TEL - TE Connectivity Ltd.

Operator: Everyone, thank you for standing by, and welcome to the TE Connectivity Fourth Quarter and Final Results Earnings Call for fiscal year 2025. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's fourth quarter and full year results and outlook for our first quarter of fiscal 2026. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Now please note that we are making a change in our non-GAAP reporting with the start of our fiscal 2026 year. The fourth quarter and full year fiscal 2025 financial results that we will discuss in today's call do not reflect this change. However, beginning in fiscal 2026, we will exclude amortization expense on intangible assets from certain of our non-GAAP financial measures, and this change is reflected in our Q1 guidance. We have recast the financial information of the quarters of 2025 and 2024 to ensure an apples-to-apples comparison of our results going forward, and this is provided in the slide appendix and in an 8-K that was filed this morning. Also, as a reminder, we will hold our Investor Day event on November 20 in Philadelphia with a product showcase the evening before. We're excited to convey opportunities for growth and further value creation for our owners and are looking forward to seeing many of you at the event. Note that we will also have a live webcast for those who are unable to attend in person. And finally, during the Q&A portion of today's call, due to the number of participants, we're asking everyone to limit themselves to one question, and you may rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thanks, Sujal, and thank you, everyone, for joining us today. Before I get into the details on the slides, I do want to reinforce a few key takeaways upfront. First off is that our strong momentum is continuing with quarterly and full year records for sales, earnings and free cash flow in what continues to be an uneven macro environment. We also continue to demonstrate the strategic positioning of our portfolio, benefiting from the secular growth trends in a number of our businesses, and we'll talk about these as we go through the discussion of our results today. We also continue to demonstrate operational resilience with our global manufacturing strategy where we've invested heavily to ensure in-region support of our customers, and we are set up for this strong performance to continue into fiscal 2026. We expect to continue executing on our long-term value creation model, and we'll click down and provide more details at our Investor Day next month. So with that as a backdrop, I would like to get into the presentation, starting with Slide 3, and I'll discuss fiscal 2025 results and our guidance for the first quarter of fiscal 2026. Our fourth quarter sales were above our guidance at $4.75 billion, growing 17% on a reported basis and 11% organically year-over-year. Both segments contributed to our sales being above guidance. We also saw orders increase in both segments to $4.7 billion, and this was an increase of 22% year-over-year, and it was up 5% sequentially. We delivered adjusted earnings per share of $2.44 that was above our guidance due to the strong execution by our teams and increased 25% versus the prior year. Adjusted operating margins were 20%, increasing 130 basis points year-over-year. And lastly, in the quarter, free cash flow performance continued the strong momentum that we've seen throughout the year and was $1.2 billion in the fourth quarter. So let me transition to full year results. Full year sales were a record at $17.3 billion, growing 9% on a reported basis and 6% on an organic basis. In our Industrial segment, we saw 24% reported growth, benefiting from bolt-on acquisitions that we made this year. On an organic basis, segment growth was 18% and capitalized on the strong demand for artificial intelligence and energy infrastructure applications. In Transportation, we continue to demonstrate our strong global position with strength in Asia that drove content growth from increased data connectivity and growth of the electrified powertrain in that region. We achieved record earnings in fiscal 2025. Adjusted operating margins were essentially 20%, expanding 80 basis points year-over-year and adjusted earnings per share was $8.76, increasing 16% versus the prior year, driven entirely by the strong sales and margin performance. We continue to demonstrate the strength of our cash generation model. We delivered free cash flow of over $3 billion with conversion levels of well over 100%. This strong cash generation gave us the flexibility for record capital deployment with over $2 billion returned to shareholders and $2.6 billion used for bolt-on acquisitions during the year. As we look forward, order levels support our outlook for double-digit growth in the first quarter. We are expecting our first quarter sales to be $4.5 billion, reflecting sequential seasonality that we typically see and increasing 17% year-over-year on a reported basis and up 11% organically. We expect adjusted earnings per share to be around $2.53 in the first quarter, and this will represent growth of 23% year-over-year. Now if you could turn to Slide 4, let me get into order details. In the quarter, we saw orders of $4.7 billion with growth year-over-year and sequentially in both segments. On a year-over-year basis, we saw organic order growth across all regions. And on a sequential basis, growth was driven by automotive, digital data networks and energy. Touching on the segment. Transportation orders increased 9% versus the prior year, driven by auto growth in all regions. In the Industrial segment, orders increased 39% year-over-year, reflecting ongoing momentum in DDN as well as our energy and AD&M businesses. Also one thing to highlight in our orders, we did see order rates improve in the general industrial end markets, and we believe this indicates stability. Now let me get into the segment quarterly results. And if you could turn to Slide 5, I'll start with Transportation. Our auto sales grew 2% organically in the fourth quarter, with growth in Asia of 11% being offset by declines in Western regions of 4%. Our growth over market reflects the ongoing regional dynamics that we've seen all year and have impacted our growth over market. As we look forward, we expect global auto production to be 87 million to 88 million units in fiscal 2026, with content growth being driven by key wins for our leading-edge products and technology around data connectivity and electrification of the powertrain. We continue to benefit from our strong global position and localization strategy, which enables us to serve our global customer base. Turning to Commercial Transportation. We reported 5% organic growth, and this was driven entirely by growth in Europe and in Asia, which was offset by ongoing weakness that we see in North America. And in our Sensors business, we saw weakness in end markets in Western regions that were partially offset by growth in Asia. For the Transportation segment, the team delivered 20% adjusted operating margins for the full year as we expected, and the team did a good job of navigating an uneven global production environment. So if you could, let me turn to Industrial Solutions segment, which is on Slide 6. And the segment grew 34% in the quarter overall as well as 24% organically. Digital Data Networks had another outstanding quarter where the business grew 80% year-over-year. We continue to benefit from increasing ramps from hyperscaler platforms. And for the full year, we generated over $900 million in AI revenue, tripling our AI sales versus the prior year, and this reflects our increased momentum. In our Automation and Connected Living business, sales grew 11% organically year-over-year with 3% sequential improvement that we believe reflects stability in general industrial markets. In our Energy business, sales grew 83% and included the Richards acquisition, which enables us to capitalize on strong growth opportunities in the North American utility market. On an organic basis, our sales increased a strong 24%, driven by continued increased investments by our customers in grid hardening as well as renewable applications. In our Aerospace, Defense and Marine business, sales grew 7% organically, driven by growth across commercial aerospace as well as defense applications. And in these markets, we continue to see favorable demand trends, coupled with ongoing supply chain improvement. And in our medical business, sales were roughly flat sequentially as we expected. Turning to margins for the Industrial segment. Our adjusted operating margins expanded by nearly 300 basis points to over 20%, driven by the strong operational performance and benefits of higher volume. I am pleased with the progress our team has made this year, supporting the strong growth that we have in this segment. Now let me turn it over to Heath to get into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 7. For the quarter, adjusted operating income was $943 million with an adjusted operating margin of approximately 20%. GAAP operating income was $916 million and included $10 million of acquisition-related charges and $17 million of restructuring and other charges. For the full year 2025, fiscal -- I'm sorry, for the fiscal '25, restructuring charges were $113 million, and I expect restructuring charges in fiscal '26 to be roughly at the $100 million level. Adjusted EPS was $2.44 and GAAP EPS was $2.23 for the quarter and included a tax charge of $0.10 related primarily to the increase in the valuation allowance for deferred tax assets. Additionally, we had restructuring, acquisition and other charges of $0.11. The adjusted effective tax rate was 21.4% in our fourth quarter and approximately 23% for the full year 2025. Moving to fiscal '26, we expect our adjusted effective tax rate in the first quarter to be approximately 22%, with the full year being similar to last year at approximately 23%. And importantly, as always, we anticipate our cash tax rate to be well below our adjusted ETR. Now if you can turn to Slide 8 for fiscal '25 performance. We set records in sales, adjusted operating margins, adjusted earnings per share and free cash flow. Relative to our business model, we are delivering on our targets for sales growth, margin performance, EPS growth and cash generation. Sales of $17.3 billion were up 9% on a reported basis and 6% on an organic basis year-over-year with both organic and inorganic growth, driven by our Industrial segment. Adjusted operating margins were essentially 20% for fiscal '25 with margin expansion of 80 basis points year-over-year, driven by strong operational performance. Both of our segments are running at the 20% level for adjusted operating margins, and we would expect further margin expansion as volumes continue to grow. Adjusted earnings per share were $8.76, up 16% year-over-year, driven by sales growth and margin expansion. Now turning to cash. We increased our free cash flow to $3.2 billion in fiscal '25, which was up 14% or $400 million year-over-year. Our free cash flow reflects over 100% conversion to adjusted net income, and we remain committed to this going forward. And keep in mind that our strong cash flow generation and cash conversion in fiscal '25 also included us investing a couple of hundred million of increased capital investments to support the growth in our Industrial segment. So a very good story there. In fiscal '25, we returned roughly $2.2 billion to shareholders through share buybacks and dividends, and we deployed approximately $2.6 billion, aligned with our bolt-on acquisition strategy. Our cash generation and healthy balance sheet gives us continued optionality with uses of capital to support investments for future growth, both organically and through M&A. Now as Sujal mentioned earlier, we are making a change to our non-GAAP reporting. And going forward and beginning with the first quarter of fiscal '26, we will exclude intangible amortization expense from our non-GAAP financial measures, and this change is reflected in our Q1 guidance. You will see the historical impact of the recast materials that we have provided for fiscal '25 and fiscal '24 in the appendix of our materials. And you can assume that amortization impact will be roughly $0.15 per quarter for fiscal '26. Now before I turn it over to questions, let me reinforce that we continue to execute well in both segments to deliver the record results you see for fiscal '25. We have positioned the company to deliver strong performance and value for our owners, and we expect our momentum to continue into fiscal '26 and beyond. We look forward to sharing more about our growth opportunities and our value creation model at our upcoming Investor Day on November 20. Now let's open it up for questions. Sujal Shah: Thank you, Heath. Kate, could you please give the instructions for the Q&A session? Operator: [Operator Instructions] Your first question comes from the line of Scott Davis with Melius Research. Scott Davis: Congrats on a great year. I got to lead in on the AI stuff because it's just a giant tailwind for you, and you're doing a -- seem to be doing a great job of capturing those revenues. But last quarter, I think you were talking about $800 million. You did $900 million. I think last quarter, you said you thought maybe '26 was $1 billion. Can we mark-to-market that forecast? And just as importantly, where are you on kind of the scale impact there where you can get to or above kind of company average margins? Terrence Curtin: Yes. So no, great question, Scott. And you're right on with where we've seen the momentum all year. And in many cases, our customers, on the programs that we win, continue to want more and they want it faster, which is a key element of how you win in this market. And so you are right, we generated over $900 million of AI sales in '25. And remember, in '24, that was $300 million. And this is really the products that we do that go into AI with the GPUs and so forth. So we tripled our revenue in this product set, which I actually think shows the job the team has done to ramp to your question. As we look into '26, the estimates out there is for hyperscale CapEx to grow about 20%. And let's face it, we have strong orders. We have the momentum and we have the design win traction. So we grew $600 million this year alone in AI in dollars. I think that's probably the baseline you have going into next year from a level of dollar growth that you should be thinking about right now. The other thing I want to highlight is while we talk about AI, we also have a lot of growth that's happening outside of AI in our DDN business. And there is business we have that is cloud business that is not AI. That business is running about $500 million right now this year. That doubled versus last year. And then we also -- that's also a real momentum. And then outside of that, where we play in enterprise and telecom over the past 6 months, I would tell you, we have seen increased momentum there where those applications are growing double digit for us. So I know we spent a lot of time on AI and a lot of -- early thing was all the cloud CapEx went to AI. We've seen a broadening out of it. Certainly nice growth in the cloud side as well that is not AI, but also seeing nice growth rates. And all of that comes together to be that nice 80% growth we had this quarter, and we can see that growth momentum continuing. Operator: Your next question comes from the line of Joe Spak with UBS. Joseph Spak: Maybe just to follow on, I mean, you talked about some of the high-speed interconnect and data center. I was wondering if there's also a power element related to AI that's going to help you in '26. And then just for CapEx in '26, like you've been close to mid-5 sales this year to help build out that support. Should we expect similar levels next year to help support that continued growth? Or has most of that investment already been made? Terrence Curtin: No. Thanks, Joe. So first off, let me get into the product sets a little bit that when we talk about our DDN business. Clearly, the bigger driver is what you get around high speed. But we have -- our growth has also been happening around what happens on the power interconnects, certainly, what we do in helping that power be more efficient from liquid busbars and things like that, that we do with our customers. And then also where we do cable connectivity that goes between racks and so forth. So the numbers I quoted to Scott include all of that in those categories, Joe. And we have momentum across all of them because all of them are key building blocks of how this architecture comes together, where you need lower power, no latency, higher speeds, all happening at once. So all of those products are there. I don't think one inflects at a higher point than the other as we continue. I think you're just going to continue to get that good momentum that we've had this year with the ramps that we have going and the program wins that we have. Heath, why don't you take the capital side of it. Heath Mitts: Sure. And Joe, just as a point of reference, and you have the material there. Our capital was up a couple of hundred million from FY '24 to FY '25, and that growth was entirely for some of these AI and cloud programs that we've won both in the past as we're expanding and/or, in some cases, adding new capacity altogether for very program-specific reasons. There will be some pressure to increase that a little bit as we move from '25 into fiscal '26. We don't guide that number specifically, but I would expect it to be kind of in line, maybe just a little bit less than the dollar increase we saw in the prior year. So I still think with the revenue growth and the growth that comes out of these programs, we'd still be at the TE average still in the -- a little over 5% range. And it kind of depends because sometimes with these programs, the revenue that comes out of these programs can lag a fiscal year or lag when you make those investments. So I know where some of the things the team is contemplating for this year is even investments that we'll make in '27 to support programs that we've won for -- I'm sorry, investments in late '26 for programs that will kick into revenue for '27. So there's a lot of great momentum there. The key is for us to get up, get operationalized things, so we're not the ones holding our customers back. Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. Mark Delaney: I was hoping you can help us better understand trends by end market beyond DDN, including how demand trends have changed over the last 90 days? And any early views you can share for fiscal '26? Terrence Curtin: No. Thanks, Mark. And like we've done already in the script, there's going to be some of this we're going to say, please come to Investor Day, but I'll tell you what we've seen and changed over the past 90 days. Let's build on the orders that we talked about, and you can see the slide. I think one of the things that is a positive is you saw the order growth both year-over-year and sequentially in both segments. So I do think the environment does feel better than 90 days ago. But let me click down a little bit by the segments. First of all, just taking Transportation, orders were up both year-over-year and sequentially in auto. And it is one of the things all in 2025, we dealt with a world where Asia production grew, Western production declined. We do actually think what we're seeing is some stability that they're probably going to be more even between regions, even though auto production is going to stay in that 87 million to 88 million unit range, which is flattish. We also think we're going to continue to deliver content growth over market of 4% to 6% because when you think about what's happening with data needed in the car, what's happening with further comfort things that we all want that drives more electronification in the car as well as just the nonending growth of electrified powertrains in Asia, all of that continue to give us confidence on the 4% to 6%. When you look at industrial transportation versus 90 days ago, Mark, honestly, there hasn't been much change, unfortunately. We continue to see Europe and Asia have growth and North America still having declines in the truck and bus and the agricultural area. So I would say that's one that continues to be uneven that we're actually really looking for signs when can we get a little bit of a North America pickup, but we are not seeing any trends that see that right now. So that's one, unfortunately, probably still feels muddled. And then in the Industrial segment, I will jump over DDN like you asked. But you look across our end markets there, we're seeing consistent growth across them. In Energy, we have -- you saw the organic growth this quarter of 20% with where we position ourselves in North America and what's happening in grid investment in the T&D side by utilities, the hardening, getting it up to current trends and everything, that continues to be very good order momentum there, and we're also benefiting from utility scale renewables like solar. AD&M just continues, I would say, the market continues to move along. You've seen airframers talk about where they're getting their build rates to, and it feels the supply chain continuing to show improvement, which is good signs. And then the one that I know we've been pretty hesitant on in our ACL business, which has general industrial, has a little bit of things that touch the consumer. What I could tell you, the factory automation side, which is the bigger piece of it, we are seeing growth in orders across all regions. The business grew sequentially. The areas where we see weakness is where we have things that go into HVAC, things that go into appliances, that's where we see some weakness there. So it does feel the industrial piece of that, the business side has improved. Certainly, the residential or consumer side has gotten a little weaker. But we did have nice growth. You saw that, and we think the momentum on the more of the industrial side continues to get more traction. So that's a little bit of going around the horn as we think about entering '26. Certainly, you see that in our guide with 17% overall growth and 11% organic growth here in the first quarter. The Industrial segment is still in very good momentum, and it feels like we're getting some stability across the Transportation segment and a couple of markets with questions. Operator: Your next question comes from the line of Wamsi Mohan with Bank of America. Wamsi Mohan: I was wondering if you could talk a little bit about margins in 2 ways. One is when you look at gross margins, just a few years ago, you were in the low 30s, you're squarely in the mid-30s now. How should we think about the potential for gross margins for you and for this industry to actually expand further from here? And if you could comment just on the new basis of accounting, how should we think about the adjusted operating margins for both your segments? And sorry, if I could, does this change in accounting imply any increased appetite around rate and pace of M&A as well? Heath Mitts: Okay. I will tackle -- I think you got 3 questions in one there, Wamsi. Terrence Curtin: Wamsi, you're ignoring Sujal's instructions. Heath Mitts: Yes. But no, I appreciate -- I do appreciate your questions and your interest. So let's talk about margins first. Margins for the year, this is a bit of a journey that we've been on. I think we were very specific with our comments around Transportation going back several years, getting them closer to their margin target of about 20%. Largely, they're there. You're going to have noise in a given quarter that's going to swing you on both sides of that. But for the year, they're at 20%, and we expect good things margin-wise as we go into FY '26. The Industrial business has been more of a story around more rooftop consolidations and so forth and taking advantage where we have scale opportunities, particularly when we have strong programs like we have going on in the DDN business. And we're very pleased with their performance and their jump forward in FY '25. Again, as we go into '26, we're going to be balanced with our investments. We think both of those segments will flow through on revenue growth at 30% or maybe a tad better depending upon the mix. So I think as you do your modeling, depending on what you want to put in there for the growth side, I think 30% is a good flow-through math on that piece of it for the organic growth. In terms of gross margin, a lot of that flow-through math does come to gross margins, and we do get some leverage on our OpEx expense as well. So we're running this past year at about 35% gross margins. The amortization change largely affects the gross margin line. So when we think about it at the TE level, it's about 100 basis points of margin improvement that flows through at the gross margin line. So at 35% in '25 would be kind of a recasted 36%. And that's where some of that flow-through is going to occur. If you think about the split by segments, which is another part of your question, it's in the schedule that we have in there for you that recast it, and it shows the segments recasted by quarter going back to prior 8 quarters. So you can see that relative to what our actual results were. But it's heavier weighted towards the Industrial segment because, obviously, the amortization expense load comes from the acquisitions, and we've simply been more acquisitive on the acquisition front in the Industrial segment over the past few years, inclusive of the Richards deal that we completed earlier this year. In terms of your third or fourth question on M&A, listen, I think we've been trying to be -- we're going to talk more about it in our Investor Day here in about 3 weeks in terms of just overall capital deployment. So I don't want to -- but I'd say it's fair to say that we're excited about our bolt-on opportunities in front of us. Bolt-ons don't always mean small. They come in all shapes and sizes, just as we completed in FY '25. We completed the Harger deal that was a little bit smaller, but then with the Richards deal, which was much larger. And our appetite ranges depending upon the business and the opportunity to create value there. Certainly, the optionality that I commented on earlier about free cash flow and the optionality that, that provides gives us some confidence that in some ways, we can be a little bit more aggressive, but we're going to be smart with the investments that we make. So stay tuned, and I look forward to seeing you in a few weeks. Operator: Your next question comes from the line of Amit Daryanani with Evercore ISI. Amit Daryanani: I just had a couple of questions just on the DDN segment broadly. Terrence, on the AI side, it sounds like $1.5 billion revenue run rate is sort of what you're comfortable with. I'd love to understand, do you see this growth coming more from end demand end units? Or is there a share gain narrative as well as some of these programs are starting to mature, perhaps the share is getting more in your favor? I'd love to just kind of understand the levers behind the growth you see. And then on DDN ex AI, your growth over there actually has been really impressive, north of 40%, I think, in fiscal '25, which is much better than what the end markets are there. So what's driving this growth on DDN ex AI as well? Terrence Curtin: Yes. So twofold one, Amit, sorry. The one time, I guess, you're adding the AI and the cloud piece together. So I just want to make sure where that comes from. And honestly, that's program ramp wins. Like we've always told you, we have a nice position with the hyperscalers. We have to play everywhere there, and these are ramps there. And I think our share has been pretty stable, but really benefiting from the technology and where we're co-designing with our hyperscale customers that, in some cases, have their own GPUs. Outside of AI and cloud, what I would tell you, what we saw and just if you take this past quarter, in enterprise and cloud, we grew about 15%. And on things around the edge and IoT, it was a similar number in the double digits. And what you see is I do think it's the bump down effect that's happening in CapEx. Our product set is very broad. When you deal with high-speed things, they do cascade down over time. So I do think you sort of have -- lines do blur between AI and non-AI. And the key thing, this cloud CapEx that the key element is that's a number