

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

circle to other you area out weak markets back have from but industrial automation, issues on subsegments of the inventory demand some and called wanted factory areas. destocking just growing, is pockets industrial I really renewable other of companies Terrence, automation the EMS being are slowing and on we in even hearing suppliers some the medical the across energy

direct channel? And in a much read you're is inventory? of sales, not seeing that us there's as give what the to terms on of in more noise you a Could so OEM

couple A question. things. the for thanks of Matt, Yes,

a automotive. direct how goes much medical, off, that in goes through is very to the being sale. much not similar It's not serve to we either. EMSs that There's channel First there, that

where we digits. are serve strong you was with And double and of procedures line world. like growing where market interventional can double the see growth the very that players So much is digit, in big very our interventional

acceleration So solar we would continue we see slow the and in tell but destocking applications. bit more energy due where on In that. you, in play we little we a to would than utilities financing the don't servicing can renewables, wind the saw I say, I to see

we've Europe. a energy of to We did growth it than primarily spending you middle has utility high bit little in bit expect in around on term been why of that really the saw that utility weakness in lower seen Europe. spending little And what any longer in business slowness the and digit. be that's to grids their single rate a being middle we see And

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

quarter, this the solid I on pretty job think you good have all margins some a posting very done upside.

linger I expected maybe question explained it We hoping that's that have guided more. on this this little little better or goals, And significantly you You've bit, quarter? these aspirational than sort have. a you of a had bit you better but I'm can know than the

You've you several just we we'll of at might some Or than and are this the while. them you've pursuing from something this thought been to earlier? take what changed? realized improvement matter profitability of level regard Suddenly some wind talked change Is for things get some up all about, -- the a things achieved having quarters, earlier see goals these And this been a we continue point? Did pursuing in you higher in a quarter? expected, upside. you being looking this

that it think of business number auto quarter. incremental volume, and the right the and shows stated can in that's the XX leverage get million really the that right production number, million. Well, and there. I cost units, the saw base We auto listen, in the went cost certainly, fixed to that about of of rooftops -- Sure. side on you the within builds And we the transportation expecting XX last north quarter structure, we into that came we really when you what

levels And I quarter, about this journey to to towards. about to there's margins. able that So those of we've the obviously, right, target things margins. more to environment part levers million global we think hold feel involved as of able do stable all a And to that we'll that different towards XX good units able just of nicely these our deliver we but to production, be then on. volume together production, came target and getting hold lot be and the that's be It's plan quarter come a back there. to down structure cost expect to having a in been But I

market been back starting back margins require running target one starting for there, of pandemic-driven XX see go support to years, coming couple getting that below benefit. bit now the of And market, well which the the We've that production. you even always we're that, in the to If last things, more volume we're terms starting several certainly transportation see up business was to our get million through a auto units globally we've a that. said we're to and would and of

So a faster. to able we're little get there

support. was Some market of that

of bit structure getting facilities Some off bit it place When in the you was auto get Europe as cost the little the running we've into But hotter having little able taken structure world communications, that. a it's we're execute. in right and that some in within benefit our being there. faster Western to place offline seeing and of a again, in

[ and bit, get the you're upside segment So that about of can but swing of of driven had little most this referring are call relative and size where transportation out to the the we out to a other wouldn't ] business. is that good I feel we margin-wise

We question Luke from from again. Baird have Junk a once

about year. especially line Sorry this are comment guess, specifically, if on pricing in Transportation about around could on factors neutral you to are the technical issues that you just keep some some down neutral is there. you neighborhood, hoping Terrence, Solutions, there the the that salt me to just to we ability that back of outlined hold if outlook helping your for getting the could pricing I companies earlier? automotive talking price in look talk about

Luke, thanks the for question.

not we not I from the But net-net, at the year-over-year. . Certainly, with we're comes today. seeing that very margin that's the up we're cost been massive with are. of to is data it, our inflationary to at costs, and the customers a important got some to costs. pretty did. we strategy around we're or still environment, deflationary world to still down. a important it power where Copper one to things connector of net also application. very this, we recover start about input costs look seeing went important a you as the And through freight's happening recover And we environment. think what talking It's honestly, input we're we conductor, always and help an neutral other how things, cost. But moving a know any vehicle And hard are certainly, things our has what's inflationary work when about that the to seeing with talking you the think customers and our I massive when but both

very be there think pricing. will It we at across businesses. an then driven been consistent been that element. as to be will I the on dictate very communicate where costs will input our And our we've that's So And all you approach.