we keep an eye on, which is growing 20%, I think is taking that bump effect that cascades down. And if you remember, like a year ago, we all just thought all the cloud CapEx was only going to AI. We're seeing that broaden out. And clearly, as you added some of my numbers together, you have those lines blurring, but it's really created that really strong growth that we've had that not only in the quarter, we grew 80%, but basically, we grew that for the year organically. And it was in the AI, the cloud that's non-AI as well as we're starting to see pick up here in the past couple of quarters on the enterprise, the telco as well as IoT and edge. Operator: Your next question comes from the line of Luke Junk with Baird. Luke Junk: Terrence, I wanted to circle back to Transportation and the orders in particular. You had mentioned that you had seen order growth in all regions this quarter. I'm just wondering relative to auto outgrowth, especially that has been more weighted to Asia and China recently, would you say this might portend to more balanced outgrowth algorithm? And I think you spoke to production being more balanced in the West, but what about some TE-specific dynamics as well? Terrence Curtin: No. Thanks, Luke. And first off, you are right in my comments. We've had this outbalance of production this year, and that has created a little bit of headwind because our mix -- I mean, our content per vehicle is higher in the West. You all know that. So that has created a little bit of pressure where you've seen our content outperformance be a little bit lighter than our 4% to 6%. But as we look forward, as we work through these Western declines and they become more flattish, I do view you're going to see content per growth in every region that contributes above that to get to the 4% to 6%. Certainly, there's different opportunities in different regions. The electrified powertrain is driven out of Asia. Data connectivity is in every region. Certainly, feature sets are different that drive electronics in the vehicle are different by region. But the key thing you have to realize, in every region, all of them are increasing. It's just the rate of increase. So net-net, we do think you'll see content growth over market be more even this year. But certainly, there'll be a little anomalies just due to the trends are very different in region. Operator: Your next question comes from the line of Samik Chatterjee with JPMorgan. Unknown Analyst: This is [indiscernible] on for Samik Chatterjee. So I just wanted to ask on implied margin guidance for F 1Q. So based on my calculation, even after adjusting for the change in non-GAAP calculations, the implied margins are close to 21%, which is a robust expansion relative to F 4Q. Can you please highlight the drivers which are driving that margin expansion there? Terrence Curtin: Yes. Samik, I'm going to have Heath answer that question on where sequential margin goes sequentially Q4 to Q1. Heath Mitts: Samik, first of all, as you know, we don't guide a specific margin target. However, I think it's fair to say with the breadcrumbs that we've given you on various things with tax rate and implied what our EPS guide is and our revenue guide, you can assume that we're going to see an increase in margins modestly sequentially, probably more driven by Transportation, which tends to have the highest auto production number in our calendar -- in our fiscal first quarter each year and neutral or maybe flattish in Industrial. But I don't want to get into guiding margin rates, but I think that would be a fair assumption. Operator: Your next question comes from the line of Guy Hardwick with Barclays. Guy Drummond Hardwick: Terrence, I know you kind of answered the question about the growth in DDN ex AI. But I think I heard you say the cloud business doubled to $500 million. Can you tell me what's driving that? I assume it's cloud companies pushing their on-premise customers to the cloud, and they seem to be growing at 20%. So just wondering how much visibility you have in this business because it potentially could be a multiyear runway. What sort of kind of growth assumption should we assume sort of medium term? Terrence Curtin: Yes. So first off, Guy, you are right. The comments I made in -- to Scott's question really had to do with our cloud revenue, which is in non-AI applications was about $250 million in last year, and it was up to $500 million this year. And I do think it's about the infrastructure being upgraded. And not everything has a GPU, but you do have cloud data center, there's other things going in it that are being upgraded, and we're benefiting from that. So clearly, you have very high-end compute that's happening on the high-end side, but you're going to have cascade down that we're benefiting from our broad product set. And I do think we're going to continue to benefit from that growth trend going forward. It may not have as much content as we have on AI, but it's going to have a nice growth rate to it because certainly connecting GPU to GPU like we do today, and that's more of the AI element, you don't have that product in there, but certainly, you have the high speeds needed in these next-gen servers that the cloud needs. Operator: Your next question comes from the line of Colin Langan with Wells Fargo. Colin Langan: Just a follow-up on the outlook in auto to grow 4% to 6% over market. I mean any way to frame the challenge from EV adoption slowing down in developed markets? Is that sort of going to keep you at the lower end of that range or even below that range given some of the pushbacks in some of those products? Or is that kind of offset by other factors? Terrence Curtin: No. When you look at it, I think, clearly, when you have EV adoption, the biggest driver of it is Asia, and that's full steam ahead. You have less adoption elsewhere in the world. Where you have, you're not going to full EVs. You might be going to a hybrid, which gives us a content increase, but not the total content increase you have in the full electric. The element that you have to remember is I need you to think about what's happened to the content, not only in EV, but outside. Think about the Ethernet connectivity that you need in a car for autonomy, for the sensor suite, for everything else that needs to happen in the car, for software updates over the top. All of that's being put in, and we benefited from that, had really nice growth this year on it, and that's going to be a key driver, almost just as important as what we've gotten out of EV. And then the other thing that come into, the safety features, the comfort features, everything else that's getting added to the vehicle also adds content. So we actually view it's going to be more balanced. And when we're at Investor Day here just next month, we'll spend more time on this to make sure everybody has a clear picture of how we see the content growth going forward. Sujal Shah: Your next question comes from the line of Asiya Merchant with Citi Group. Asiya Merchant: Can you just talk a little bit about the book-to-bill, specifically, I think, in Industrial, given the strong momentum you have, DDN as well as some of the other segments that you talked about, is book-to-bill below 1 here? I think I calculated it to be 0.96. Is that a metric that investors should focus on? And how we should think about that relative to your guide? Terrence Curtin: Thanks for the question. I would say you have to look at order levels and the one element you get always this time of year is we do have sequential seasonality that's very normal. And especially in our Industrial segment, you have factories that shut down around holidays in the western part of the world. So in many ways, and if you look back over time, you will always see we have a step down quarter 4 to quarter 1 due to this factor. It's almost like we have 1 less week of business due to how people leverage their production planning. And the element is $4.7 billion of orders in the fourth quarter against a $4.5 billion guide for the first quarter is very healthy. So I know the book-to-bill takes current quarter, but what's really nice is the trend you see going into a sequentially slower quarter just due to seasonality is really how you should look at it. Operator: Your next question comes from the line of William Stein with Truist Securities. William Stein: I want to first recognize very good results on revenue and earnings and the outlook in the same regard. So the question I'm going to ask is maybe is not quite as optimistic, but I do want to recognize the great results and outlook. On the margins, however, I have this lingering question. You're, again, beating on revenue. You're beating in this new -- partly from this new category of AI, which I would expect carries better margins. The conversion margins are not bad, but I think they were a little bit below consensus. And if you look to the out quarter, if you don't make that amort adjustment, I think it's the same story. Revenue beat and earnings beat, but margins are a little bit disappointing from a [indiscernible] perspective. Is there something dragging on profitability today that you could clarify for us? Heath Mitts: Yes. Will, I'm not -- we've kind of been holding this roughly 30% flow-through here for a while. And so I think when you look at our -- and there are some bridges, I think, in the back, when you look at our operational performance and you look at the fourth quarter or the full year '25, our guide for '26 year-over-year or at least our first quarter guide, I think you would come back into a number that has a 3 in front of it. So certainly, amortization change was not done for any reason other than to better represent kind of our cash profitability of the business. And so you're always going to have a little bit of noise between segments and within a segment, maybe even some mix within a segment, but that noise goes both directions. And so I don't get too hung up on that quarter-to-quarter. But no, from a fundamental perspective, there's nothing that drags on us. I would say in certain pieces of the business that are passing on a little bit more tariff pricing, that tariff pricing and the revenue that comes from that does not include any margin behind it. So when we do see a spike in some of that tariff pricing, some of those businesses struggle a little bit because you might add revenue with no margin, but that's just more of a recovery mechanism. So that can create noise. But I'd say if you look at the schedules that we provided for the quarter, for the full year and certainly for our guide, you'd see a 30% or so in there. Operator: Your next question comes from the line of Shreyas Patil with Wolfe Research. Shreyas Patil: On the AI piece, you're growing very rapidly, run rating at about $1.2 billion. You've talked in the past about this being a 3-player market. One of your competitors appears to be quite a bit ahead on revenue, maybe 3x the revenues that you're doing at the moment. So I guess, as we think ahead, how do you think about the market share dynamics in this space? Do you see an -- should we be thinking over the long run that this will eventually become a more balanced market share across the 3 big players? Or do you see TEL as sort of a firm #2 over time? Terrence Curtin: I think what you have here, and you said it well that when you look at the players, it is a concentrated player because what occurs is who can provide this technology. And when you look at how you have to co-design, ramp to the levels that you've seen us do, it doesn't mean it's going to be a concentrated market. I think we have to continue to look for technology inflections, and they are typically going to be the areas where you see opportunities to gain share. But we got to compete on technology, we got to compete on ramp with the customers and we have to compete plan on the ecosystem. And I think what's really good is that we provide the technology that shows we can provide it, and we're going to compete every day to try to increase share. Operator: Your next question comes from the line of Joseph Giordano with TD Cowen. Michael Elias: This is Michael on for Joe. So previously, you mentioned strong content in busbars and cabling and also previously other quarters, backplane content in particular. Are there any recent order wins you'd like to highlight there specifically? And then what types of customers are you seeing the most order activity with right now between GPUs, custom ASICs, hyperscaleers, stuff of that nature? Terrence Curtin: So first off being the wins that we have are across the product set. And in some cases, we're stronger with certain customers on one product set versus the other. You shouldn't assume you get one product set or all product sets with one customer. We compete individually on each one of those product sets that you sort of talked about. And that's just reality as we work the architecture real time. The bulk of our wins that when you see the revenue traction we have in the ramp are mainly with the hyperscalers. We had wins across the hyperscaler group as well as the semi players. But the element is the bigger driver of growth for us is the hyperscalers that have their custom TPUs and GPUs. Sujal Shah: Okay. Thank you, Mike. It looks like there's no further questions. So we appreciate all of you joining us this morning for the call. And if you have further questions, please contact Investor Relations at TE. Thanks, everyone, and have a nice day. Terrence Curtin: Thank you, everybody. Operator: Today's conference call will be available for replay beginning at 11:30 a.m. Eastern Time today, October 29, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. Thank you for participating. You may now disconnect.

Operator: Everyone, thank you for standing by and welcome to the TE Connectivity Third Quarter Earnings Call for Fiscal Year 2025 [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's Third Quarter Results and Outlook for our Fourth Quarter of fiscal 2025. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. I would also like to take this opportunity to announce that we are planning to hold an Investor Day on November 20 in Philadelphia with a product showcase the evening before. We are excited to share more about our opportunities for growth and further value creation for our owners, and we'll be sending out details of the event shortly. Finally, during the Q&A portion of today's call due to the number of participants, we're asking everyone to limit themselves to 1 question and you may rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence R. Curtin: Thanks, Sujal, and thank you, everyone, for joining the call today. As I normally like to do, I do want to take a moment before we get into the slides to frame our results for our third quarter as well as our guidance for our fourth fiscal quarter. We are pleased that we delivered double-digit increases in both sales and adjusted earnings per share in the third quarter that exceeded our guidance and demonstrate our team's ability to continue to execute in a dynamic global environment. We delivered 14% sales growth and 19% adjusted earnings per share growth, and both of these are quarterly records for our company. A key driver of our success has been the strategic positioning of our portfolio and the investments that we've made to broaden our business to benefit from secular growth trends in both the Transportation and Industrial segments. The investments that we made will see that are paying off and are evident in our results as we're capitalizing on the strong demand for artificial intelligence as well as growth in energy applications where our products needed. We're also benefiting from strength in Asia in our Transportation segment, where we see increased data connectivity trends and ongoing growth of the electrified powertrain. You not only see the benefit of the investments on the growth side, but you also see it in our operations. We achieved record adjusted operating margins of 20% and record free cash flow generation of $1 billion this quarter. This is the result of our global manufacturing strategy, where we've invested heavily to have over 70% of our production localized, and this is providing to be a differentiator with our customers. And finally, we do expect our strong performance to continue into the fourth quarter with both double-digit sales and double-digit adjusted earnings per share growth again in the fourth quarter. So with that as a backdrop, let's get into the presentation, starting with Slide 3, and I will discuss some additional highlights and the guidance for the fourth quarter of fiscal '25. Our third quarter sales were above guidance at $4.5 billion, growing 14% on a reported basis and 9% organically year-over-year. We saw acceleration in our Industrial segment with over 20% organic growth that was broad-based and driven by our digital data networks and energy businesses. We delivered record adjusted earnings per share of $2.27 that was well above our guidance and increased 19% versus the prior year. Our adjusted operating margins were 20%, and they increased 60 basis points over last year, driven by strong operational performance by our teams. As you know, we've been on a journey to expand margins at the company level, and both segments are now essentially running at 20%. Importantly, to highlight, and we'll get into it in more details, the Industrial segment adjusted operating margins expanded nearly 400 basis points year-over-year. We also saw orders improve again this quarter to $4.5 billion, and this was an increase of 8% year-over-year as well as 5% on a sequential basis. And these order levels support our outlook for the double-digit growth in our fourth fiscal quarter. We delivered record year-to-date free cash flow of approximately $2.1 billion, and we returned $1.5 billion to shareholders, and we deployed $2.6 billion of capital for acquisitions in the Industrial segment, which includes the Richards acquisition that we closed this quarter. As we look forward into the next quarter, we do expect fourth quarter sales to increase to $4.55 billion, and this is growth of 12% on a reported basis and 6% on an organic basis year-over-year. Adjusted earnings per share is expected to be around $2.27, and this will be a 16% increase on a year-over-year basis. Our fourth quarter guidance implies strong performance in fiscal 2025 with high single-digit sales growth and double-digit adjusted earnings per share growth year-over-year. With that as an overview, now let me get into order trends, and I'd appreciate if you could turn to Slide 4. In the quarter, we saw orders grow to $4.5 billion. In Transportation, orders increased 5% versus the prior year, with growth in Asia of 17%, partially offset by declines in Europe and North America. The global auto market remains uneven by region, and we continue to see strength in our Asia position in both our orders and our sales, which is helping to offset the continued softness that we're seeing in Western markets. Looking at orders in the Industrial segment, we continue to see strong order momentum with 12% growth both year-over-year as well as sequentially, and this reflects ongoing momentum in artificial intelligence applications and in our energy and aerospace and defense businesses. One key sign that we saw in the quarter, and we're encouraged by is that we have improvement in orders that we're starting to see in the general industrial end markets. Now let me get into segment results, and I'll start with Transportation that's on Slide 5. Our Auto business grew 2% organically in the third quarter, with growth in Asia of 11% being offset by declines in Western regions of 5%. While Auto production on a global basis was down slightly in the third quarter, it is expected to be roughly flat this year. And we continue to generate growth over market and secure key wins around data connectivity and electrification that will drive future content growth. In addition to the leading-edge products and technologies, we are also benefiting from our strong global position and localization strategy, which enables us to serve our global customer base in this environment. Turning to our Commercial Transportation business. We experienced 3% organic growth, and this was driven by growth in Asia and in Europe, partially offset by declines in North America. We did see orders improve both year-over-year and sequentially, indicating that there is some traction in the commercial transportation cycle. And in our Sensors business, we saw weakness in end markets in Western regions, partially offset by growth in Asia. For the Transportation segment, adjusted operating margins were 19.4%, and we expect margins to be above 20% for the full year. Now let me turn to the Industrial Solutions segment, and that starts on Slide 6. And at the segment level, we grew 30% in the quarter with over 20% organic growth and the benefit of acquisitions in our Energy business. The Digital Data Networks business grew over 80% organically with increasing ramps from hyperscale platforms across our customer base. You see the strong growth, and I just want to remind you that AI revenues last year was $300 million. We now expect our revenue from artificial intelligence applications to be above $800 million in this fiscal 2025 year and continues to reflect the strong momentum that we've been talking to you about. In Automation and Connected Living, we grew 5% organically, and we are seeing signs of recovery in factory automation applications as markets have begun to improve. In our Energy business, our sales grew 70%, and this includes the Richards acquisition, which enables us to capitalize on strong growth opportunities in the North American utility market. On an organic basis, our Energy business grew a strong 20%, driven by continued momentum in grid hardening and renewable applications. In our AD&M business, sales grew 6% organically, driven by growth across commercial aerospace, defense and space applications. And in these markets, we see favorable demand trends that continue to be coupled with ongoing supply chain improvement. And in our Medical business, our sales were roughly flat sequentially as we expected. Now let me turn to margins for the segment. And for the segment, adjusted operating margins expanded nearly 400 basis points to over 20%, driven by strong operational performance and benefits of higher volume. I am pleased with the progress our team has made of balancing our footprint consolidation efforts with supporting the strong growth that we've had in the segment, and that's clearly evident in the growth as well as in the margins. So with that as an overview of our segment results and orders, let me turn it over to Heath to get into more details on the financials and expectations going forward. Heath A. Mitts: Well, thank you, Terrence, and good morning, everyone. Please turn to Slide 7. For the quarter, adjusted operating income was $901 million with an adjusted operating margin of 19.9%. GAAP operating income was $857 million and included $30 million of acquisition-related charges and $14 million of restructuring and other charges. For the full year, we continue to expect restructuring charges to be around the $100 million level. Adjusted EPS was $2.27 and GAAP EPS was $2.14 for the quarter and included restructuring, acquisition and other charges of $0.13. The beat versus our guidance was driven by strong operational performance and higher volumes. The adjusted effective tax rate was 24% in Q3, and we expect a similar tax rate for the fourth quarter. As a reminder, the increase versus the prior year is primarily related to the impact of the Pillar 2 global minimum tax and our jurisdictional mix of earnings. But as importantly, and as always, we anticipate our cash tax rate to be well below our adjusted ETR. I'll now discuss a couple of housekeeping items. During the quarter, we saw the U.S. dollar weakened against other currencies, resulting in a year-over-year benefit from foreign exchange of $68 million in sales and $0.05 in adjusted EPS. Our Q4 guidance assumes foreign exchange contribution of $111 million in sales and $0.03 to adjusted EPS year-over-year. And these are part of the bridges in the back of the slide deck. The impact from tariffs in the third quarter was approximately 1.5% of sales with minimal earnings impact. Based upon what is currently enacted, we expect the impact from earnings in Q4 to be similar to Q3 levels. With our global footprint, we will continue our strategy of mitigating tariff impacts through both our sourcing changes by TE and our customers as well as implementing pricing actions. Turning to Slide 8. When you look at the graphs on the slide, we have set records in sales, adjusted operating margins and adjusted earnings per share. I do want to focus on cash flow. Cash from operations was nearly $1.2 billion and free cash flow was $962 million in the quarter. Year-to-date, we have delivered free cash flow of roughly $2.1 billion, and we expect to deliver another year of free cash flow conversion well above 100%. Our cash generation and healthy balance sheet position us well and provides us optionality with uses of capital. So far this year, we have returned approximately $1.5 billion to shareholders and deployed $2.6 billion for acquisitions. Before I turn it over to questions, let me reinforce that we are executing well to deliver record results and have positioned the company to continue to deliver strong performance and value for our owners. I am pleased with the way our team is performing, the results we are delivering and the opportunities ahead of us. We are well positioned for a strong finish to the year, setting us up for further growth and earnings expansion as we go forward into our next fiscal year. As a reminder, that starts October 1. Now let's open it up for questions. Sujal Shah: Okay. Thank you. Can you please give the instructions for the Q&A session? Operator: [Operator Instructions] Your first question comes from Scott Davis with Melius Research. Scott Reed Davis: Terrence and Heath, Sujal. Congrats on positioning the company well this year, particularly around the AI stuff, which I need to ask about because it's topical, obviously. But is that business now when you think about $800 million, which is just a big number really when you think about where you were just a couple of years ago. But is that business now fully ramped and scaled, meaning like profitability at or above company levels? How do you think about that? Terrence R. Curtin: Yes. No. Thanks, Scott. And to your point, I said it on the call, last year, we had in just AI application about $300 million of revenue, and it's up -- it will be above $800 million this year. And when you look at where we're even run rating now this quarter, it will be above $1 billion next year. So it has been something from the scaling side. Our teams have done an exceptional job trying to keep up with the demand. When you look at the growth we have, it is on ramps. And when you look at the margin that we get in this business, it's not surprisingly, it is a little bit above where the Industrial segment plays. And I think you're going to continue to see nice conversion on that as that continues to ramp. And I still think we're sort of middle of the early innings in this and what we're working on with next-generation programs with our customers. And like we've always said and as we've talked about AI, we're playing a broad slate of the hyperscalers. It isn't one customer here and how our teams are bringing not only the technology that's needed on the product set, but then to your question around the operations side. Our team is executing very well to really make sure we can deliver the technology at the pace that the hyperscalers expect. So that momentum, we feel good about. Certainly, we see that not only being in '25, we see that continuing into '26. Sujal Shah: Okay. Thank you, Scott. Next question please. Operator: Your next question comes from Amit Daryanani with Evercore. Amit Jawaharlaz Daryanani: Terrence, in June quarter, something that really stands out. I think everyone is just the broadening in both growth and the margin performance across your portfolio. The double-digit growth in industrials really stands out. So can you just talk on what's driving this diversification and growth that we're seeing in June? And then really related to that, the industrial segment margins achieving 20%, I think, much faster than any one of us expected. Can you spend a little bit of time on kind of what factors contributed to this outperformance? And how sustainable do you this margin levels are? Terrence R. Curtin: Yes. No, thanks, Amit. And let me break that into probably 2 pieces. I'll talk about the growth, and I'll ask Heath to talk about the margin journey that you've all been following with us. So first off, when you think about the growth, and let's face it, we have an unbelievable position in transportation that we've always talked about. But really, when we think about -- when we make investments and you think about what we do, which is across these markets is really connectivity is a couple of key trends that we've been investing in is around where do you need data, where do you need higher speed data. And AI, to Scott's question, is front of mind. But also realize when we deal with things and we talk about software-defined vehicles, it's around where we're strong and where those trends help us. So it does come to a big point of those data speeds. And you see that in Industrial, we benefited from in Transportation, but also in places like factory automation, you have data speeds that are needed. And that's why we like our position there and to your question, broadening out. The other big trend is its connectivity around power. And in Energy, we've made investments around our go-to-market and our product set. You see it in the organic growth that we've had now for -- goes back pre-COVID. And in this quarter in energy, it was 20% organic growth. And then we've deployed capital in M&A there. So it does come around power connections and no different than power connections we have where the architecture changes in the car for the electrified powertrain. So it's things we do good. Yes, we have to be targeted to create value with our customers. But you're seeing that throughout our results, and you see both segments contributing. And that's the broadening that we get excited about because it's things that we have been investing in. And certainly, you see them in this quarter's results. Heath, do you want to talk about the margin side of his question? Heath A. Mitts: Sure. Amit, I appreciate the question. Certainly, we're pleased with the progress that we've made in the Industrial segment margins as it's been a journey to work its way from the mid-teens into the high teens and now cross over the 20% threshold for that business. But we would expect these level of margins at these volumes, right? So we've done a lot of footprint work in the Industrial segment, as you are aware. And we've been pretty transparent that this restructuring journey that the segment has been on to reduce some of the rooftops as we've undertaken. So as you get that both combination of reduced fixed cost out of those fewer facilities and then the scale that we get and the volume leverage we get when we start to see these volumes, it's not a huge surprise to us, and we would have that level of expectation. Now some of the things we're benefiting from around the Energy sector, particularly in North America and the AI business within our GPN business unit certainly helps. But all pieces of the segment are contributing towards this journey and certainly aligned with what our internal expectations are. So we're happy to get there sooner, but certainly, it's come as the top line has been supported. Sujal Shah: Alright, thank you, Amit. Can we have next question please. Operator: Your next question comes from Mark Delaney with Goldman Sachs. Mark Trevor Delaney: I'm hoping you can comment more on your view about the sustainability of the current fundamental strength. And if you think any of the current demand is due to customers prebuying in order to mitigate tariff risk? Terrence R. Curtin: Yes. No, thanks, Mark, for the question. And we don't see any meaningful impact to pull-ins. In our product set, when we look at things and we talk to our channel partners, we don't see that. Certainly, I think you may see that a little bit more in semiconductors, but we do not see any meaningful pull-ins. And I think that goes back to the orders that we talked about back when I covered slide, I think it was 4. And when you look at it, both year-over-year and sequentially, we saw nice growth, and we also saw growth year-over-year in both segments. Now it's evident when you look at the slide, you look at the Transportation line that you just sort of see something that looks very stable. But as I said, Asia is strong. Western car production is still weak. It is down mid-single digits in the West between the U.S. and Europe. And then you're also getting into elements of what they're making. There are less electrified vehicles just due to the trends there. So Asia is an area where we continue to see strength and half of our revenue in Automotive is Asia-driven. We also saw commercial transportation. We continue to see growth outside the United States in commercial transportation. So North America is the one area that continues to be soft in commercial transportation. But one of the things we were encouraged by is we saw sequential improvement in global orders. So maybe we're seeing some traction there. And then in the Industrial segment, Mark, it is, I think, the continuation of the AI momentum that we already talked about. Energy continues to have strong orders. North America is very strong in orders and the Energy space, so that's going to continue. We'll benefit from what we did with orders in Richards from an M&A perspective. And then the Aerospace business continues to be strong. We do see supply chains improving. And what was nice in the Industrial segment I talked about was in our Automation and Connected Living, we started to see encouraging signs about improvement in orders. And we're going to continue to watch those to see what shape they are. But it's nice to finally see after a couple of years where it's been down. There's some encouraging signs there. And they're pretty broad around the world. It isn't just one region. It's broader than that. So finally, I think there's more upward potential there than what we've been talking about over the past 2 years. So durability feels good. Clearly, it's reflected in our guide. And some of these are real trends, secular trend driven. When you think about electricity growth, you think about what's happening with AI, which gives us even more confidence because around those trends. Sujal Shah: Thank you, Mark. Can we have the next question, please. Operator: Your next question comes from Luke Junk with Baird. Luke L. Junk: Terrence, I was hoping we could maybe touch on the industrial book-to-bill, especially any timing-related impacts we might be seeing there in terms of AI that could be causing some distortion plus or minus? And maybe if you just comment on AI awards, specifically, I'd be especially interested in anything above and beyond this continued acceleration in like-for-like growth that you're seeing maybe relative to both the hyperscaler opportunity and chip makers as we step into '26? Terrence R. Curtin: Yes. So let me take the second part first. When you look at where it at, I would just say it's the momentum is continuing. I don't think there is an incremental platform or an incremental customer. It's really where we have been strong. We continue to see momentum there. And as we've always talked to you, Luke, and everybody else, we have to play across the ecosystem to really win here. It has to be with the chip makers, with the hyperscalers with obviously the contract manufacturers that put the equipment together that really supports the growth on top of technology. So I think when you look at it, you're going to continue to see those that we've had traction and continue, and it's pretty broad, which gives us the confidence that I've talked about already. In Industrial, the orders are broad-based improvement, like I just answered to Mark's question. And even if you look sequentially, essentially every business in the industrial business, orders improved sequentially. So it is broad-based momentum. It isn't like there's one AI order in there that's taking the orders up. It's broad-based across the markets. And I think that reflects the tone that I just handled with Mark. So that's one of the things that's encouraging that in some areas that have been down, we see signs of life in areas that have been strong continue to stay strong. Sujal Shah: Thank you, Like. Can we have next question, please. Operator: Your next question comes from Joe Spak with UBS. Joseph Robert Spak: I guess just maybe following along those lines, Terrence, I mean, it sounds like everything you think is at least sustainable. I think you and we would all sort of expect sort of continued growth. So I mean, how should we think about a new sort of aspirational target for the company as we think out here a couple of years -- margin target, sorry? Terrence R. Curtin: Margin-wise?. I'm going to let Heath take that. Heath A. Mitts: Joe, I appreciate the question. It's something that internally that we work through as well, but looking at where the growth is, certainly, we are focused on a total company margin. But as we look at our businesses, respectively, both at the segment level that we report to here as well as we run the business day-to-day in all of our business units, we really look at incremental flow-through and the incremental flow-through on that organic revenue growth. And as we do that, we do target businesses to be at 30% or better. There are some that have a little bit of self-help work that we've spent more money on restructuring in. And in those cases, they always a little bit more flow through because we've got to pay for some of those that benefit of that restructuring. But in aggregate, that's kind of how we measure what success looks like as we move forward. That will have the natural impact as we hit those targets over a cycle, the natural impact of gradually moving that margin up. And then we obviously layer on the inorganic side on top of that, those come in all forms and fashions. Sujal Shah: Okay. Thank you, Joe. Can we have the next question, please. Operator: Your next question comes from Christopher Glynn with Oppenheimer. Christopher D. Glynn: A question on the Energy segment. I'm wondering the renewable energy and the grid hardening, the degree of codependence of those 2 versus maybe some independent drivers supporting the 2 call-outs there. And if you're starting to see Richards kind of cross-sell or bilateral pull creeping in there and if the run rate you're seeing here are just really structural lift or some particular periodic stream? Terrence R. Curtin: No, great question. I think just let me peel that apart a little bit here. First off being, I think when you look at both trends that we position around. It starts with electricity growth is the common trend. When you deal with grid hardening and renewables, they are independent. They don't have to be completely interlap because there can be things you're doing on the infrastructure to secure the infrastructure. That doesn't mean it's a renewable energy source. So they are separate as you click down. Now that being said, Richards is much more aligned to what we do in grid hardening. It has really broadened what we do in grid hardening in North America. So if you look at our North American business before Richards, which was around $600 million, probably only $1 million of it was in grid hardening. Richard's is all grid hardening. So we get much more exposure to grid hardening with Richards. We do view down line, we could repurpose some of the Richards products for renewable applications, but I would not say that's in the results because we are still in the middle of how do we increase the capacity to serve the current opportunity in the grid hardening side. But I do think down the road, that will create revenue opportunities. And in the growth that we had this quarter of 20% organically, even without the M&A, North America was much stronger than that. The trend around renewables, we are continuing to see strength there as well as in the grid hardening. So we still think this is an area that will drive nice growth. Certainly, we think we're positioned well, and we'll also look for opportunities where we can strengthen it both organically and inorganically. Sujal Shah: Right, thank you, Chris. Can we have next question, please. Operator: Your next question comes from Samik Chatterjee with JPMorgan. Samik Chatterjee: Terrence, maybe I'll go back to something you mentioned in the Q&A earlier, which is you still think we are in the early innings in terms of the AI opportunity. There's also an investor perception that maybe you're a bit early innings in terms of market share opportunity as well in terms of AI, particularly related to your peer company. Maybe if you can sort of highlight where -- how do you think about market share between -- that you have between hyperscalers versus the chip companies? And where do you see more opportunity on that front as we look forward? Terrence R. Curtin: Well, to your question, and I said it earlier, Samik, thanks for that question, is we have to play with everybody here. When you sit there, let's face it, some people design their own chips and TPUs. In other cases, they leverage the leaders chips. And to really win, you have to make sure you're playing with everybody in the ecosystem. I cannot stress that enough. I like our broadness and I think that can create market share opportunities in the future. And we also have to make sure we ramp the programs that we've won. To Scott's first question, these programs are ramping, and we got to make sure we capitalize on it. So I think from a technology, we're extremely well positioned. I think there can be share opportunities in the future. But right now, it is, hey, we got to capitalize on the growth. And you're seeing that growth went from that $300 million to $800 million, and we expect to grow even more as we go into next year. So thanks for your question. Sujal Shah: Thank you, Samik. Can we have the next question, please. Operator: Your next question comes from William Stein with Truist Securities. William Stein: Great quarter. I was going to focus on AI, but I feel like that's been covered pretty well already. I'd like to ask about a couple of -- well, at least one weak spot anyway. Book-to-bill was slightly below 1, and it looks like that's driven by Transportation. Can you talk about what's dragging that? And is it even an important metric for us to focus on? Terrence R. Curtin: So a couple of things. I think it's a metric to look at. I would say when you look at our guide, I wouldn't over dwell on it. What you do see is in Transportation, the automotive market typically declines sequentially going from our quarter 3 to quarter 4. And we do expect that trend to continue. So that will impact. We did see orders come down, but that's more with a seasonal trend. So auto production, we believe, was 21 million units in the third quarter. We expect it to be closer to 20 million in the fourth quarter. So we do expect a sequential decline in production, Will. And that's really driving the book-to-bill when you have that type of trend, but we would normally see that this time of year. So it's not concerning to us. And hey, all of it's included in the guide that we just went out with for the double-digit growth at the company level. Sujal Shah: Thank you, Will. Can we have the next question, please. Operator: Your next question comes from Colin Langan with Wells Fargo. Colin M. Langan: Congrats on a good quarter. I just want to ask a little bit about the organic growth in transport and auto. I thought the long-term target was to be 4% to 6% over market. I thought you were trending at the low end. I think S&P is up 2% on light vehicles. So it looks like you're kind of in line with market growth in that segment. Any color there? And how should we think about that? Is that being impacted by all the EV pushouts in the U.S. and Europe? Terrence R. Curtin: No, it's a great question. And first off being, we view that auto production declined about 1 point in the third quarter, and we grew 2 points. So we had about 3% outperformance where we are running a little bit below our 4% to 6% really has to do with the unevenness of the world. In Asia, we're growing 11% on a 4% production growth of cars. So we really are seeing that content outperformance with the West being down 5% in production, our content is a little bit higher in the West. That does pressure the overall calc. I think we're going to be around 400 basis points in the fourth quarter. But the unevenness in production right now is impacting what you see in the overall content. We still feel good about the 4% to 6%. But right now, we're getting a little bit of pressure due to Western production levels being light. And that will correct at some time, but you're seeing that in the growth over market. Sujal Shah: Thank you, Colin. Can we have the next question, please. Operator: Your next question comes from Joe Giordano with TD Cowen. Joseph Craig Giordano: Can you talk about price a little bit? And how was that in the quarter end? And just curious how you think about that going forward? Like I believe that most of your price was surcharges related to tariffs. And if we're going into like a de-escalation phase here, can price turn into like a modest headwind maybe on the top line with like better margins coming through? Terrence R. Curtin: Yes. Let me talk about price a little bit, and I'll talk about it. There's the tariff impact versus normal pricing environment. In the tariff side of things, when we guided last quarter, we thought that tariff cost would be about 3% of our sales. Due to all the policy changes, it came in about half that number. So about 1.5 points and as Heath said in his pre-remarks, we -- it had no earnings impact. So our teams mitigated through the strategy that we talked about last quarter. How can we do things from a supply chain perspective, both ourselves and our customers and where we can't do that. We implemented pricing and the bigger impact in our Industrial segment. So really, where you see where we did do pricing. It's really in the Industrial segment. But it wasn't as big of a number as we talked just due to the policy changes. And in our guide, we basically assumed with what was enacted, it will be similar to what we just did in quarter 3. So our guide for the fourth quarter sort of assumes that same impact that we had in quarter 3. And as we've talked about just overall pricing without surcharges because they are the tariff surcharges, as we've talked historically, the bigger driver of where pricing goes from here will be material cost. We're continuing to watch that closely. I think you're going to continue to see areas where we have that. We'll be positive in price in our Industrial segment. And that's just something we're going to keep in front of us because, obviously, some things are jumping around right now. But we feel how we're managing it and continuing to pull the levers we can pull to minimize the impact on earnings, feel the teams are doing a good job. Sujal Shah: Alright, thank you Joe, can we have a next question please? Operator: Your next question comes from Wamsi Mohan with Bank of America. Wamsi Mohan: You're going to be exiting this fiscal year with very strong momentum. Any thoughts on early puts and takes on fiscal '26 and sort of this momentum of high teens EPS growth. Is that something that we should be underwriting? And I know you just noted the impact of rising, let's say, copper pricing at least. And so if you could sort of frame that in that thought process around '26, that would be great. Terrence R. Curtin: Yes. I think when you look at '26, and I just think some of the things we talked about and let's face, as Sujal talked about Investor Day in November, Wamsi. So we have to make you come to that. So I think what you see is the growth momentum we have, I think, is clear and certainly we'll keep in front of us. And I do think it comes through the fall-through on the volume from here. We've done a lot of structural work. You've seen the benefits of it certainly with what we put up here. But I think it's going to be the fall-through on the growth that I think we have proven the operations of TE and you see it in many of the businesses and markets that we're in, which does create strong levers for fall-through that gets to double-digit earnings. And the other thing is while that's a P&L view, I don't want to lose sight of what we've done on the cash side. Cash conversion this year will be over 100% again, and that provides the optionality that Heath talked about, whether it is deployed to owners or as we did with a couple of acquisitions this year to strengthen some of those secular trends that were around. So I do think the levers are there to continue this. Certainly, we need to continue to execute. But I also think, like I said in the pre-comments, the investments we made and how we got deeper into some trends just broadened out some of the growth factors that we had versus historical. Sujal Shah: Alright, thank you, Wamsi. Can we have the next question please. Operator: Your next question comes from Asiya Merchant with Citi Group. Asiya Merchant: Great. Just some early thoughts, if you may, on the passage of this one big beautiful bill and perhaps offsetting some macro pressures that may be a function of tariffs? Like any early thoughts on that? And one, if I may, again, on the cash flow. I mean you guys have talked about optionality here with strong free cash flow generation. Just some thoughts on where you would like to use that optionality as it relates to the acquisition front? And where do you -- and how is the pipeline looking for those acquisitions? Terrence R. Curtin: Yes. Let me talk about the first one and then I'll let Heath talk about the pipeline there. First off being -- we're a global company, we play all around the world. And like we sort of said, some of the things where we've invested to make sure we strengthen ourselves from a localization are things that I think are evident in our results. And there are some areas like when you think about Energy, that will certainly help us and continue to help us. But we're going to be focused more on our customers to really make sure how do we bring the innovation to them around the world where we can play. And do we have the supply chain to capitalize it to make sure we can win our fair share and then gain share. So the bill itself touches a lot of things but let's also realize TE is a global company and how we deploy our innovation and our manufacturing is all over the world. So there'll be some things that I think we position ourselves well for that's in the bill. But net-net, we also have to realize the trends we have are global, and that's just sort of factor of electronics. And Heath, why don't you talk about the capital side of things? Heath A. Mitts: Sure. We have been obviously more active this year with a couple of deals, particularly in the Energy space, one, a sizable deal with Richards. As we look forward, not just for the remainder of our fiscal year, the next couple of months, but certainly into FY '26. The pipeline does look good. Now it's bolt-on in nature. So the types of things, that doesn't mean they're small, just like Richards was a sizable check we wrote, but was a bolt-on for our Energy business. And so we see things coming kind of in all shapes and sizes that are out there. Some are more interesting than others. But the beauty, particularly of our Industrial business is that it's a fairly fragmented landscape of things out there where there, in some cases, has not been a ton of consolidation. And in those opportunities where it makes sense, we think we're in a good position to deploy capital to do that. So we're pleased with what we've done to date. We always work in the pipeline and the cultivation efforts. It's nice to have the strength of the balance sheet behind us and the cash flow that we generate to be able to look at things of all different sizes and be able to make multiple bets. And that should be what you'll continue to see us do as we move through the near and medium-term future. Sujal Shah: Okay, thank you Asiya. Can we have the next question, please. Operator: Your next question comes from Steven Fox with Fox Advisors. Steven Bryant Fox: I was just wondering on the AI growth that you talked about, the 80% growth, how successful you feel you are in just keeping up with demand? And what kind of investments do you see yourselves making into next year, whether it's capacity or maybe you're being pushed to expand your product set with the customers? Terrence R. Curtin: So first off, we have been investing ahead. And even if you look this year, Steve and Heath can probably add more color, our capital this year is up almost 30%, CapEx had been 30%. And the vast majority of that has gone into AI. So we have been investing ahead. And that's something that goes back to the first question of how are you making sure you have the capacity in place that can absorb the volume what our customers are expecting as we get the program win. So I feel we have been investing. I feel we're continuing to look at how do we expand for more -- even more flex capacity to make sure we're well positioned to continue to drive the growth. But I feel it's real-time investment that's going there, and you see it in the numbers to scale from $300 million to $800 million. That's massive and these are products that are new-to-world type products. These are not just making things that we've made for 40 years. This is cutting-edge technology on the high speed and it's a real testament to what our DDN team has been ramping. And in some ways, what we did and learned back when we had the cloud home about 4 years ago. We did it then, and we've just continued to expand to make sure these type of opportunities around high speed, we can capitalize on. Sujal Shah: Right. Thank you, Steve. Can we have the next question, please. Operator: Our final question comes from Shreyas Patil with Wolfe Research. Shreyas Patil: So as we look at the company today, you're delivering 20% EBIT margins in both segments. I believe you have additional restructuring savings coming through in 2026 based on prior actions and some of the higher-margin segments appear to be turning a corner. So how should we think about the trajectory of margins from here? Are there strategic investments you think the organization needs to make that may offset the incremental margins you're getting from just the strong top line growth? Heath A. Mitts: Sure. Listen, we've been making investments. So when you think about the run rate of our existing profile, whether that's on operating expense investments, which are primarily around engineering or the capital investment that Terrence just referenced that help us build out the manufacturing capacity in different parts of the world. Largely, those are embedded in our run rate. So there will be things that we will have trade-offs on. We may invest certainly in some of these areas like around AI that have shorter cycle times that need quicker ramps and trade those off with other areas, but that's what we do every day in terms of managing to that. At times, we take the total number up or the total expense up. And other times, we absorb it within there. But I don't think you're going to hear us come out and say, well, our margins would have been this if we didn't do this. That's not what we're all about. I do think as you go into next year, balancing all this though, with the growth opportunities that are in front of us, which are very broad-based. I mentioned earlier, probably a 30% incremental flow through and I think that's probably for a modeling purpose is a fair way. And listen, when you start getting volumes higher, you could see that tick up. And when you start to see volumes in low mid- single digits, that gets pressured a little bit. But in aggregate, relative to our business model, that's kind of how we think about it. Sujal Shah: Okay. Thank you, Shreyas. We want to thank everybody for joining us this morning. And if you have further questions, please contact Investor Relations at TE. Thank you and have a nice day. Operator: Today's conference call will be available via replay beginning at 11:30 a.m. Eastern Time today, July 23, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. Thank you for participating. You may now disconnect.