from question from comes Wolfe Shreyas Patil Research. the And

last see the the I moment, guess you if that or X% get price [ up normalization question. to ], for downs on maybe it eventually a to Maybe of pricing, maybe following to Tal were up maybe just pricing do feel I clarify, we you typically, X%. appears X%. At of think is maybe

that how talking relative ICE also the between actions And think enough you're curious just business auto maybe kind restructuring going high the level cost XX% a that other still where of can There the existing and margin profitability then forward? to in about EV sustain or you product. about at is

we kind think slowdown as some about if in globally of EV to potentially were Just adoption? there be

we around is, there's can when sure that articulated we productivity. competitive, environment there would be said to certainly, Sure. normal margin. first No, being We XX% our in deflation want A drive, assuming always off, things. of would was they're couple customers the back whatever a make to we Yes. would we get be to environment

about our So to to this, price margin. we increase get said to XX% we you talked need we've never when always

X The it recover lag. we done cost is to on did inflationary and environment past a we've the X years, pretty dramatic over in pricing to a

early when So acceleration. we it our margin the did impact saw on

it. if start of could continue don't see materials, to we'll little yet. I'm we're -- but talk sure think And you I a So bit price deflation we not seeing about there again back,

on Half content is ICE vehicles X is vehicle. elements is on our I we electric On an be same the versus about. have think to that an vehicle that honest there's ICE content EV of vehicles,

the are or sets over it's low whether a product those because vehicle same, the powertrain. that's and that of the vehicle drive an profitability the electric So carries place in doesn't voltage architecture

is And segment those products, going to high-power profitability to For up product the up. the average. been that is continue of we've said to what we've the that element we're lines the scaling move

made lower vehicles. million tremendous over our the where We've XX than ones is at that contributor progress. the made has the margin that go team transportation. progress been the It's to still But also scale in

vehicles few team nice has and the versus electric as were made. scale investing a there just we we job So when were done that very

increase we closed opportunity So significantly. the but have there, still has gap to

Merchant comes . Citigroup. of question Asiya from Our line next from the

Great.

have And You should about just free done that how questions have on that guys If job here a at the of you cash flow to about I margins. on the could any most about going M&A margins we be can given as guys expected level? answered. remainder are year? it your forward, for And have think been thoughts think the talk on generation, this fiscal of you great

side. Well, had from Sure. year to FY and did always first us in the 'XX free for the the free with cash my we our We flow of was strong It's near cash up well and on on cash momentum sheet further sets all, heart. balance thank the to a start you have flow, question dear flow. good which

that cash -- income we we momentum had about and that unchanged, moving XXX% guidance really 'XX our which that we good the feel specific FY forward. a As in but really number year, we for cash, largely which to is it's net not for is maintain conversion achieved how the

we periods things at sometimes done some we've to So time. have select different of working capital and

we payables, levels, our But fund where and particularly to the levers where to our year. our for be different for then inventory maintain good fiscal pull, to land restructuring receivables, first CapEx spending momentum we ability half is to to in the feel but of we're going relative what and there and with is rigor addition that to have that the we tends the

there's active of the out are again, terms things unchanged. environment, that that's, largely there. M&A In It's --

in and again, Some that others. things lot it various got there's December. here that other across are that, things announced to going a early owner because a The we're deal, that the But things right was us, for sure are public right the finish through that private of we more are more it's that work. that Swiss if interesting have strategy was it, for Schaffner line than it on. company, And processes our nature make numbers the that then in even we the fit fits strategic it

you close given those dozen looking a the any half finish get of time, about not all at at us be line. to probably expect a And to deals,

So -- but environment. it is an active

to through have We seen, -- is as activity up count year the that pick we've calendar across moved threshold starting moved the in some. the

I'd to X or get So to our as be we deal think done to in have tuned. always, year. stay you can another that fiscal able like But

further Langan No time. question final do We this Fargo. at Wells questions Colin Mr. from X from have

Just follow-up. want to

about talk tax. You didn't

permanent that rate? Is impacting mentioned call It's you minimal about forward. that over the of I a global think on of a be seen How brought going forward? historically. you've that the think is should down we some XX% kind higher Is changes about going the rate time? bit than tax? can that Or on

went very anticipated. to that than -- thanks into rate the of guided we our going up Swiss Colin, XX%, original Well, tax and The question. what we've last from our fiscal rate that year for quarter, increased change XX%, to was specific the had we sooner the

absorb to and our it financials have through as And well. we put that so

move different that forward, be parts periods. moving will at jurisdictions different relative enacting to minimum tax global a we of As time there's lot the

more to ETR some just down those have how to that that Some on importantly, cash think you that how of do are underway tax There's protect we things our ourselves we not would rate. more meaningful others. from planning the we than would probably do work tax us also but can expect about

out there's so report a there there's to And lot nothing of today there. unknowns because

anticipate look But corner to there. and there's activity around a underway lot to of try the

So to question, I to on we'll and is mitigate continue work good work your any to to XX% at think answer pressures. going rate a forward,

us joining morning. appreciate All Thank this Colin. right. We everyone you,

and Investor additional a If please hope nice day. at everyone we you TE. contact has Thanks questions, Relations again, have

for a.m. portion you. replay Today's on Time the Relations call Connectivity's be at That XX Investor the available Eastern Thank today. XX:XX of will conference today, January conclude will website. conference beginning TE

You may disconnect. now