Operator: Everyone, thank you for standing by, and welcome to the TE Connectivity second quarter earnings call for fiscal year 2025. At this time, all lines are in a listen-only mode. Later, we will conduct a question and answer session. If you'd like to ask a question during that time, please press star. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's second quarter results and our outlook for our third quarter of fiscal 2025. With me today are Chief Executive Officer, Terrence Curtin, and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning. We ask you to review the sections of our press release that address the use of these items. The accompanying slide presentation, the press release, and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, during the Q&A portion of today's call, due to the number of participants, we're asking everyone to limit themselves to one question. You may rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thanks, Sujal, and thank you everyone for joining us today. As you're all well aware, we continue to be in a dynamic global environment that has gotten more complex over the past month due to trade dynamics. As Heath and I will cover on today's call, we are performing well and continue to execute on what we can control to deliver strong financial performance, as is evident in our second quarter results we published this morning. But before I get into the quarter details and our guidance, I want to begin by sharing how the recent tariff and now and the actions that we're taking to navigate these impacts. I think it's first very important to start by framing TE's business and how global we are. First, it's important to highlight that three-quarters of our sales are outside the United States, and we've invested to manufacture close to our customers to be aligned with their supply chains. A second key point is that our manufacturing strategy was developed by working with our customers and has resulted in over 70% of our production being localized within each region. When you think about combining the first point of how much of our sales are out and combined with the second point of our manufacturing and our localization strategy, it does result in a small percentage of our sales being impacted by current tariffs, with more of the impact being seen in our industrial segment than in our transportation segment. For those products that are impacted, we have already been working with our customers to minimize the impact. We are implementing a combination of mitigation actions. This will include sourcing changes by both TE as well as our customers. As well as where sourcing changes are not possible, we will be implementing price actions. We will continue to monitor changes to trade policy, but due to the mitigation levers I just laid out, we do not expect tariffs to have a meaningful impact on our third quarter earnings based upon what is enacted currently. And Heath will get into more details in his section about the tariff levers. I feel our teams are well positioned to now around us to deliver on the value proposition for our owners and our customers. So our performance and momentum to consistently execute on our business model is reinforced by the current year results, which include our strong second quarter and guidance for the third quarter. When we step back from some of the noise, we are hitting on all cylinders as a company. We're growing in line with our business model. Adjusted operating margins are running at the 19% plus range. We continue to demonstrate our cash generation model. And we have a strong balance sheet that enables us to continue our balanced capital deployment strategy. So with that as an overall backdrop, and I'm sure we'll cover more in the Q&A, I'd like to get into the presentation, which starts with slide three, and I'll discuss some of the highlights and guidance for the third quarter of fiscal 2025. Our second quarter sales were above guidance at $4.1 billion, and this was up 5% organically and 4% on a reported basis year over year. You know, these results were driven by double-digit growth in our industrial solutions segment, and what we saw there was very broad-based in that growth. We had record adjusted earnings per share of $2.10. And this was ahead of our guidance and up 13% versus the prior year. Adjusted operating margins were 19.4%, up 90 basis points over last year, driven by strong operational performance in both of our segments, and the overall expansion was driven by a 260 basis point increase in the Industrial segment. Our orders were $4.25 billion, and these were up 6% on both a year-over-year and a sequential basis, and this supports our outlook for the sequential growth into the third quarter. And I'll get into more details on the order levels in a little bit. We delivered strong free cash flow of $1.1 billion in the first half of this year. We approximately $1 billion return to shareholders, and we also announced a 9% increase to our dividend. And this reinforces our strong cash generation model. I also want to highlight that in April, we closed on the Richards acquisition in the industrial segment, and we deployed $2.3 billion related to that acquisition. As we look forward, we are expecting our third quarter sales to increase sequentially to $4.3 billion, and this will be up 5% organically year over year. Our guidance includes a Richard's acquisition as well as two points of pricing related to tariff recovery. Adjusted earnings per share is expected to be around $2.06. This will be up 8% year over year. So if you could, I'd appreciate if you could turn to slide four. And I'll get into more details on the order trends. In the quarter, we saw orders grow to $4.25 billion, and we had a book to bill of 1.02. In the transportation segment, our orders were flat versus the prior year. And we had growth in Asia of 18% in transportation that was offset by declines in Europe and North America. The global auto market continues to be uneven by region, and you see the strength of our Asia position in both our orders as well as sales, which is helping to cover weak western auto markets. Sequentially, we saw orders growth in all business in transportation. In the industrial segment, we continue to see strong order momentum with 13% year-over-year growth and 4% growth sequentially. And this growth reflects ongoing strength in artificial intelligence application as well as strength in our energy and AD and M businesses. Another thing I would like to highlight is that for the first three weeks of April, we continue to see stable order patterns and a book to bill greater than one, which further supports our Q3 guidance. Now let me discuss year-over-year segment results, and I'll start with transportation on slide five. Our auto business was flat organically in the second quarter with growth in Asia of 16% being offset by declines in Western regions of 11%. Our sales growth in Asia outperformed a 5% increase in Asia car production and reinforces our strong position in that region. As we look forward, we expect our global content growth to be at the low end of our four to six-point range for the second half of our year. While we do expect global auto production to decline this year, we anticipate electronification across all power trains to be a key driver for our growth of our market in the second half, and as we talked before, it'll be driven by software-defined vehicle architecture, the related proliferation of data connectivity in the car. We also continue to expect 20% growth in hybrid, electric vehicle production with roughly 80% of that production occurring in Asia, where we're strongly positioned and we produce locally. Turning to the commercial transportation business. The 5% organic decline was as we expected and driven by market weakness in Europe and North America that was partially offset by growth in Asia. We continue to expect this market to be slow next quarter, with sales looking a lot like the second quarter. In our sensors business, the sales decline was driven by weakness in the broader industrial market in Europe and North America. For the transportation segment overall, our teams continue to execute well in a slow environment reflected by adjusted operating margins that remained above 20% in the second quarter. Let's turn over to the industrial solutions segment. I asked you to turn to slide six. And, you know, just start with let the segment had very nice growth this quarter of 17%. You know, that growth was driven by our digital data network, which grew nearly 80% organically. With increasing ramps from hyperscale platforms. We now expect revenue from artificial intelligence applications to be above $700 million in fiscal 2025, reflecting strong program ramps and leadership in multiple hyperscale AI platforms across the customer base. In automation and connected living, it was nice to see that the unit returned to growth in the quarter. With 2% organic growth and, you know, just I would tell you, it was broad-based. For the third quarter, we are expecting sales to be roughly flat to the second quarter, in our AC and L business. In aerospace, defense, and marine, our sales were up 11% organically. Driven by growth across commercial aerospace, defense, and space applications. In these markets, we continue to see favorable demand trends coupled with ongoing supply chain recovery, and we see the momentum in these markets continuing. And in our medical business, it did decline 14% in the quarter due to the inventory normalization by our customer that we've been talking to you about. But a key for this business is we did see double digits sequential growth in this business. As we expected. And let me wrap up with energy where we saw 8% sales growth organically driven by continued momentum in grid hardening and renewable applications, with double-digit growth in the United States. The Richards acquisition enables us to capitalize on strong growth opportunities in the North American utility market. I would like to welcome the employees of Richards to the TE team. And look forward to the value they will create as we strengthen our position in North America together. Now let me turn to margins. In this segment, you know, in the industrial segment, adjusted operating margins expanded 260 basis points to 17.9%. As the teams executed well on the strong sales volumes. I am pleased with the progress that we're making on our margin journey in this segment. So with that, as an overview, let me hand it over to Heath. He'll get more detail on the financials, tariffs, and our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide seven. For the quarter, adjusted operating income was $805 million with an adjusted operating margin of 19.4%. GAAP operating income was $748 million and included $12 million of acquisition-related charges, and $45 million of restructuring and other charges. For the full year, our view of restructuring is unchanged at around $100 million. Adjusted EPS was $2.10 and GAAP EPS was $0.04 for the quarter and included a one-time non-cash tax charge of $1.91 due to change in tax laws, as well as restructuring acquisition and other charges of $0.14. Our beat versus guidance was driven by strong operational performance in both segments. The adjusted effective tax rate was approximately 22% in Q2, and we expect both the third quarter and the second half adjusted tax rate to be in the 24% to 25% range. The higher tax rate will result in a $0.06 sequential headwind to EPS in the third quarter. For the full year, the adjusted tax rate is expected to be roughly 24%. And as a reminder, the increase versus the prior year is primarily related to the impact of the pillar two global minimum tax and jurisdictional mix of our earnings. Importantly, and as always, we anticipate our cash tax rate to be well below our adjusted ETR. Now if you sort of turn to slide eight, sales of $4.1 billion were up 5% organically year over year. Adjusted operating margins were 19.4%, and in the second quarter, expanding 90 basis points year over year. Adjusted earnings per share were $2.10, a company record and up 13% year over year driven by revenue growth and margin expansion. Turning to cash flow. Cash from operations was $653 million and free cash flow was $424 million. Through the first half of the fiscal year, cash flow was $1.1 billion. We continue to expect our free cash flow conversion to be over 100% year. While we are in a dynamic environment, we feel comfortable with where we are as a company and our ability to effectively navigate through this. Our cash generation and healthy balance sheet position us well and provide us optionality with uses of capital. Through the first half of this fiscal year, we returned approximately $1 billion to shareholders. And as Terrence mentioned, we recently made an announcement to raise our dividend by 9%. And also as Terrence mentioned, earlier this month, we deployed $2.3 billion of cash for the Richards acquisition in our energy business. All this activity demonstrates the strength of our balance sheet and the confidence we have in our cash generation model. We will continue to monitor the environment as we make decisions on capital deployment going forward. Elliot had a couple of other details on our third quarter guidance that Terrence shared. First, we are including Richards, which contributes roughly $70 million to sales, and is roughly neutral to adjusted EPS including the impact on financing. The second item I want to cover is the tariff impact. That is factored into our Q3 guidance. For those products that are affected by enacted tariffs, we estimate a cost impact of approximately 3% of sales. We anticipate that about one-third of this impact will be mitigated by sourcing changes by TE and our customers, and we expect to recover the vast majority of the remaining two-thirds of the tariff impact through pricing actions will represent about two points of price related to tariff recovery in the third quarter. These are the actions that we can control with the direct impact. We will continue to work with our customers as they evolve their supply chain strategies. Before I turn it over to questions, let me reinforce that we are executing well to deliver strong results and have positioned the company to successfully navigate the current dynamic environment. So with that, let's open it up to questions. Ellie, can you please give the instructions for the Q&A session? Operator: We are now opening the floor for the question and answer session. If you'd like to ask a question, please press star or by one on your telephone keypad. Your first question comes from Scott Davis from Melius. Your line is now open. Scott Davis: Hey. Good morning, Terrence. Terrence Curtin: Good morning. Scott Davis: Congrats on the numbers and on all this. It's encouraging. I have to ask on the tariff stuff just because it's so topical right now, and what people are focused on. But, you know, there's another kind of concern that people have, and that is an anti-American sentiment in the supply chain that perhaps certain regions may favor local suppliers versus, you know, US suppliers. Talk through us. And I guess the other kind of natural question is that sounds like it's easier to get price within your auto contracts. Is that because specifically in your auto contracts, they allow for changes in pricing if there's tariffs? I just wanted some clarity on that. But I'm more interested really in the geopolitical challenges and what that does perhaps to the US, you know, US company like TE. Terrence Curtin: So twofold. Let me take the second part first, Scott, on the pricing. The tariff impact that we have is much more in our industrial segment than our transportation segment. Because of our global scale and how much we make in region, the tariff impact that we even talk about is much more in our industrial segment where you have more fragmentation and a little bit where you're crossing borders. So when you look at it, there will be elements where we will be doing surcharges for tariffs and transfer in the numbers we talked about. The vast majority relates to our industrial segment. And, you know, we've been working with our automotive customers for that part on mitigation sourcing, how do we do supply differently as well as moving tools. So I want to make sure that's clear. On your anti-American sentiment, I think there's a couple of things that are important that our teams are viewed very locally. When you think about how our business model works, it is local teams designing with at the design centers. It's also manufacturing and sourcing that's done from a localization. So you get that feel that's very local. You know, we are an extremely global company. Yes. We have American executives at the top, but when you look at really what our customers see, it is very much driven down into those local markets whether that is in China, whether that's in Germany, whether that's in Japan, whether that's Brazil, everywhere. And localization's always been a big part of our strategy. That's how we do business. As you see in our China auto results as well as China overall, we have good traction. We have not seen anti-American sentiment around what we do. But it is certainly something we always keep in front of us. And it's something that, you know, we run locally for a long time, and that's why that tariff amount is as low as it is. Because we've always said we want to be tied to the design center locally as well as to the supply chain locally, and we don't export things from the United States elsewhere to the world. I think that's a key element when you look at it. These tariff impacts are really where we, for what we do in the United States, which is about $4 billion of our $16 plus billion of revenue. It really is things that we bring in from scale from elsewhere in the world, and we'll have to look at do we move some of that tooling to be much more local here as we work through our mitigation strategies. Scott Davis: Okay. Thanks. Thanks, Scott. Thank you, Scott. Can we have the next question, please? Operator: Your next question comes from the line of Mark Delaney from Goldman Sachs. Your line is now open. Mark Delaney: Yes. Good morning. Thank you very much for taking my question. I wanted to better understand how tariffs are affecting your outlook by end market and to what extent that's informed by your recent customer conversations and order patterns, including in April, importantly, as you think about how tariffs are affecting your reviews by end market, what gives you confidence that there isn't a material amount of pull in sales occurring in the near term due to tariffs? Thanks. Terrence Curtin: Yeah. So hey, Mark. Let me talk about the polling question, and then I'll get into some of the market dynamics. First off, you know, while there were discussions with customers about maybe thinking about, hey, do they pull some things forward? I would tell you, were just scenario planning. We did not see anything meaningful whether it be from our direct customers or distribution customers. So when you look at it, I think in an environment where lead times are relatively normal, there is inventory available because we've been through the supply chain elements. As well as uncertainty. It's not something where people say, hey. I want to pull things forward, and we did not see pull-ins meaningfully. As I said on the call, our orders have been remaining stable. There are a lot of customer discussions of how do you work through the mitigation strategies where you do have tariffs. And our teams have continued to work with our customers on the things that they have choices they can make. We also have things that we're proposing to say, how do we work through to say, how do you do as much as you can to localize to eliminate it? I also have to be very honest with you. We are a small part of the Some of our customers have bigger things they have to figure out. We are not involved in all those discussions. We're just trying to figure out how do we help them. And we're very much running the business on what we see in our orders and these customer discussions. And when we look at, you know, what I said on the call, and let me just recap it a little bit. You know, in industrial, there's areas we just see momentum that continues to crank. You know? DDN, the AI ramps, you know, what we see, those ramps have accelerated. We told you in the call that we expect that to be over $700 million versus $600 million we just told you last quarter. In energy, the growth factors around hardening and renewables, we continue to see further strengthening there. Richard will add to that. In aerospace and defense, continues to crank along. The space half applications continue to crank along. We really have, like, seen no pauses there. And then one bright spot that I would say in the quarter in our ACL business it finally returned to growth but we're taking a view due to what's going on that we think that gonna stay flat line. And then in transportation, we just sort of view we don't expect view ICT and sensors to improve near term. With the dynamics going on. And in automotive, you know, we do expect auto production to go down sequentially. We do expect auto production to be down 5% year over year. And that's gonna be the trends continue that we saw in the second quarter. Growth in Asia, declines in the west that are probably pushing, you know, closer to 10%. So, you know, it's still a very mixed environment. I think those who are feel right based upon what we're seeing, and do view their balance but but it isn't everything is just going up. And I think our team's operating well in this uneven environment. And hopefully, that gives you a flavor of how recapping the markets that we see them. Today. Mark Delaney: Okay. Thank you, Mark. We have the next question, please. Operator: Your next question comes from the line of Amit Daryanani from Evercore ISI. Your line is now open. Amit Daryanani: Good morning, everyone. I just have a question about margin expansion. Expansion over the last few quarters, in fact, the last couple of years. You know, as you go forward, can you just talk about if margin expansion and the EPS growth can sustain, especially if we end up in a more difficult, choppy end market environment. Just hoping you could flush out, you know, margin expansion vectors that peak and leverage across both transport and industrial segments. And how much of that going forward you think is demand versus self-help? Self-help driven? Thank you. Heath Mitts: Well, I'm gonna just say it. I'll take this. You know, obviously, I think we've covered this first step of our hero's call, you know, some of the volatility in the markets. You know, we do have some markets that are growing nicely. We have some that are kinda more stable, and we have some that are weak. You add it all up, and it's a fairly even or uncertain market. If you will. We're not getting a lot of support there at the aggregate level. However, we have, over the last several years, as you're aware, reduced our manufacturing footprint, and we have taken sites offline, and this is part of our localization strategy that is aligned with where our customers want us to be. And in markets where we can also then get scale and get leverage. So I do feel good about our ability to continue to ramp margins is a huge focal point here. The over the next year or so, the bigger jump is gonna be continue to be in the industrial segment as industrial, you know, continues its journey. And that's a combination of a variety of factors. A lot of that is volume and continued rationalization of locations. But I continue to see that our transportation business has been hovering between 20% and 21% here for the last several quarters. I feel good about where they can be. Obviously, Terrence just outlined softer markets there. Again, so our ability to hold our head there above the 20% line feels like the right place to be until we can get back into a situation where we're growing the top line. So we've got a series of different operational levers that we're pulling in terms of protecting both margins and growing in the industrial segment as well as how that converts into EPS. So you know, our business model contemplates, you know, where we sit today and where we had a good quarter. We have our outlook for the third quarter is good. Look to finish strong in FY25 and then jump into 26. Without a lot of certainty what these markets are gonna do. Amit Daryanani: Okay. Thank you, Amit. Can I have the next question, please? Operator: Your next question comes from the line of Wamsi Mohan from Bank of America. Your line is now open. Wamsi Mohan: Yes. Thank you. Good morning. Terrence, can you address how you're thinking now about content growth for the year given your commentary on production trends getting worse and obviously been a slower start in the first half of the year from a content perspective. And a quick clarification for Heath, if I could. The 3% of cost impact that you're noting next quarter, how much of that is direct impact from tariffs versus your own cost increases or maybe operations or logistics or just in managing these tariffs. And how should we think about it going forward as well? Thank you. Terrence Curtin: Yeah. Wamsi, let me I'll take both of those just for ease. First off, being on auto production, I think the one thing that we've talked to you all about with content this year is, you know, with Europe being extremely weak, Europe is our strongest content region historically. And when you look at European production this year, like, last quarter, it was down basically 10%. That has pressure on our content, and we had about a two-point outperformance in this past quarter over production. Age is very strong. So we're feeling a little bit of uneven by region and just say different regions have different content levels. As I said on the call, as we look through the remainder of the year, you know, we're expecting to be at that low end of the four to six. We have ramps that are going on in Asia that we feel very good about. We talked about to your last quarter, some of them. The data momentum around data connectivity in the car I know years ago, it was a lot about electrified powertrain. The data connectivity growth and the programs that we've run around the world as people get ready for autonomy and software-defined, you need Internet architecture in the car to really make this happen, and that's what we mean by data connectivity. Gonna be the element that allows us to get it up to the low end of the four to six. But right now, we are being impacted by Europe being weak and being our higher content per vehicle region. Is creating a little bit of headwind to what you see overall. On your second part of your question, that I'll just jump right on to, you look at the impacts that we have, they're the tariff costs that we have. That 3% of sales, they are things and most of what we have due to our localization is just where we source something could be something from Germany or Japan that we bring over here, that we have scale advantage on. That create the tariff impact. So it is tariff surcharge and that's based upon the tariffs that are enacted today. Wamsi Mohan: Okay. Thank you, Wamsi. Can I have the next question, please? Operator: Your next question comes from the line of Luke Junk from Baird. Your line is now open. Luke Junk: Great. Thank you for taking the question. Terrence, hoping you can maybe just parse out what you're seeing in automation and connected living between those two subsegments, the inflection this quarter, should we think that automation within that is also inflecting and maybe, if you could also comment just what you're seeing geographically across those two parts of the business, including maybe indirect tariff impacts on picking appliances in China, especially. Thank you. Terrence Curtin: Yeah. Certainly. So when you look at it, appliance, you know, has been growing and, you know, continued to grow. And I would tell you, if that's been growing pretty much in all regions, big area that we were running behind was in the automation side of it. And what we saw in the quarter loop, which was really nice and took the entire unit up to growth overall was we saw orders started to pick up. You saw in Europe, they started to inflect upward. Certainly saw them also inflect upward in Asia. North America was steady. So right now, when you look at them, you know, the order trends started to show an inflection point. Right now, what we're assuming with everything going on with tariffs and this is capital goods, and we sort of have an outlook that we expect our sales to sort of stay where they were in the second quarter. Because we'd like to see that momentum stick a little bit longer just knowing to what's going on on the tariff uncertainty. And this is one of the markets where when we talk about impacted by tariffs, you do have a lot of supply chain crossover that happens. Because of the fragmentation here. So probably taken a more conservative view than the orders we saw. But it is something right now. Hopefully, we can tell you next quarter we continue to see momentum in the orders what we saw just this last quarter. Luke Junk: Thank you, Luke. May I have the next question, please? Operator: Your next question comes from the line of Samik Chatterjee from JPMorgan. Your line is now open. Samik Chatterjee: Hi. Thanks for taking my question, and good morning, everyone. Maybe if I can just ask Hi. Hopefully, you can hear me. If I can just ask you on the AI momentum that you're seeing on that front. I know the first three months of this year, there's been a lot of concern from investors about sort of pullback from customers in relative to their sort of spend on data centers and expansion of data centers as well as new bids. But maybe if you can clarify what's driving the higher guide on your front. Are you seeing some of the orders come in much higher than expected, or was this more about you being conservative initially with the numbers and raising it with more higher visibility? Just any more color on what you're hearing from the customer there, primarily just in the backdrop of the investor concerns we're hearing. Thank you. Terrence Curtin: No. Samik, thanks for the question. And, you know, think one of the things that's important in our second quarter, we saw a 150% increase on our orders. So these are real orders. Certainly, overall, AI capex has continues to grow. And certainly, I know some of the players have made different comments. But I think what's important is you know, these are ramps of programs that we want. So these are ramps that, you know, we're working with our customers on and, you know, hyperscalers are the ones that we're working with here across our customer base. And the increase that you saw was about $50 million more than we had in the second quarter. You know. So some of the beat that I said was broad-based was due to us being able to ramp quicker for our customers. And then you're gonna have the remaining increase in the next couple of quarters. And it's really about ramping quicker on program fleet one and orders coming in with higher demand on it. So that's something that we get excited about, and I know we talked earlier probably two or three quarters ago about where do we go there? You know, we're closer to that billion-dollar number. That, you know, we'll probably be running at next year in 26 as we continue to have these ramps increase. So the momentum is real. The programs are real. And certainly working hard with our customers make sure we ramp to their needs as they're trying to deploy their AI servers. Samik Chatterjee: Okay. Thank you, Samik. Can I have the next question, please? Operator: Your next question comes from the line of Joe Giordano from TD Cowen. Your line is now open. Joe Giordano: Guys. Thanks for taking my call. I wanted to talk on the automation side. You know, it's good to hear the commentary that Europe is getting better. I mean, audibly off very low levels. In the US, I'm curious. Like, are you just still seeing kind of a pause in customers wanting to move forward with things until they know what the rules of engagement are from a policy standpoint? Terrence Curtin: No. What I would say there is uncertainty, Joe. Yeah. We let's face it. Everybody's trying to figure out their supply chains right now. So there is a lot of effort that are going on to say, how do I work on supply chains? How do I work upon, you know, what's in front of me? So that uncertainty let's face it, we all have the same number of people pre-tariff than we have today. So, you know, it does create a distraction of what people work time on. I would tell you, we did see orders pick up in the United States and automation. I think the element that we're just being a little bit cautious with our guide is really it you know, it was this was the first quarter in a long time. We do worry just as where do people take their capex plans. Very honestly, our capex plans are not changing meaningfully. You know, we have to ramp AI programs. We have other programs we have to ramp. The facilities we need to build to support those. But I do just think the amount of effort going in around how do we make sure we make what we can, I think is pretty prevalent across every company as they're trying to figure this out? It does create a little bit of a distraction and then another focus area for people to figure out real time. And, typically, people that are working the automation plans are the same people are in the manufacturing area trying to figure everything else out. On capacity and so forth. So just why we have probably a little bit more of an uncertain tone around it. Than some of our other markets. Joe Giordano: Alright. Thank you, Joe. We have the next question, please. Operator: Your next question comes from the line of Saree Boroditsky of Jefferies. Your line is now open. Saree Boroditsky: Hi. Good morning. Thanks for taking the question. Maybe it's Turning to medical, obviously another tough on destocking. Can you just update us on channel inventory and how you expect this market to play out the remainder of the year? And then just a way to estimate what underlying demand is first what you're seeing in your sales. Thank you so much. Terrence Curtin: Sure. Yeah. Where we position our medical business, you know, it's around the mid-single-digit market. We did have coming out of COVID, and our first quarter, we expected. So that's a December quarter, you know, we saw customers pull back majorly. Around, hey, all the supply chain inventory. What's really nice is you saw about a 20% sequential increase in that business. We view that inventory elements over, and you're gonna continue to see us have a second half sequential improvement over the first half in that business. As we work out of that. Saree Boroditsky: Okay. Thank you, Saree. Can we have the next question, please? Operator: Your next question comes from the line of Colin Langan from Wells Fargo. Your line is now open. Colin Langan: Oh, great. Thanks for taking my question. It sounds like you're pretty well positioned on tariff risk given you're pretty local within region. You know, I guess we'll find out over the next few months how things settle in. But do you think that could be an advantage over time? Or do are your competitors do they all have pretty similar footprints? Yeah. Any thoughts there in terms of maybe how that shapes that going forward? Terrence Curtin: No. Well, you know, it's very much competitor can buy competitor, but we do view we're advantaged. You know, the localization that we've invested in, has been significant. And, you know, some of the things we did when we invested in restructuring to get things. We took capacity offline in certain regions of the world. To make it much more localized. Is an advantage. Now we do have some competitors that only make in one region of the world. Some of our middle and smaller competitors. So we very much for you, as we deal with our customers and we look at mitigation strategies, this is something that can be advantage. As we move forward. And as we help work them through it. So we have a very positive competitive tone going through this. And, you know, how do we help our customers work through it and also show we might have more options than others. Colin Langan: Okay. Thank you, Colin. Operator, next question, please. Operator: Your next question comes from the line of Christopher Glynn of Oppenheimer. Your line is now open. Christopher Glynn: Thanks. Good morning. Take care. Good panoramic. Hey. A lot of good panoramic topics covered. It was curious about space. You know, it's a relatively small market, but it's scaling. Just wondering if you could help us understand the scope of that in it. Is it something that's kinda doubling from a small base or kind of the contours of what's going on with space and how that might contribute, you know, over the next couple of years, really. Terrence Curtin: Chris, I appreciate you using the word panoramic. I don't think I've ever had that on an earnings call. You know, space is important. So when you sit there and it where we serve it is really in our aerospace defense, and marine, not surprisingly. And one of the things that is nice is where this is where you get a convergence with how the space field has changed with who actually builds current space vehicles happen, also what happens in lower satellites. Benefit us in space. So it is an area that is has morphed a lot. An area where, you know, data speeds, things that we talk to you about in AI, similar data speeds you need to continue to work to, and we leverage what we do in our DDM business. But clearly, the environment is much different in the space application and it's where, you know, some of the standards that are there and the materials you have to use get very specialized. And it's areas where we excel at. So it has been a driver. It is something you said it very well. It's multiplying at a very quick pace but it's on a lower base. You know, while you benefit also benefit from redundancy in these applications, but you do have compute that's increasing massively and that's areas when we look at high speed, high power and then have to do the packaging that exists in a space application. It is a vector that is a smaller vector in our AV and M space, but a vector that we've been benefiting from, and we expect we're gonna continue to talk to you about. Christopher Glynn: Thank you, Chris. Can we have the next question, please? Operator: Your next question comes from the line of Asiya Merchant of Citigroup. Your line is now open. Asiya Merchant: Great. Good morning, everyone. Thanks for taking my call. You can if you can just talk a little bit about commercial transportation. I think the guide is for it to be kind of flattish. Just how we should think about the trajectory of that segment, subsegment as it is higher margins and when we should start to see some recovery in that, that could possibly be a positive driver for your transportation segment. Margin. Thank you. Terrence Curtin: No. Certainly. So, you know, we have told you numerous quarters now, we see an environment. And when we do commercial transportation, that's class a truck. That's AG equipment, that's also construction equipment. And, you know, the ag environment has been, you know, tough. Certainly, financing has hit some of these markets. And, you know, in Europe and North America, you've seen that softness play out more. While this year, we do expect that places like India and China have had increases in unit production. So really, there's catalysts that are out there for Europe and North America. Certainly, with North America around some of the emission changes that are coming up in 27, how does that all impact with some of the uncertainty? We do think that will create at some point and then an inflection point. We just don't know if that's gonna be, you know, two quarters out, three quarters out. Right now, we see our business. The orders are staying very stable. So we've got it into the third quarter. It's stay stable. But I do think what you'll get is as some of those emission things play in, you will see a more traditional cycle for the class a trucks. And your point's very valid of, you know, this does run a higher mark. Asiya Merchant: Okay. Thank you, Asiya. Can we have the next question, please? Operator: Your next question comes from the line of Joe Spak of UBS. Your line is now open. Joe Spak: Thanks so much, everyone. I just wanted to maybe dive in a little bit more to the industrial orders, which were strong. But are you including any of the Richard's acquisition in that growth? And I know you sort of made some comments about, you know, AI as well. So I'm just trying to get a sense of, like, what the underlying organic, like, old core historical orders industrial orders were. Because, you know, you also made a comment about, I guess, in the US, you saw a pickup but like, you know, my understanding is a lot of that equipment for factory automation comes from overseas. So it seems like they're, you know, it isn't gonna get more expensive under this regime. So just want to understand how you're thinking about that sort of order trends there. Terrence Curtin: No. When you look at our order trends in the industrial segment, pretty much across the board, we had orders growth year over year. So I just want to make sure that when you look at that, you know, that was, you know, across the board, strong order growth. It was in automation. It was in the appliance area. And this would be only where we serve local customers, Joe. So if we're serving a German factory automation player, we would be getting that in our European business, not in our US business. So the growth is very broad. There is no Richard Daughters. In our orders. That's that. We didn't close that till April, so that we'll start getting that. And the growth was also you sit there, you know, it was across the board with Europe actually getting closer to zero than where it was before. So it was very broad geographically. Around the world. Across all the business units. And you even saw that in our results sequentially. Our sales were up across all our business units from quarter one to quarter two. Joe Spak: Alright. Thank you, Joe. We have the next question, please. Operator: Your next question comes from the line of Steven Fox of Fox Advisors. Your line is now open. Steven Fox: Hey. Good morning. Terrence, I was wondering if you could just more broadly talk about your price and power going forward from two aspects. One, you sell into a lot of large OEMs that may be feeling, you know, demand pain down the road in addition to, like, all the tariff questions. And then two, like you mentioned, you know, there's a lot of different types of competitors out there that you may run into, regional, smaller, large global, otherwise. And just sort of how responsible you think they will be on pricing. Thanks. Terrence Curtin: Yeah. No. Good question, Steve. I think when you look at it, you know, this year before the tariffs hit us, our pricing is neutral at the total TE level. We are price positive in our industrial segment. And, you know, just a little negative in the transportation segment. So, you know, one of the things that we've had this year, let's face it, that certain input costs have gone up on certain materials. You know, we've been very disciplined on that. As well as the tariffs that we talked about today. So, you know, I tend to think that the pricing environment will continue to be dictated by where input costs go and also the tariff impacts. And, you know, I feel our team has done a good job managing it as well as the other things that we can do to help our customers, like we talked about, you know, on the mitigation actions. You know? Are there things we localize, move tools on, you know, the way we have our supply chain set up with our customers. Is there things we can do together? And they're the ideas we're going that are also ways we provide value that's a little bit different than we talk to you about in a certain environment like that. So that's the benefit that we have in this uncertain time. But I feel good how the teams are managing through the pricing aspects and, you know, I do think it's different than how we used to do. Steven Fox: Alright. Thank you, Steve. Can we have the next question, please? Operator: Your next question comes from the line of William Stein from Truist Securities. Your line is now open. William Stein: Great. Thanks for taking my question. But first, I'd say, Paul is also hydroponic. The question is about my AI data center business. Industry context that I see to reflect a pretty meaningful pull in activity that went on to some degree during counter Q1, but more so that's sort of accelerating. Okay. I wonder how certain you are about your earlier comment about not seeing meaningful pull-ins. I wonder what your visibility is to that. And, also, I'm hoping you can comment on the customer concentration or dispersion and any anticipated change in that? Thanks so much. Terrence Curtin: So, Will, on the AI side, you know, we do play across the hyperscalers. We also partner with the other semiconductor companies that would be more of our peers in that space that do some of the signal elements from a semiconductor. So our focus is more on the hyperscaler side. I would say we did not see pull-ins related to this. This has been very much a function of ramping with our customers on the AI side, which gives us confidence of what they're telling us as well as how, you know, we're working with them together to continue to ramp up that gives us confidence in the over $700 million. So we did not see pulling from the AI customers at all. William Stein: Thank you, Will. Can we have the next question, please? Operator: Your final question comes from the line of Shreyas Patil of Wolfe Research. Your line is now open. Shreyas Patil: Hey. Thanks so much for taking my question. Just maybe to put a finer point on a previous question, how should we think about the pace at which you can get recoveries in the auto end market? I believe in the past, talked about how it takes longer than industrial, but I'm wondering if you'd expect recoveries to be faster in this scenario. And then maybe just on capital allocation, curious how you're thinking about the priorities there. Between buybacks and M&A. Especially following this Richard's acquisition? Thank you. Terrence Curtin: I'll let Heath take this, but I do want to stress what I said earlier that the bulk of our tariff exposure is more in our industrial segment than our transportation segment. So I know I said that times. I want to make sure that comes through where if certainly in the industrial segment, we have, you know, more pricing levers. Heath, anything you want to add capital over that? Heath Mitts: No. I just think on the capital allocation, obviously, we did deploy a significant amount of capital with the Richards deal. It was $2.3 billion. So you've seen that and you'll see that results in a modest amount of increase in our debt levels as well. Having said that, as we look forward, you know, we still will feel very confident in our cash generation model. Our ability to generate cash in this environment has been fairly resilient. And, we feel good about it. So, you know, an M&A engine is not something you just turn on and off. It's something you have to cultivate over time, and so we're always active in that. Having said all that, you know, there's opportunities to buy our shares as well. So you'll see a balance of that as we go through the year. I don't mean to intend to be too vague here, but deals gonna come in with lumpy format. It's never a linear process in terms of when acquisitions get done. But we have a, you know, sticks in the fire right now with that and looking at things not of the same size of Richards. So but it's still in the bolt-on category of things that we look at. In the meantime, we're in the market every day with share buyback. Shreyas Patil: Alright. Thank you, Shreyas. If you have further questions, please contact investor relations at TE. I want to thank everybody for joining us this morning, and have a nice day. Operator: Today's conference call will be available for replay beginning at 11:30 AM Eastern Time today, April 23rd, on the investor relations portion of TE Connectivity's website. That will conclude today's conference call. Have a good day.

Operator: Everyone, thank you for standing by, and welcome to the TE Connectivity First Quarter Earnings Call for Fiscal Year 2025. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's first quarter results and outlook for our second quarter of fiscal 2025. With me today are Chief Executive Officer, Terrence Curtin, and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning. We ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables along with the slide presentation can be found in the Investor Relations portion of our website at te.com. As a reminder, we reorganized into a two-segment structure effective with the start of fiscal 2025. Transportation Solutions, where the end markets remain the same, and Industrial Solutions, which adds the two businesses from communications. As we talk about our results today, they will be discussed in the new segment structure. Please refer to our 8-K filed in December for recast financial information under the new structure. Finally, during the Q&A portion of today's call, due to the number of participants, we're asking everyone to limit themselves to one question. You may rejoin the queue if you have a second question. Now, let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal. And I first off want to say Happy New Year to everyone, and thank you for joining our first quarter earnings call. As you all are well aware, we continue to be in an uneven global economy where we see pockets of strengths and pockets of weakness. Global economic uncertainty is creating noise as we think about 2025, but what's key is we're performing well and our focus is to execute on what we can control to drive financial improvement as we move through 2025. Within this backdrop, the results that our team delivered for the first quarter are very straightforward. On the top-line, our sales organically were in line with our expectations, our adjusted operating margin and EPS were records and ahead of our guidance, and our free cash flow was a record for the quarter, all driven by the execution of our teams. Our orders were slightly ahead of our expectations and accelerated both year-over-year as well as sequentially, which gives us confidence in our guidance for the sequential improvement in our top-line in the second quarter and further growth in our Industrial Solutions segment as we go through the year. The one area that was not in line with our expectations was the impact of a stronger dollar, which will impact us through this year. I am proud of our team's performance on what we control to deliver earnings and free cash flow that were above our expectations. Now, as we expect this environment to remain dynamic, I want to reiterate four key areas that we're focused on. The first one is innovation. And even with the unevenness that we see, our customers are continuing to innovate on next-generation architectures and what we do from a connectivity and sensing perspective is a key enabler. We are supporting their effort in ramping key programs to drive application growth. And you're going to hear about them whether they're the secular drivers such as high-speed connectivity for AI programs, hardening and monitoring applications of the energy infrastructure, next-generation vehicle architecture, as well as continued ramps to support our AD&M customers. The second thing that's important that we're focused on is making sure we're executing on the operational levers to drive further adjusted margin expansion, and you see this in our first quarter results as well as our guidance. Thirdly, an area that we've been working on a lot and we've invested in is really making sure we benefit from how we -- our global manufacturing strategy. And this includes the localizations that we've done, where our customers need China Plus One strategies. And also on the tariff subject, we will deploy our playbook that we exercised during the 2017 tariff cycle, and we're prepared to do so if tariffs are implemented. And the fourth key and lastly is continuing to drive our strong cash generation model that enables optionality of returning capital to owners as well as capitalizing on bolt-on M&A opportunities as they occur. So, with that as an overview, I'd like to get into presentation. If you can move to Slide 3, and let me discuss some additional highlights and our guidance for the second quarter and then Heath will provide further details. Our first quarter sales were $3.84 billion, which were flat year-over-year. Adjusted earnings per share of $1.95 was ahead of our guidance and up 6% versus the prior year. And adjusted operating margins were record at 19.4%, up 30 basis points over last year and up in both segments. Orders of $4 billion in the first quarter grew both year-over-year and sequentially. And as I said earlier, this was slightly better than we expected. This reflects broader growth within the Industrial segment, including increased momentum in artificial intelligence programs. We delivered record first quarter free cash flow of $674 million, and this was up 18% year-over-year, and this demonstrates the high quality of our earnings. And as we look forward, we are expecting our second quarter sales to increase sequentially to $3.95 billion. On a year-over-year basis, we expect to be impacted by unfavorable currency exchange headwinds of over $100 million. Adjusted earnings per share in the second quarter is expected to be around $1.96, which will be up 5% year-over-year, and this includes a $0.06 headwind from currency exchange and tax versus the prior year. Stepping away from the financials for a second, we are pleased to be included in the Dow Jones Sustainability Index this quarter for the 13th year. This designation continues to demonstrate our dedication to sustainable business practices that is expected by our customers and also provides value to our owners. So, with that as an overview, let me get into the order trends and you can see that on Slide 4. In the quarter, we saw orders grow to $4 billion and our book to bill was 1.05. In our Transportation segment, orders came in as we expected, while in the Industrial segment, orders were up 15% on a sequential basis, supporting our outlook for sequential organic sales growth in the second quarter. In Transportation, our auto orders came in as expected, reflecting continued growth in Asia and offsetting softness in Western car production. When you look at the orders decline for the segment, it was driven by weakness in commercial transportation and sensor end markets. Turning to the Industrial segment, all of our business had a book to bill over 1 in the quarter and it supports our growth outlook. We are continuing to see sales growth in aerospace, defense and marine, as well as in energy, and our orders in automation and connected living are indicating stabilization in factory automation end markets. We've also talked to you about our momentum in artificial intelligence applications, and this is continuing. And just to highlight, when you look at our digital data networks business over the last three quarters, our total orders in the last three quarters for this business exceeds $1.5 billion, which sets us up for the growth that we talked to you about. Now, let me get into year-over-year segment results, and I'll start with Transportation on Slide 5. Our auto business performed as we expected and was down 3% organically in the first quarter, with strong growth in Asia being offset by declines in Western regions. As we look forward, we continue to expect global auto production to be down 1% to 2% in fiscal 2025, and we continue to expect our content growth to be at the low end of 4 to 6 point range for the year. While we expect overall auto production to decline this year, we expect continued growth in hybrid and EV production, with now roughly 80% of that production growth this year occurring in Asia where we are strongly positioned. We also expect further electrification of the vehicle and realize when you get electrification benefits that's completely powertrain agnostic. And we're seeing increased content momentum driven by software-defined vehicle architectures, which require more data connectivity and provide content growth for us. And really to give you impact of what the momentum we're seeing, I'll share with you, we just secured over $1 billion of new design wins with the leading Chinese auto OEM for their next-generation platform that is entirely around data connectivity in the car. So, let me turn to the commercial transportation. And as you can see on the slide, we were down 12% organically, as we expected, and this was driven by heavy truck production weakness in Europe and North America. We do expect that demand trend will improve later in this year. And in our sensors business, the sales decline was driven by weakness in the broader industrial markets in Europe and North America. From an adjusted operating margin perspective for the segment, our teams executed very well, and it's reflected by the adjusted operating margins that were 21.3% in the first quarter. Now, with that as an overview of Transportation, let me move to the Industrial Solutions segment on Slide 6, and this segment grew double-digits in the quarter. Starting with our digital data networks business, it grew 50% organically and our design wins are reflecting increased momentum. We now expect revenue from artificial intelligence applications to be above the $600 million in fiscal 2025 and it reflects strong growth and leadership in multiple hyperscale AI platforms across the customer base. In automation and connected living, and this combines our former industrial equipment and appliance businesses, we declined 5% organically, driven by ongoing weakness in factory automation applications in Western geographies, especially in Europe. One nice thing is that we have seen order patterns begin to reflect stability in this end markets, and we've seen increased strength in Asia in the automation area. In AD&M, our sales were up 15% organically, driven by broad growth across commercial aerospace, defense and space applications. In these markets, we continue to see favorable demand trends and ongoing supply chain recovery, and we expect the momentum in these markets to continue. Our medical business in the quarter declined 25% as we expected, and this resulted from inventory normalization by our customers that we're seeing as the broader medical supply chain has improved. And we do expect that our medical business will show sequential growth as we move throughout this year. And the last market that I want to highlight is our energy business. Sales were up 7% organically, driven by strength in all regions and ongoing momentum in utility scale renewables, along with investments that are being made to support increased power generation needs as well as hardening of the infrastructure. I also want to highlight that within the quarter, we acquired Harger, which is a North American leader in lightning protecting and grounding solutions that are foundation to grid reliability and complementary to our existing product set. This acquisition expands our portfolio for grid reliability and connectivity solutions of renewable power, utilities and industrial power applications. And I welcome the employees of Harger to our TE team. For the Industrial segment, adjusted operating margins were 16.8%. They expanded 100 basis points year-over-year, driven by the higher volume and strong operational performance. We do expect all businesses in the Industrial segment to grow sequentially on an organic basis in the second quarter, as I highlighted earlier. Now, with that as an overview of our performance, let me hand it over to Heath, who will get into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 7. For the quarter, adjusted operating income was $745 million, with an adjusted operating margin of 19.4%. This was a record performance with year-over-year expansion in both segments, as Terrence mentioned, and it reflects strong execution by our teams to deliver on operational levers, including savings from past restructuring initiatives. GAAP operating income was $690 million and included $5 million of acquisition-related charges and $50 million of restructuring and other charges. Q1 restructuring charges specifically were $43 million, reflecting continued footprint optimization efforts. I expect restructuring charges in fiscal '25 to be around $100 million level, same as we said 90 days ago. Adjusted EPS was $1.95 and GAAP EPS was $1.75 for the quarter, and included a tax charge of $0.04 in restructuring, acquisition and other charges of $0.16. Again, as we guided 90 days ago, the adjusted effective tax rate was 23% in Q1 and we expect Q2 to be at this 23% level as well. We do continue to expect the full year tax rate to be in the 23% to 24% range. As a reminder, the increased ETR versus the prior year is primarily related to the impact of Pillar 2 global min tax. But as always and importantly, we expect our cash tax rate to be well below our adjusted ETR. Now, if you turn to Slide 8, we delivered strong adjusted margin and EPS expansion along with record first quarter free cash flow, with sales that were effectively flat year-over-year. Sales of $3.84 billion were unfavorably impacted by increased currency exchange headwinds in the quarter that impacted us by roughly $50 million versus our guide. Due to the strengthening of the U.S. dollar against other currencies, we now expect year-over-year currency exchange headwinds to exceed $300 million for fiscal '25, with roughly $100 million of impact in each of the next three quarters. Adjusted operating margins were 19.4% in the first quarter, expanding 30 basis points year-over-year. Adjusted earnings per share were $1.95, up 6% year-over-year, driven by margin expansion and included headwinds of $0.04 from the higher tax rate. Turning to cash flow, cash from operations was $878 million and free cash flow was $674 million. In the quarter, we deployed roughly $500 million to shareholders through share buybacks and dividends, and we utilized $325 million for bolt-on acquisitions in the Industrial segment, including the Harger acquisition that Terrence mentioned earlier. Our cash generation and healthy balance sheet gives us more optionality with the use of capital. We will continue to have strong return of capital to shareholders, but as I mentioned last quarter, we are also looking to pursue more bolt-on acquisition opportunities at attractive valuations. Now, before I turn it over to questions, let me reinforce that we expect to build upon our past performance to deliver strong financial results in 2025. While we cannot control the dynamics of our markets, we are well positioned to benefit from the secular growth trends in the markets we serve, while continuing to deliver strong operational performance to expand margins and drive strong cash generation this year. So, with this -- with that, let's open it up for questions, Sujal. Sujal Shah: Okay. Christa, can you please give the instructions for the Q&A session? Operator: [Operator Instructions] Your first question comes from the line of Mark Delaney. Your line is open. Mark Delaney: Yes, good morning. Thanks very much for taking the question. I was hoping to better understand order trends and if you could speak a bit more around orders by end market and the linearity of orders you saw this last quarter and perhaps how that's informing your 2Q guidance? And just while you're talking on orders by end market and recognizing the full year AI outlook is now for over $600 million and that's strengthened, but just here in the shorter term, as you look at the order patterns, have you seen any volatility either positively or negatively as the industry is starting to transition to Blackwell? Thank you. Terrence Curtin: Sure. Thanks, Mark, for the question. And like I said on the call, orders were ahead of where we expected and certainly we had the FX impact, but when we think about them coming in stronger, it is why we feel good about the sequential improvement we're going to see and ongoing broad momentum in the Industrial businesses to build sequentially, certainly, AI, as you talk about more broadly and I'll talk about that. So -- also I want to highlight regionally what we're seeing. We are continuing to see orders reflect broad strength in Asia. And even when you look at the orders growth that we saw, you see Asia has been accelerating. Weakness continues to be in Europe broadly especially when you think of auto and in the industrial space and the heavy truck space where we play. And so, you see that unevenness with United States and the Americas sort of being a little bit more neutral. To your question about the Industrial segments and the markets, what's important is every business had a book to bill above 1. And we do have the momentum in AI, and our AI orders did grow nicely in the quarter, but the Industrial segment, if you take out the AI orders, orders grew 10% year-over-year in that segment and 7% sequentially even without the AI orders that we continue to benefit from. In aerospace, we continue to see growth as commercial air still was recovering. Defense is strong, and while space applications are smaller, they are the fastest-growing applications that we have in that area that you see the strong double-digit growth in aerospace. In energy, it's a business that we've been investing in. We talked about the M&A, but you just continue to see continue order momentum around the utility applications where people are -- you see increased CapEx going into the utilities and it's pretty broad. The area that positive sign even though stability doesn't sound positive is the automation and control space. It's an area where we have seen orders moving sideways. We've seen acceleration in Asia. Certainly, Europe in that area continues to be weak, but it's an area that sort of says it's good to finally see some stabilization in the automation and control area that maybe we can see some improvement later in the year. And in Transportation, I talked about what we're seeing in auto production. We do expect auto production to be down for the year, but the orders are sort of tracking that, and we still expect to be at the low end of the 4% to 6% of our growth over market there, and really the weakness we saw is in the heavy truck market, and we hope that will improve later in the year. So, I think that gives the color that you asked for, and thanks for the question, Mark. Sujal Shah: Thank you, Mark. Can we have the next question, please? Operator: Your next question comes from the line of Scott Davis with Melius Research. Please go ahead. Your line is open. Scott Davis: Hey, good morning, guys. Terrence Curtin: Hey, good morning, Scott. Scott Davis: Hey, thanks for the color on the orders. That's actually super helpful. Hey, I wanted to move to margins, because that was -- operating leverage is your second thing you mentioned of your four priorities, but seems like you guys have done a really nice job managing margins and actually improving margins in relatively low-growth environment. But how do you guys think about incremental leverage and let's just focus on TS, because I think Industrial is a little bit more clear, but how do you think about incremental leverage in TS when we get a recovery? Do you have costs that need to come back proportional to that recovery or would you expect to see kind of outsized incrementals when -- again it may not be till 2026 or whatever, but whenever we do see a volume recovery there? Heath Mitts: Scott, this is Heath. I'll certainly take that and I appreciate the question. Listen, it's -- we've made a lot of strides in the TS margins. If you go back a few years, we're always talking about target margin of 20% and so forth. We don't -- we're comfortable that we're at that level. Certainly, Q1 was probably is outsized, which is pretty common as you think about our seasonality, because our -- and our China factories are always humming very strong in the first quarter, and you saw that last year as well. So -- but we're confident that we're going to be at our 20% number or better as we -- by quarter as we work our way through the year. So, we're feeling good about automotive element of that. The element of the growth side as we move through this year and obviously position ourselves for next year are also the other components of TS, of the Transportation segment, the commercial transportation business, which as you're aware is a nicely profitable component of our portfolio, has been depressed with heavy truck builds and construction and mining and ag equipment being in the rough part of the cycle. As that returns to growth, that would be where we're going to get a lot more of the leverage from. And we're working our way through it, we're holding our head on that, but that's where we're going to see some of the leverage elements as we work our way into '26, because that lever is up very nicely. From a cost perspective, Transportation segment, particularly automotive and in Europe has been a heavy focus of some of our footprint activities over the last few years. And so, we are getting the benefit of being able to tolerate low or sometimes negative growth environments because we've reduced some of that fixed cost structure, particularly in Western Europe, where we're probably too dependent if you go back over the past five or 10 years. So, that's been a concerted effort and that journey is not quite over, but certainly you see it in the results now where our automotive growth is down 3% year-over-year, yet in aggregate, the Transportation margins are quite solid. So, we feel good about that. Hopefully, that answers your question, Scott. Sujal Shah: Okay. Thank you, Scott. Can we have the next question, please? Operator: Your next question comes from the line of Amit Daryanani with Evercore ISI. Your line is open. Amit Daryanani: Thanks a lot. Good morning, everyone. Terrence, you folks talked about AI revenues exceeding the $600 million target for the year that you had actually given last quarter. I was just wondering if you could talk about what is driving the strength here. Is it better demand from hyperscalers or silicon companies? And is this more broad-based? Are you seeing more share gains that's helping you? Just anything that can provide some clarity in the levers of the upside you're seeing on that $600 million target would be helpful. And then, Heath, maybe just related to this, as AI ramps, how should we think about the margin profile of AI versus the broader Industrial segment average? Thank you. Terrence Curtin: Yeah, sure. Thanks, Amit. Appreciate the question. First off being when you look at it, our AI revenue in the quarter doubled already in the quarter. And we did $300 million last year. We told you we're going to be above $600 million. And what is nice, it is a broad group of the hyperscalers. When we think about where we positioned ourselves and it is about how you play in that ecosystem with the other semiconductor players that are in there and the hyperscalers, it isn't just one program, it is pretty broad and it's consistent with what we told you. Now, what is nice the orders keep on layering in. The momentum that we've talked to you about as we started talking about this a year and a half ago continues. Our teams are very focused on the ramp. The ramping of these programs that we have across the customer pace is really a key focus. And I think in many ways upside to the number we talked about will really be driven by how do we execute on the ramps, which is what we like. The other thing, you sort of talk about share, our share has not changed. It sort of stays in that 30%, 35% range and that's at the level of the programs that we're winning. But it also shows how big the opportunity is when you think about the benefit that our industry has from bringing the connectivity to this technology and the major connector companies are going to have the share because of the complex technology requirements that we have. On the margin, it's similar to our cloud margin products that we talked about a few years ago. We are in ramp, so these are early ramps. But margin you're going to see the volume benefit as we move forward and you see it in the IS margin as well as we continue to move it up, feel that we can continue to scale it, and it's going to continue to drive momentum not just this year but into next year. Sujal Shah: Okay. Thank you, Amit. Can we have the next question, please? Operator: Your next question comes from the line of Wamsi Mohan with Bank of America. Your line is open. Wamsi Mohan: Yes, thank you so much. I was wondering, Terrence, if you could talk a little bit about some of the levers that you can use if tariffs do get implemented? I think you noted some of the advantages you have around your manufacturing strategy and localization in your prepared remarks. And secondarily, your cash flow has been very strong. We're entering kind of what is at least broadly perceived to be a market that's more favorable for M&A. Would be curious to get your thoughts around, I heard you say bolt-on, but how open is TE to doing larger deals as well? Thank you so much. Terrence Curtin: Sure. Let me take the first part of it and then I'll let Heath take the cash flow piece of it. First off, let's just start with a little bit of a baseline for everybody about our footprint, and I know we've talked about our footprint historically from how we repositioned. Heath even talked about some of the things we've done in Transportation. But the first thing is we've been focused a lot on localization within region. So, our business is not one where you make in one region of the world and that's the manufacturing center you ship to. Our footprint is very much aligned to our customer supply chains and we work very hard to say how do we make sure it's right to supporting our customers in region, and 80% of what we manufacture is in region. So, it is very focused on our customers. And as we do work, we feel we're playing from a good offensive position, but each customer supply chain is very nuanced and we continue to talk to them of how -- no matter what comes out at us from a tariff perspective, they would adapt so that we can leverage what we have or adapt. So, with that as a little bit of an overview, I think the key that you should all think about as we're thinking about it is we've dealt with tariffs already in 2017. It impacted. We had about $300 million of tariff costs that we worked with our customers on whether that be logistical lanes, whether that be moving tooling from a manufacturing perspective, and also in the areas where we couldn't find solutions with our customers or their choice. It was passing along the tariff cost to our customers via price and that playbook that we went through back in 2017 is what we're prepared to do and we've been preparing to do depending what we get hit with, and we don't know what it could be. So, it is important staying close to the customers and we recovered the cost last time through all those options and leveraging our footprint. We think we'll do the same thing this time and we're prepared to. So, Heath with that maybe on the tariff front, why don't you cover the cash flow and M&A topic? Heath Mitts: Yeah. Wamsi, obviously, our cash flow, we've stacked up a couple of years of record free cash flow as a company, and it's given us a lot of optionality. We have returned a fair amount to our owners through dividends and share repurchases, but we've continued to be active in M&A. We use the term bolt-on really referring -- just as a reminder, referring that we're looking for things that are close to home or close to the areas that we know well versus a platform that may be a new space for us. So, I don't want to confuse bolt-ons with size. Sometimes bolt-ons can come in as a small to midsize company, sometimes those opportunities are much larger. And we're very active right now. We have seen the pipeline increase. We have resourced it. Let's just say, we've enhanced our resources around that in very particular areas where we see fragmentation and opportunities for us to go and acquire things. And it's an active environment. I'd say it's more active over the past six months in terms of discussions and deals coming to market than we had seen prior for a while. So, I think there's some good opportunities out there and you should expect us to be active as we move forward here. Sujal Shah: All right. Thank you, Wamsi. Can we have the next question, please? Operator: Your next question comes from the line of Steven Fox with Fox Advisors. Your line is open. Steven Fox: Hi, good morning. Terrence, I was wondering if you could just maybe talk a little bit more about the industrial markets, not away from the cloud business, but traditional automation and controls. You've mentioned it sideways stabilization. Is that much different from what you've seen 90 days ago? How encouraged are you that some of these trends can improve as you go through the year in any particular region? Thank you. Terrence Curtin: Yeah. Thanks, Steve, for the question. The stabilization, I would say, is good that we're seeing. I would tell you last time we were together, I would say we're probably a little bit more in the mode of hoping for stabilization, but we were still seeing not as many strong spots in the orders as we would like and also in discussions with our customers. When we sit here, we truly have stabilization in our orders. I also would tell you as we look through a lot of this market goes to our distribution partners, it does look like the inventory elements are more behind us than in front of us and we've all been trying to get our arms around that. And the other thing is what are those inflection points that are upward that we're seeing. I would tell you when you look at our customers in Japan and in China, the larger automation where we serve them directly, I would tell you for the past couple of quarters, you're seeing upward order momentum. So, that is a positive in Asia. I would say, the U.S. customers we have here are probably more sideways, but that's a positive versus where it's been. And our European customers are continuing to show weakness. So, overall it's stable. I think it's not surprising when you think about the geographic mix what we're seeing in different economies and investment levels, but stabilization is a first step. And certainly, when we think about what is needed when you think about productivity, if people do things that are needed around tariffs, about reshoring, these are all areas that we think are positive drivers where we play which is mainly in the discrete. And let's face it, we've been a company that's been investing CapEx and investing ahead and we think other companies are going to have to do it. So, net-net, I think it's more positive than it was, but certainly, it's not a full upward tilt in every region on the order book by any means, it's more sideways globally with unevenness like I talked in the early part. So, Steve, I hope that adds color, but I think that's an area that we can build off of as we move through this year. Sujal Shah: Okay. Thank you, Steve. Can we have the next question, please? Operator: Your next question comes from the line of Colin Langan with Wells Fargo. Your line is open. Kosta Tasoulis: Hey, guys. This is Kosta Tasoulis filling in for Colin. I just wanted to double-click on your LVP assumption down negative 1% to 1.5% growth over market, low end of the 4% to 6% range. Can you just double-click on North America, Europe and China? Terrence Curtin: Sure. Thank you for the question. And first off, being as we said on the call, we do expect auto production this year to be down 1 point or 2 points. It was down 3% in the first quarter. And the first quarter, we saw very strong production growth in Asia. We saw Europe was down 10% in auto production. And we saw North America being down a little bit in auto production. So, you see the unevenness in the production. When we think about the 4% to 6% range, we have said we're going to be at the low end of that range. I do want to remind everybody when it comes to Europe, Europe is our highest content per vehicle we have. So, we still believe we can be at the low end of that range. The 4% to 6% growth over market really driven out of Asia. And the other thing is I know the discussion around electric vehicles in the West is one where there's lots of questions, but on the planet, there's going to be about 4 million more electrified vehicles made and 80% of those are going to be in Asia where we have a very strong position. So, we still will benefit from that content increase in Asia as the Western OEMs do their transitions. The other thing I would say, electronification, which we've always talked about and that includes what happens around 48-volt introduction into a vehicle, all the safety features, autonomy features, zonal compute designs that get put in and certainly how software defined architectures occur. All of that creates need for connectivity and certainly we're seeing an acceleration on that. That also gives us confidence to be at the low end of that range. And I mentioned the design win that we had just recently with the large China OEM that sort of shows the level of that content increase. So, this year we do expect the production environment to be weak in Europe. We do expect the EV environment to be weak in Europe. North America slightly down. The growth of vehicle production and then the electrified trends will driven out of Asia where we have a great position. Sujal Shah: Okay. Thank you, Kosta. Can we have the next question, please? Operator: Your next question comes from the line of William Stein with Truist Securities. Your line is open. William Stein: Great. Thanks for taking my question. Terrence Curtin: Hey, Will. William Stein: Hey, thanks. I'd like you to maybe [indiscernible] opportunity a little bit, maybe one level down. We've heard quite a bit about cross licensing technology in this area. I don't think that's new to the connector industry. So, maybe you can confirm that or put it in context and maybe also help us understand the effect on revenue and margins when there's cross licensing of IP going on in that space? Thanks so much. Terrence Curtin: Yeah, sure, Will. A couple of things, when we do have cross-licensing, and you have seen it over time in the telecom and datacom space, so you're right, this is not new, and it's an area that as you have ramps, our customers ask for, hey, I want to make sure I have security of supply, and we have cross-license with competitors over time to really make sure we help the customers with these ramps. So, when you sit there, you have a sharing of share obviously. It is a collaborative, but it's also, let's face it, we have to cross-license each other's technology to really make sure we help the customer get to the solution. And so, I actually view it as something that's about an exciting growth trend, and let's face it, as we cross-license to each other we have to make sure we have partners that can meet the ramps of the volumes that are coming and it's really something that's been very traditional in the interconnect space and the datacom space for a long time. Sujal Shah: Okay. Thank you, Will. Can we have the next question, please? Operator: Your next question comes from the line of Asiya Merchant with Citigroup. Your line is open. Asiya Merchant: Great. Thank you for the question. We got some questions recently about the co-packaged opportunity that some of the semiconductor players are participating in. How do you guys think about this AI opportunity? I think you've outlined it as $1 billion, perhaps, in a few years. Clearly, that's accelerating or seems to be accelerating here just given what you guys are forecasting for fiscal '25. But longer-term, how do you think about co-packaged optics and how TE plays in that space? Thank you. Terrence Curtin: First off being while we do play in optics, we don't play in co-packaged optics. That is a capability we do not bring. But even when you get into that, you have connectivity you're going to need that will still be on copper, and let's face it, that is our strength. And when you look at the architectures, you do have customers, how they're going to experience, what happens close to the chip, what happens further away, and over time, it will be a hybrid approach. So, when we think about what we've gone out with the guide that includes that you will have evolution of the architecture and when you get into things like that it just means you're going to have harder problems you have to solve, which typically means that's where engineers do their best work and we get excited as the architecture gets evolved. Sujal Shah: Okay. Thank you, Asiya. Can we have the next question, please? Operator: Your next question comes from the line of Luke Junk with Baird. Your line is open. Luke Junk: Good morning. Thanks for taking the question. Terrence, hoping you could just expand a little bit more on your comment about the opportunity for TEL around data in the car, specifically -- and of course coming out of [SDB] (ph) architectures. You mentioned that major award in China, but maybe if you could just zoom out to the pipeline more broadly, especially in Asia where that trend is ahead of the West and maybe would it be possible to put some guardrails around [CPV] (ph) terms as well as a lot of attention on electrification in terms of incremental content, but maybe this could be an underappreciated driver? Thank you. Terrence Curtin: Luke, no, a couple of things. When we've always talked to everybody about content, we've always sort of said as the electrified powertrain moves that plays a big chunk of the content, but there's this other bucket that's electronification that is just as important. And as you said when you think about software-defined, our Asian customers are clearly leading the way here and we continue to see that momentum. And it's an area that we've always been excited about. You're really looking here how do you get data connectivity, Ethernet in a car that really allows all the software definitions as mechanical buttons move and so forth get eliminated, you need to have that software-defined architecture that allows that configuration to occur. And let's face it, there needs to be connections that go into all the modules to make sure this comes to life. And what's been nice is our product set here has continued to grow, it's up to about $600 million this year, which doesn't even include the win, and you can get a feel of what that does already on a content per vehicle. And we only expect that that's going to accelerate. And even when you think about that $1 billion of wins we've got recently from one customer, those wins are accelerating, and it's adding another content lever that supports our 4% to 6%, and it's one of the things that we get excited about and we'll continue to share thoughts about how those wins continue to impact us as that acceleration continues to occur. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: Your next question comes from the line of Joe Giordano with TD Cowen. Your line is open. Joe Giordano: Hey, guys. I think we've talked a lot on the major subjects. So maybe, if I can just ask quickly on industrial equipment. I know you've mentioned orders suggest stabilization. Are you seeing any evidence of, like, that orders need to kind of ramp from here, or we kind of just had a level that seems consistent with end demand? And then, similarly on medical, the pretty substantial kind of decline there in the quarter and much different than the last couple that we've been seeing here. So, is that the beginning of something that you're seeing there, or is that kind of a one-time correction and we're kind of back to a normal rate? How do you kind of view that market? Terrence Curtin: Sure, Joe. Two very different questions. Joe, on industrial equipment, I think what we're seeing is stabilization and we would like to see other regions strengthening more to call it broader on that inflection point like I talked earlier, but I think from a modeling perspective right now, we'll get a little bit of sequential improvement, and then hopefully that accelerates, but I would say have a view of stabilization right now. On the medical, I would say, that's a one-time event. We did expect this. We had some customers that over-inventoried, and across the medical device, we did see them take it down. And then, we think that as we move forward, you're going to see sequential improvement off the first quarter. You shouldn't assume it stays there and we've seen orders already improve book to bill well above 1, but it really was a pocket here in the supply chain that will build sequentially back up as we move through the year. So, thanks for the question, Joe. Sujal Shah: Thank you, Joe. Can we have the next question, please? Operator: Your next question comes from the line of Saree Boroditsky with Jefferies. Your line is open. Saree Boroditsky: Hi, good morning. So, maybe just building on some of the margin commentary that you've made, you spoke about some of the restructuring charges related to footprint consolidation this year. Maybe talk a little bit about the benefit of that restructuring for margins for 2025 and maybe 2026? Thank you so much. Heath Mitts: Saree, it's Heath. I'll take that. Well, our footprint journey has been going on for several years now, and a lot of it is the continuation of moving legacy Western or more expensive production areas to lower cost regions. And that has continued, that will continue. You see it currently in our certainly as we can leverage modest to negative growth in our Transportation segment yet ability to expand margins. So, that is a global comment, but certainly most of our restructuring there has been a little bit more focused in Europe as we've moved away from Western Europe and into Eastern Europe and in Morocco. For the Industrial segment though, the Industrial segment is obviously a little bit more fragmented with five different business units within that segment that we report on here. We will see more growth there this year. And to Terrence's point, some of that's obviously driven by the AI activity within our DDN business, but it's also more broad-based across other areas like energy and aerospace and defense, and then modest recoveries and things like our [ECL] (ph) business, which is the old industrial equipment and appliances. So, we are expecting not just top-line support there, but pretty significant margin improvement as we work our way through the year. And we feel good about that. We know we're below where we need to be from an entitlement perspective there at that segment level. Certainly, getting some help from the factory automation side of industrial equipment, which is a nice margin business, will help in that journey, but in the meantime, there's some things that we've done on the cost side and otherwise to mitigate some of this as we start to pull ahead margin wise within that segment. I think when you sit back and we're sitting back at the end of the year, you'll see more margin expansion there than you will anywhere else in the company. Sujal Shah: All right. Thank you, Saree. Can we have the next question, please? Operator: Your next question comes from the line of Samik Chatterjee with JPMorgan. Please go ahead. Samik Chatterjee: Hi. Thanks for taking my question. Just a quick one here. I know multiple times in your prepared remarks you mentioned that you expect commercial vehicle to improve during the year and that to drive transportation margins to be better. Can you just sort of highlight what is driving that confidence? What are you seeing in data points to inform that view? I mean, just would help to understand sort of the indications that you're getting there. Thank you. Heath Mitts: Yeah, Samik. The ICT business, I think we've been pretty public with it. It is a nice margin business and has been for quite a long time. It does cycle. It cycles with heavy truck production. We're well positioned globally there. Sometimes we do feel the impact of certain regions as they go through different parts of their cycle both directions. And so, my comment earlier was really referring to even though there's the top-line and there's a dilutive impact there coming from that part of the segment relative to where it fits in, we've been able to hold our margins okay, but as we start to see growth in that segment -- I'm sorry, in that business unit, the commercial transportation business unit, hopefully towards the end of this fiscal year, but certainly where we see things starting to line up with our customers for 2026, we would expect some outsized margin support there, just given how it weights into that segment. So, we're not spiking the ball now. We're not calling for a recovery in the next quarter or two, but certainly some of the discussions that we're seeing and there is a little bit of a longer view in terms of where things are and particularly with some of the emissions standards change for heavy truck. Terrence Curtin: Yes, there will be an emissions change in '27 and there will -- there is typically pull-forward of demand before that and that's one of the elements as we look further out in the year and into '26, we would expect that that's when that cycle you'll probably see some benefit from it to Heath's point. Sujal Shah: All right. Thank you, Samik. Can we have the next question, please? Operator: Your next question comes from the line of Joe Spak with UBS. Please go ahead. Joe Spak: Thanks so much. Two quick margin questions for me. First, in auto, we know typically the December quarter, companies tend to get some engineering recoveries from the customers. I was wondering if that occurred at all and helped the Transportation margins? If so, by how much? From the old reporting segment, we could surmise that Digital Data Networks is an above-average segment margin business. You talked about how you're investing ahead, the need to invest. I'm just wondering if -- as you sort of continue to see strong AI growth, whether we could actually see a little bit of margin variability from that growth depending on the pace of investment and when business comes on? Terrence Curtin: Couple of things. We have been investing for these ramps. So, let's take the second part of your question, Joe. On the first part, I'm going to ask you to re-ask it. You broke up a little bit. But on DDN, you've seen where it was in the cloud cycle. We have been investing ahead to make sure we're adding capacity to really handle the ramps we have, doubling businesses does create a lot of execution and investment in the head and we have been doing that. And there will -- program will be lumpy at times and you'll see that in our orders already. So, you will see that impact on our margin in this segment. Can you talk about the Transportation question again? I missed that one around December? Joe Spak: Yes, sorry. In auto, typically we see in the December quarter sometimes companies get some engineering recoveries from their customers. I was just wondering whether that occurred or helped the margins at all in the quarter? Terrence Curtin: No, we do not have that. When you look at the first quarter margin, Heath said it well earlier, it is the highest production period of the year, mainly out of Asia. Our plants really crank at that time and that we get the volume benefit from it. And if you look back in many years, our first quarter margin is a little bit hotter than other times of the year and it's really due to Asia, has nothing to do with engineering reimbursement, Joe. Sujal Shah: All right. Thank you, Joe. Can we have the next question, please? Operator: Your next question comes from the line of Christopher Glynn with Oppenheimer. Please go ahead. Your line is open. Christopher, you may be on mute. Sujal Shah: Okay. I think we're having some trouble with Chris' line. So, Chris, we will circle back with you later. But if there's no further questions, I want to thank everybody for joining us this morning. And if you do have more questions, please contact Investor Relations at TE. Thanks, everyone, and have a nice day. Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Operator: Everyone, thank you for standing by, and welcome to the TE Connectivity Fourth Quarter and Final Year Fiscal 2024. At this time all lines are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. I'd now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. You may now begin. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's fourth quarter and full year 2024 results and outlook for our first quarter of fiscal 2025. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. As you know, in September, we announced a reorganization into a 2-segment structure effective with the start of fiscal 2025. Our Transportation Solutions and now a larger Industrial Solutions segment, which adds the two businesses from Communications. Our Data and Devices business moves into the Industrial segment and is renamed Digital Data Networks. Our Appliances business will be combined with Industrial Equipment, and the new business is named Automation and Connected Living. As we talk about our results today, they will be discussed in the old 3-segment structure, and we will begin reporting our financial results in the new structure beginning in the first quarter of fiscal 2025, with an 8-K of recast financial information being issued before the end of our fiscal first quarter. [Operator Instructions] Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal. And as always, we appreciate everyone joining us today. And before I get into the slides, let me just make some comments for our fourth quarter, I am pleased that we delivered revenue and adjusted earnings per share that was ahead of our guidance driven by continued solid execution across the segments. Our teams delivered consistently in 2024 on the operational levers to drive margin improvement, along with strong cash flow generation, which was our key focus that we discussed with you all throughout this year. We delivered strong margin expansion and double-digit growth in adjusted earnings per share in what continues to be a dynamic market backdrop. When we look at our results for fiscal 2024, we delivered record operating margins, earnings per share and free cash flow. And I guess a few things to highlight building on this. We generated over 200 basis points of adjusted operating margin expansion and double-digit earnings growth year-over-year against a flattish volume environment. We also continue to demonstrate the strategic positioning of our portfolio and alignment to secular trends as we benefit from the electrification and increased data connectivity adoption within the vehicle, growth in renewable energy and aerospace and defense markets, and accelerated momentum in artificial intelligence applications. And the content outperformance that we saw in these markets were offset by the softness we saw in the broader industrial markets. And lastly, we demonstrated the strength of our cash generation model with free cash flow of approximately $2.8 billion and disciplined capital deployment that included a strong return to shareholders. I'm also pleased today to announce that our Board authorized a $2.5 billion increase to our share repurchase program that reinforces our value creation model. Now let me share some of the market trends and what we're seeing versus our earnings call that we did 90 days ago. We do continue to have some markets that are accelerating, some that are stable and some that are weak that are still trying to gain some traction, and let me highlight them by our segments. In our Transportation segment, global auto production was essentially flat in fiscal 2024 with growth in Asia being offset by declines in production by Western OEMs. As we look forward, we expect a slight decline in global auto production in fiscal 2025. We do expect continued growth in hybrid and electric vehicle production with over 70% of that production occurring in Asia, which is our largest revenue region in auto and where we're extremely well positioned. We also expect further electronification in the vehicle, which will benefit across all powertrains and will continue to drive content growth for us. In the commercial transportation markets, we continue to see end market decline with some potential improvement in the cycle later in 2025. In our Industrial segment, we continue to see strong growth in the aerospace and defense and energy markets, coupled with ongoing weakness in factory automation, and that's particularly weak in Europe. In the Communications segment, growth trends that we've been talking about are continuing. In cloud data centre, we see momentum accelerating in artificial intelligence across our broad customer base. We had $300 million of sales for AI applications in fiscal 2024, which is higher than our expectations, and we expect these sales will double in fiscal 2025. We are set up for strong performance in fiscal '25, which will build upon the momentum we established in '24. While we're continuing to work through sluggish industrial end markets, we do expect them to return to growth in 2025. We also are continuing to invest in our engineering skills, technology and operations capacity to support the growth. Key examples of some of the larger investments we are making are the further expansion of our Asian operations to spark the ongoing growth in EV in that region as well as our continued investment to expand our engineering and capacity to support the ramps of design wins that we have in AI. With these investments and what we see in our end markets, we do expect an acceleration of growth as we move through this coming year. Finally, I want to reiterate that our long-term value creation model is centered around having a portfolio aligned to secular growth trends, operational levers to drive further margin expansion and a strong cash generation model to return capital to shareholders while investing in bolt-on M&A opportunities. Executing on these pillars will enable sales growth, margin and EPS expansion and strong cash generation in fiscal 2025 and beyond. So, with that as an overview, let me get into the presentation starting with Slide 3. And I'll jump into some additional highlights and our guidance for the first quarter of fiscal '25, and then Heath will jump into more details in his section. Our fourth quarter sales were $4.1 billion, which was above our guidance and up 2% organically year-over-year. The upside versus our expectations was driven by the Communications segment with higher sales from artificial intelligence applications. Adjusted earnings per share of $1.95 was ahead of our guidance on a quarterly record and was up 10% versus the prior year. Our adjusted operating margins were 18.6%, and they were up 130 basis points over last year. Our free cash flow generation was very strong and was approximately $830 million in the fourth quarter. Now let me turn to the full year results that you see on the slide. Full year sales were $15.8 billion with organic growth in Communications and Transportation segments offset by weakness in our Industrial Equipment end markets and headwinds from a stronger dollar. Adjusted earnings per share was $7.56 and was up 12% versus the prior year. And please keep in mind that this included $0.39 of currency exchange and tax headwinds. Adjusted operating margins were 18.9% for the full year, and they expanded 220 basis points over '23. The high quality of our earnings continues to be reflected in our cash generation model, and I'm pleased with our record free cash flow of approximately $2.8 billion in 2024. Now as we look forward to the first quarter of '25, we are expecting our sales to be $3.9 billion, up 2% year-over-year, and it reflects the typical seasonality in our business. We expect adjusted earnings per share to be around $1.88, and this includes a $0.04 tax rate headwind versus the prior year. Now if you could please turn to Slide 4. Let me make some comments on the order trends that are highlighted there. Our orders were over $3.8 billion, reflecting typical seasonality, ongoing momentum in AI programs and continued weakness in general industrial end markets. By region, our order patterns reflect strength in Asia with weakness in the West. In Transportation, sequential order patterns reflect stability in global auto production, along with ongoing market declines in commercial transport. In auto, orders continue to reflect growth in Asia with weakness in Western markets. In the Industrial segment, we continue to see softness across factory automation and building automation, particularly in Europe. And in our Communications segment, our order levels came in as we expected and they increased nearly 40% year-over-year, in addition to the strong order growth we had last quarter. This supports the strong growth we're expecting in fiscal 2025 from artificial intelligence programs. And the trends and the innovation that are happening in these applications is an exciting growth opportunity for both TE and our industry. Now with that as a backdrop about orders, let me get into the segment results, and I'll start with our Transportation segment that is on Slide 5. Highlighting our ability to generate growth over market, our auto business declined 1% organically against a global auto production decline of 5% in the fourth quarter. The 400 basis points of outperformance versus production was driven by double-digit organic growth in Asia, offset by mid-single-digit declines in the West. And quite frankly, this continued the trends that we've been seeing by region all year. As everybody knows, automotive production and car sales dynamics are very different by different regions in the world. We do continue to expect content growth to be in the four to six point range long-term. This is supported by data connectivity and further electronification benefit across all powertrains, our leading global position in hybrid and electric vehicles and our strong position in Asia. I do want to emphasize that -- and remind everyone that over 70% of EV and HEV production occurs in Asia, where we are very well positioned, and we expect the adoption of EVs and HEVs in Asia to continue the pace they've been at. Our differentiated position is proven by the fact that we grew sales in mid-teens in Asia this year in an environment where regional production was only up mid-single digits. Turning to the Commercial Transportation business. We did see a 4% organic decline, and this was primarily driven by weakness in Europe. We do expect this business to be a down again sequentially in the first quarter with potential improvement in the cycle as we move throughout the year. In our Sensors business, the sales decline continued to be driven by market weakness in industrial applications as well as portfolio optimization efforts that we've talked to you about. We do expect these exits that we've talked about to be completed in 2025. For the Transportation segment, adjusted operating margins were 19.3% in the fourth quarter. For the full year, we delivered 20% adjusted operating margins, and these were up 300 basis points year-over-year driven by strong operational performance. And we expect our first quarter margins to be similar to the fiscal year '24 levels. So, please turn to Slide 6, and let me get into the Industrial Solutions segments. As you can see on the slide, our AD&M sales were up 14% organically, driven by growth in the commercial aerospace and defense markets. In both of these markets, we continue to see favorable demand trends as well as ongoing supply chain recovery. In our Energy business, sales were up 14% organically, driven by strength in the Americas and in Europe. We continue to benefit from momentum in renewables as well as investments that are being made to support increased power generation needs. Our Medical business declined slightly in the quarter and the Industrial Equipment business declined 20% organically. For the full year, we saw growth in the Aerospace and Defense, Energy and Medical businesses. On the margin front, Industrial segment margins were 15.6%, and this was in line with our expectations given the current volume levels and business mix. So, let me wrap up the segment discussion with the Communications segment, and this is on Slide 7. Our Data & Devices business grew 35% organically, and our design wins are reflecting accelerating momentum. Our AI revenue came in at $300 million in fiscal 2024, and we expect sales from AI applications to double from this level in fiscal 2025 from design wins across a broad base of customers. Our Appliances business grew double digits again, the second quarter in a row and this was really driven by strength that we saw both in the Americas as well as in Asia. The segment had adjusted operating margins of 21.7%, and this was aligned with our expectations. Margins did show a significant improvement over last year, and that was driven by strong operating leverage on the higher volume that we had on the segment. So, with that summary, let me turn it over to Heath, who will get into more details on the financials as well as our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Before I get into the details of our financials, I want to reiterate something that Terrence said earlier. We are dealing with a dynamic market environment. So, our focus this past year has been on improving margins and earnings. I am pleased that we delivered record margin, EPS and free cash flow in fiscal '24. For the quarter, adjusted operating income was $755 million with an adjusted operating margin of 18.6%. GAAP operating income was $651 million and included $5 million of acquisition-related charges and $99 million of restructuring and other charges. For the full year, restructuring charges were $144 million, reflecting continuing footprint optimization efforts, and I expect restructuring charges in fiscal '25 to be at or below the $100 million level. Adjusted EPS was $1.95 and GAAP EPS was $0.90 for the quarter and included a tax charge of $0.78 related to the increase in the valuation allowance for deferred tax assets. Additionally, we had restructuring and acquisition and other charges of $0.26. For the fourth quarter and for the full year, the adjusted effective tax rate was approximately 22%, which was as we expected. As we move into fiscal '25, we expect our adjusted effective tax rate in Q1 to be approximately 23% with the full year 2025 being in the 23% to 24% range. The increase versus the prior year is primarily related to the impact of the Pillar two global minimum tax implementation. Importantly, our fiscal '24 cash tax rate was in the mid-teens, significantly below our adjusted effective tax rate. And you can continue to expect our cash tax rate to stay in the mid-teens longer term. Now turning to Slide 9 for additional information on full year performance. Fiscal '24 sales of $15.8 billion were flat on an organic basis, we did have organic growth in the Communications and Transportation segments, which was offset by the Industrial segment. Adjusted operating margins were 18.9% for the full year with margin expansion of 220 basis points year-over-year driven by strong operational performance. At the segment level, we expanded margins by 300 basis points in Transportation and nearly 400 basis points in Communications, resulting in a roughly 20% adjusted operating margins for both segments in 2024. Adjusted earnings per share were $7.56, up 12% year-over-year, driven by margin expansion and included headwinds of $0.39 from currency exchange and a higher tax rate. And given the flattish market environment, double-digit EPS growth in this environment is something I'm very proud of. Turning to cash. As you may recall, we generated record free cash flow of approximately $2.4 billion in our fiscal '23. And I'm pleased to share we exceeded this by $400 million to a new record of $2.8 billion in fiscal '24, which was up 17% year-over-year. Our free cash flow reflects 120% conversion to adjusted net income and was in the high teens as a percentage of sales, demonstrating the high quality of our earnings. And as we look forward, we expect free cash flow conversion to remain above 100%. In fiscal '24, we returned roughly $2.8 billion to shareholders through share buybacks and dividends, and we deployed approximately $340 million, aligned with our bolt-on acquisition strategy. Our cash generation and healthy balance sheet gives us more optionality with uses of capital. We will continue to have a strong return of capital to shareholders, and as you saw today, we announced an additional $2.5 billion repurchase authorization, which supports our optionality. We will also look to pursue more bolt-on acquisition opportunities at attractive valuations. And we are seeing a more favorable deal environment than we have seen in the past few years, so I'm a bit more bullish on our inorganic opportunities. Before we turn over to questions, let me reinforce that we expect to build upon our performance in '24 to deliver even stronger financial performance in 2025. We are expecting a return to growth this fiscal year, and our investments in markets with secular trends are expected to accelerate as we move through the year. In addition, we expect to deliver margin and EPS expansion along with strong free cash flow generation. Now with that, let's open it up to questions. Sujal Shah: Thank you, Heath. Eli, can you please give the instructions for the Q&A session? Operator: [Operator Instructions] Your first question comes from Amit Daryanani from ISI Evercore. Amit Daryanani: Terrence, I'm hoping you can just perhaps expand more on the AI opportunity that you see unfolding going forward. There's been a lot of discussion around what's happening and some of the shifts here. So, would love to hear your perspective. What sort of customer diversity do you both have here? And some of the recent architectural changes that we're seeing has any impact to TE? And perhaps you can leave into this discussion, how should we think about this billion-dollar AI opportunity talked about longer term? Is that getting bigger or perhaps going to happen sooner? Terrence Curtin: Thanks, Amit. And obviously, you heard us talk about this for a number of quarters, and it's a great trend which also demands really excellent engineering and tough engineering problems we solve. It's about higher speed that all of our cloud customers need with lower latency as well, at the same time, really helping solve the power efficiency that's needed with what we provide from our product. So, it is something that we like, that engineering stickiness. I do think when you look at the trend, let's face at the baseline when we look at the growth is the design wins, we have as well as where cloud CapEx spending is going. And you can see from their reports, that just continues to increase and is expected to be up 20% again. And that's really what's really funding these programs and the designs that we're working on with our customers, and our position really built on what we did from our cloud penetration from them that we talked about a few years ago. So, when we look at the momentum, to get to the momentum that you talk about, let's face it, a few quarters back, we started with $200 million and we said $250 million. Now we ended the year at $300 million. So, we do continue to see increased momentum, things pulling in more than actually getting pushed out. And let's face it, our customers really are just asking for everything to be accelerated. And you see that in the order patterns that we had last quarter, where our orders were up almost 100% in our Communications segment and then this quarter being up 40%. So, we did talk about today in the prepared comments, we do still expect doubling of our $300 million to the $600 million next year. So, the momentum feels really good. And the $1 billion that we talked about, if anything, I think it's slides to the left more than it's going to slide to the right, it's going to be closer in on us as we continue to execute on these programs. The one thing that I guess I didn't talk about when it comes to who our customers are, they are the hyperscalers, they are the semi companies. It's pretty broad-based similar to like we had in the cloud. And the other thing that's just as important is how you play in the ecosystem to the other people that actually have to make the architecture come to life, the other players that make acceleration chips and other silicon solutions that are very important as well. So, we do have engagement across that. And I do think it's not concentrated on one customer, it's really across the ecosystem. And that's what I'm really proud of what the team has done. So, I think you're going to continue to see our revenue increase in this area. We've been investing, as I said in the prepared comments, around engineering skills to make sure we have the capacity to really support these ramps. And it's going to probably be the biggest growth driver for us. And next year, as you look at '25 clearly with what we've laid out for you. Sujal Shah: Thank you, Amit. Can we have the next question please? Operator: Next question comes from the line of Wamsi Mohan from Bank of America. Your line is now open. Wamsi Mohan: Yes, thank you so much. Terrence, I was hoping maybe you could unpack your comment on the content outgrowth in Asia. That sounded closer to 10 points of outgrowth. I was wondering, how much of that is coming from EV mix versus increased electronification in that region? And do you see those trends sustaining in fiscal '25 as well? Terrence Curtin: Yes. A couple of things. I think what's important is, first off, being -- when we sit here today and you think about Asia, Asia is very much -- it's our largest revenue region. It's also where the vast majority of the EVs are made. And if you look at just last year, Wamsi, there were four million more electric vehicles made last year. They were all made in Asia, while the West was sideways and slightly down from a production perspective. And when you look at overall Asia car production, it was up mid-single digits. Our revenue was up mid-double digit. So, really nice content outperformance. Certainly, it's the EV momentum. It is also data in the vehicles. A Chinese vehicle as well as any Asian vehicle, you look at the software that's getting put into them, that needs more data connectivity in the car as well as the architecture continue to evolve. So, the outperformance is both EV as well as everything we get from a content across all powertrains. And we do expect that you're going to continue to see EV production growth probably similar in the units that we had this year, around four million units. That's going to be mainly driven by Asia, and we feel very well positioned for that. Sujal Shah: Thank you, Wamsi. Can we have the next question please? Operator: Question comes from Steven Fox of Fox Advisors. Your line is now open. Steven Fox: Hi, good morning everyone. I was wondering if you could help us maybe reset a little bit on the new segments that you're switching to this year in terms of just how to think about growth by the two segments, maybe margin expansion and how it maybe compares on a pro forma basis to what you just reported? Terrence Curtin: Yes. A couple of things. We will, as Sujal said in his premade remarks, we're going to give you all data through an 8-K later in the quarter, Steve. So, when you sit there and when you think about the growth, it's really combining the IS and the CS segment today together. And I think that will be a good baseline until we get that out. I do think when you look back at this year, you see a couple of things. The growth this year, places like AD&M, Energy and what we saw in the Communications segment, that growth is just going to continue as we go into next year. Auto, we're going to -- we feel good with the 4% to 6% outperformance over production. Even though auto production will be slightly down, we do think we can drive that. And I think the real question as we look ahead is going to be some of the areas where we've seen softness, whether it be Industrial Equipment, Commercial Transportation and also in our Sensors business, just where the industrial markets have been weak and have been impacting us. When does that relieve as we go in there and, yes, that becomes a lesser of a headwind as we go into '25. We do think that will happen through the year. We do expect growth to improve through the year. But that's how you should be thinking about '25 growth. And Heath, I don't know if you want to comment on the margin side? Heath Mitts: Sure. Steve, as both Sujal and Terrence have commented, we will put out some pro forma backward looking here later in the quarter so you can update your modelling. But I'd say from -- there's not much change in Transportation at all. So, we kind of know what that stands. And then as you add the other two segments together, you can probably get pretty close doing your own math in terms of that. But it's fair to say that the new Industrial segment would have finished 2024 in the high teens and Transportation in our 20% range. As we look forward, Transportation is unchanged with the growth opportunities that Terrence just outlined and some of the investments that we're making. We feel comfortable with where we are with Transportation as we move into '25 with Transportation being a 20% or better as we move through the year. And then the biggest move opportunity for us is in the Industrial segment, and we'll see improvement there in the new Industrial segment in '25 versus '24 on the margin front, but moving them closer to 20% at the segment level for the total company to be at 20% is the goal over the midterm. So, we're working that and feel good about where we're going to go. The biggest move that you'll see is going to be in Industrial in FY '25. Sujal Shah: Thank you, Steve. Can we have the next question please? Operator: Your next question comes from Scott Davis of Melius Research. Your line is now open. Scott Davis: Hey, good morning, guys. Terrence. Congrats on managing through a tough year as margins. Terrence, I wanted just to turn to Industrial a little bit, factory automation side. Is there any visibility on when that business stabilizes? It seems to be kind of your toughest one right now. And if we get a snapback on that in '25, that would be pretty helpful. Terrence Curtin: No. Thanks, Scott, for the question. And it's an area that, in many ways, we would have thought -- and as we commented, we would have expected a little bit of recovery this year. I would say the areas where we really see the weakness, just to make sure you hear where we're seeing it, it is in the factory -- discrete factory automation space, where we have a very nice position. It's also been around building automation. And the one thing I would say where -- while it feels it's bouncing around the bottom, I do want to make sure that that's clear. We do feel it's bouncing around the bottom. Europe got a little weaker. I would say Americas is stable. And we have seen in Asia a slight improvement. So, I do think we're dealing with some regional mixes as well, Scott. I do feel there is -- with some of our customers, they are still working off a little bit of inventory of what they have. So, there is a little bit of destocking in there. I do think we're probably going to have to get out into our calendar '25 until we see that improvement. But right now, it's sort of bounced around the bottom and it has been a big headwind this year. It's absorbed some of the growth we had in other areas. And we do think with the trends out there, it will improve, but I think we still need a little bit more time. Sujal Shah: Thank you, Scott. Can we have the next question please? Operator: Question comes from Mark Delaney from Goldman Sachs. Your line is now open. . Mark Delaney: Yes, good morning. Thanks for taking my question, you spoke about the success the company is having with content growth and the four to six points of outgrowth is something you think you can sustain. But as you think about auto content growth over the longer term, I'm hoping you may be able to share thoughts on the announcement from Tesla earlier this week around the plan to look to simplify their low voltage connector architecture and any implications for your company. Terrence Curtin: Sure. Thanks, Mark. And we don't comment on individual customers because we play with everyone, but I would just tell you, an announcement like that gets us excited because we do work with every car company in the world. And when you go into messing with the architecture and evolving the architecture, there are real challenges to that. And that can be whether it's you're trying to go and say, how do I go from 12-volt to 48-volt, how do I go from distributed compute to zonal compute or central compute. And these are things that have nothing to do with an electric vehicle. They are architecture changes that happen across all powertrains. And in each one of those you may be going, also trying to solve on how do you improve assembly efficiency, which certainly Tesla always does a great job on. So, in these cases, typically the interconnects get more complicated because you're combining things together. They typically get more miniaturized, especially when you're going from 12 to 48 volt, you're using thinner wires, which also create challenges in the assembly process. And what occurs as you get to these more complex problems and engineering problems, it typically increases the content for us. And that's when we use the word electronification versus electrification. As you have any change where you're trying to hang more electronics on an architecture in a car, you're trying to basically improve that, that creates content opportunity for us. And even when we talk about the four to 6, we have to realize, electronification is just as important as electrification of the powertrain and that happens across everything. So, those types of changes we're excited about. And we're fortunate that we can work with every car company in the world as they work on these next-gen architectures. Sujal Shah: Thank you, Mark. Can we have the next question please? Operator: Your next question comes from Christopher Glynn from Oppenheimer. Your line is now open. Christopher Glynn: Thanks. Good morning, Heath. You talked a little bit about capital allocation. I was noting the $2.5 billion repurchase. I think it's a little bigger than normal. So, I just wanted to go back to that discussion. Does that suggest any adaptations for your capital strategy? Heath Mitts: Thanks, Chris, and I appreciate the follow-up question on this. No, I think when we sat with our Board and went through it, part of this announcement was taking into consideration the amount of cash flow that we've been generating as a company and where we need to be positioned to give us options. And we've used the word optionality a couple of times today and that seems to be the word that's resonating with us in terms of -- we do have a stronger M&A pipeline in front of us, but we've got to do deals that make sense for our owners and valuations and value creation opportunities. Having said that, we still have an ample excess cash flow and we have no intention of piling up on our balance sheet here. So, we never have and that's not our strategy. So, it gives us an opportunity to deploy capital via share buyback to our owners in addition to what we do with the dividend which will increase as our earnings and cash flow increases. So, it's just another mechanism. I suspect it will take us out over the next couple of years in terms of that authorization. But no change in that, just maybe a little bit more bullishness about our ability to continue to generate cash flow, utilize our balance sheet and stay balanced with what we're doing. Sujal Shah: Thank you, Chris. Can we have the next question please? Operator: Your next question comes from Luke Junk from Baird. Your line is now open. Luke Junk: Great, thank you. Good morning. Thanks for taking the question, Terrence, it would be great to get your updated perspective on TE's automotive positioning in China. Specifically you've talked a lot about Asia this morning. But I want to zoom in on China and just some of the key achievements underpinning what's been seemingly a very strong year overall there. I guess I'm thinking about your positioning with current customers, turning on new customers maybe and especially leverage to locals and just what that might mean as we move into next year. And then simultaneously from a competitive standpoint, are you seeing any changes there, especially any local players making incremental incursions into the market in China? Terrence Curtin: No, fair. Thanks, Luke. And first off, you have to assume, when we talk about Asia, China plays a very big part in that. About half of Asia's vehicles are made in China. So, when you think about the world and we always talk about global auto production, while there's 87 million cars made in the world, 50 million of those are made in Asia. And of those 50 million, half of those are in China. And China is a very important position for us. And about $2 billion of our automotive revenue is China alone. And with that type of weighting, the trends that we talk about, relate about the growth outperformance I mentioned on Asia, you can assume the same type of growth outperformance in China. And one of the things that I think has always been a strength of ours is because we play with every OEM, not just multinationals, we would not be able to drive this content outperformance if we weren't with the local OEMs. It's not a secret. Multinationals are losing share in China and it's inverted. So, where you used to have multinationals have 2/3 of the share and local Chinese OEMs have 1/3. Today it's 2/3 Chinese OEMs, 1/3 multinationals and the growth that we've had just sort of proves that we are winning with the locals and winning with everybody. And our market share is similar between the two. It's something that I think our team has done a great job and something we've invested heavily in. And we're actually -- as I mentioned in my prepared remarks, we're actually opening our sixth automotive factory in China to support the growth that we have. So, we're continuing to expand with our local resources, local engineers, local capacity. Because that is served locally, which is very important. Competitively, we still have primarily Western competitors here. It is the other companies that you cover as well as Japanese competitors play there. And there are some traditional Chinese competitors that we've competed against for some time, that they are not new competitors. But there are also competitors that quality, cost and everything, that is important, we have to make sure we're winning with -- against them as well. So, I feel good about our position. It is going to be something as we look at '25, we expect Asia is going to be the driver of volume production on the world. It's going to be the driver EV. And our content outperformance that we saw in the second half, of these 5 points of outperformance we had in the second half, our content outperformance will be driven by Asia. And then we hope the Western trends pick up and that can also help us as well. But really, the Asia position is very important. Sujal Shah: Thank you, Luke. Can we have the next question please? Operator: Your next question comes from Saree Boroditsky from Jefferies. Your line is now open. Saree Boroditsky: Hi. Thanks for taking the question. I know you're going to some new segments. But just given the strong growth expected in Communication for 2025, are you still looking for 25% to 30% incremental margin on that growth specifically? Are there additional investments needed that we should think about? Heath Mitts: Sure. I'll take that. As you would expect with the type of growth that we're seeing, there are investments that we are making in that space both on the capital front to increase capacity for production to handle that type of uplift as well as engineering investments that we're making. Now those have been underway and some of those are already embedded in our run rate for our 2024. So, I'm not here to suggest that it's going to be a massive uptick as we go into '25 because some of these programs have been underway for a while. But as we move forward, you should expect us to continue to. From a -- at the segment level, from an incremental flow-through perspective, which I think you were asking, we need to dial that in a little tighter. And we can give you a little more color when we come back out in the January time frame, which will be when we first report on the new segments. But having said that, I think 30% is probably a decent number. But that's not just coming from this AI side. That's also coming from some cost actions and other things that we're doing in the rest of that segment. So, I think you can be dialed in somewhere in that ballpark, and we'll tighten it up for you. Sujal Shah: Thank you, Saree. Can we have the next question please? Operator: Your next question comes from Joe Spak of UBS. Your line is now open. Joseph Spak: Thanks. Heath, you converted over 100% of free cash flow this year. I was wondering if you could just give us a little bit of color on CapEx plans for next year and whether free cash flow conversion could be similar. And then just to follow up on the earlier question, like if that M&A pipeline doesn't materialize, should we still expect about 100% of free cash flow to be distributed via dividends and the new buyback? Heath Mitts: Joe, a couple of things there. First, I think -- and I know we may sound like a broken record, but from a modeling perspective, I would still assume roughly 5% revenue towards CapEx as a modeling. We came a little under that this year, but there's always timing elements and things. I do expect our CapEx in '25 versus '24 to probably be about $100 million higher. Most all of that is to support the AI program growth and some of the capacity we need to bring online from that. So, if you're looking to dial in your model, it kind of feels like it's in that ballpark. And we'll continue to update you, but nothing outsized relative to that from a CapEx perspective. From a conversion perspective, we certainly have benefited from the fact that -- from a cash conversion perspective that we've been able to manage working capital in a manner that you would expect in a flat growth environment. And when you're in a flat growth environment and the number of widgets that we're making is largely flat, we can go after things like inventory pretty aggressively. The other thing that's worked in our favor is we've been able to, as the world is finally from a supply chain perspective recovered more coming out of the COVID swings over the past four or 5 years, one of the things we're able to do is just plan a little bit better and have more trust in our suppliers as well as the order patterns from our customers as we sit in the middle of everything. Now as we move into '25, we are expecting to grow, and we are expecting our volumes to be up in '25. And so that will have a natural impact of putting a little bit of pressure on working capital, both on receivables as well as on inventory. So, I think that math would tell you that I don't -- we're not going to be at 120% again. But I still feel confident that we're going to be over 100%. And we'll continue to update as that moves forward. But I appreciate the question and stay tuned. Sujal Shah: Thank you, Joe. Can we have the next question please? Operator: Your next question comes from Joe Giordano from TD Cowen. Your line is now open. Joseph Giordano: Hey, guys. Good morning. I appreciate that this is kind of happening in real time, but you're getting a lot of announcements in Germany about workers at auto facilities joining nationwide strikes. And so when you think about your auto guidance and specifically how you're dialing in the next quarter, how do you feel that kind of situation is handicapped? Terrence Curtin: Well, when we guide, Joe, everything we know is in our guidance. And certainly, we have customers in many of our business units that are going through unique things. And we do -- one thing when we think about the first quarter, we do expect global auto production to be down similar to what it was in fourth quarter year-on-year. So, I do think we are going to be seeing -- in the West, you're going to have that weakness at some of the things you've talked about. But Asia is going to be the real driver of growth and then in the production as we look at next year. So, next year, we do expect overall global production to be down slightly. And certainly, the decline in auto production, the mid-single digits we talked in quarter 1, Europe is going to be a big chunk of that. Sujal Shah: Thank you, Joe. Can we have the next question please? Operator: Next question comes from Colin Langan from Wells Fargo. Your line is now open. Konstandinos Tasoulis: Hey guys, this is Kosta Tasoulis filling in for Colin. I just wanted to place more focus on the commercial vehicle market. Can you just offer some color on how the business will impact your Transportation segment margins and full year '25? Terrence Curtin: Well, first off, let me talk about the market a little bit and then I'll let Heath talk about the margins. When you look out there, impact of financing rates, certainly a little bit of inventory, you do sort of see globally heavy truck market, which also includes in our world ag and construction has weakened. And we've experienced that. What's been nice is that our team has grown probably 200 basis points better than the decline. So, I think as we work through this cycle, which these are common here, we will get some outperformance as we're in a negative environment. And there are some things that are in '26 that on the emissions front in certain parts of the world that we do think could spark demand and improve later next year. But Heath, why don't you talk about the margin side of it? Heath Mitts: Well, it's a good question because sometimes the mix within the segment can impact the Transportation segment margins there, and we've been pretty public that our Commercial Transportation business is a very profitable business for TE and for that segment obviously. Now, the softness that we're seeing does put pressure on the margins. However, it put pressure on the margins in 2024 as well. So, it's kind of in our run rate. As we move into '25, while we do expect things to improve as we work our way through the year from a market and demand perspective, we are not -- our assumptions on Transportation margins and holding their head at 20% or better are not contingent upon our Commercial Transportation business seeing some big uptick. So, our Auto business has performed very well and has been able to handle the headwinds that's come out of other parts of the segment. Sujal Shah: Thank you, Kosta. Can we have the next question please? Operator: Your next question comes from Matt Sheerin from Stifel. Your line is now open. Victor Santiago : Good morning, this is Victor on for Matt Sheerin. I was hoping to get some color on your Data & Devices business ex the AI opportunity. How is that recovery for traditional datacom applications been tracking? And how do you view the business going into 2025? Terrence Curtin: Sure. Let me get into that. And we do talk a lot about AI. First off, we're seeing -- when you take outside of AI, and it is always difficult to try to parse between AI and true cloud. But as we parse it, we do actually see the cloud element returning to growth. We do see that being probably a mid-single-digit growth next year after we had a shift that really went from up to AI dollars versus nothing being invested elsewhere. So, it's nice to actually see that we do see more cloud programs coming back up. Enterprise continues to be sideways. This is the way I would look at it as we look at next year. And then we don't play largely in telecom networks. But I do think it's nice to see the cloud recovering spend that's outside of AI going into next year. Sujal Shah: Thank you, Victor. Can we have the next question please? Operator: Your next question comes from William Stein from Truist Securities. Your line is now open. William Stein: Great. Thanks for taking my question. Good morning. I'm hoping, hey, I'm hoping you can comment on two things, first, the sequential decline in comms orders despite the strong results and the comments about growth next year. Perhaps this is just anticipated lumpiness, but it's been a little bit surprising to investors this morning, I think. And then also, if you could elaborate on the product exits that you mentioned. I think in the slides, you talked about this in Sensors, but maybe just give us a little more color. Terrence Curtin: Yes, sure, Will. So, first off, on the sequential decline in orders in D&D, I think you have to realize, our orders grew 100% last quarter, 40% this quarter year-on-year. And you nailed it. Well, they're going to be lumpy based upon when the programs are in, based upon when we get to agreements with our customers. And so I think you're going to continue to see that lumpiness. I think the real punchline to keep in front of you is collectively in D&D, we had $1 billion of orders in the past two quarters combined. So, that's very strong. And I would really be careful in taking one quarter versus another, what's accumulative. And what we're seeing really supports that guidance we gave you in the doubling of our AI revenue and even the cloud trends I just talked about, the non-AI cloud trends. In Sensors -- let me switch to the second question you had. In Sensors, we've been talking about pruning we've been doing to be focused and make sure we get to basically four markets that are important to us as we reposition ourselves in Sensors. It was automotive, it was heavy vehicle, it was medical and factory automation. And they're the areas that we really challenged ourselves a few years back to say, look, it's in our way to winning in those four markets. And we've been doing 80/20 work, that has been exits. This coming year coming up, it will be about $50 million of exits that we're doing to really end this program. And you can put that in as a headwind for next year, but 2025, they'll be done. Sujal Shah: Thank you, Will. Can we have the next question please? Operator: Your next question comes from Shreyas Patil from Wolfe Research. Your line is now open. Shreyas Patil: Hey, thanks so much for taking my question. Heath, you mentioned a little earlier that the goal is to get to 20% operating margins. Wondering if you can expand on that a little bit. It would appear that the underlying margin is probably pretty close to that level if we were to adjust out some of the cyclical challenges in Industrial and Commercial. But just curious on your thoughts. And then on AI, just how to interpret the revenue guidance of around $600 million for next year with what appears to be two straight quarters where orders are probably close to somewhere around $400 million to $500 million per quarter. Heath Mitts: Yes. I'll take the margin question. We haven't gone out with formal margin guidance in terms of that. But what I was trying to do was provide a little color earlier that if you think about the new segment structure, our Transportation margins are already at 20% and will continue running at that. There's always a little bit of quarter volatility either direction on that side of 20%. But we feel good about where we are, particularly in light of the softness in the commercial transportation market which is a bit of a headwind on that front. As we think about the new Industrial segment, which combines our traditional Communications and Industrial segments together, it's a blended rate now that's going to be somewhere in the high teens. It does provide us with that opportunity. And given both some of the opportunities on the growth side as well as some cost things that we've done to get that segment over -- the next couple of years up over to 20%, which in total, for TE, would obviously put us at 20%. So, my comments were not intended to be entirely a 2025 versus '24. It was meant to be where we see this thing going and getting more comfort around. This year, we ended up close to 19%. We see over the next couple of years to get closer to that 20%. But volume is going to help in that formula as well. And then Terrence, do you want to... Terrence Curtin: Yes. Shreyas, just one thing, just to clarify, the orders we talk about of this $1 billion, while the increases are driven by AI, there are the other parts of the business in non-cloud AI enterprise. So, all I would say is I do think the momentum that we have is there to support it. It's just there is a difference between that order level versus the AI only doubling. So, I do just think as you put those together, as you get into '25 and '26. Sujal Shah: Thank you, Shreyas. Can we have the next question please? Operator: Comes from Guy Hardwick from Freedom Capital Markets. Your line is now open. Guy Hardwick: Hi, good morning. Good morning. Hi gentlemen. I appreciate the guidance you gave for Transportation. I think you said it will be -- for Q1 it will be equivalent to FY '24 level. So, that's kind of around 20%, but not equivalent too much. But in Q4, the Transportation margin was a little bit below consensus expectations, and I understand it's due to investment. But given you're at 20% now, it begs the question, how much high can it go given that's kind of close to peak levels. But you are talking about 30% incrementals. So, what's the kind of -- I know you don't want to give specific guidance for next year yet, but what are the kind of dynamics for the margin for Transportation for next year, given maybe a back-end recovery in Commercial Transportation, the Sensors business getting through the restructuring and exits and then what you said about outlook for production and mix? Heath Mitts CFO, Executive VP & Executive Director Well, Guy, I think you nailed all the various moving parts there. I'm not worried about the 19.3% and change that we did in the fourth quarter. We've also had quarters where we were 21%, right? So, in a given quarter, there can be noise. It could be mix. In this quarter, we did have some heightened investments and some timing of things that we maybe thought would have layered in over a couple of quarters. So, these things happen. I don't get hung up on one quarter particularly with the foresight that we have looking into not just our Q1 but our FY '25 for that segment. In terms of moving past that 20%, the incrementals would suggest that the natural growth in that business would drive to that. Now we have not seen a ton of volume growth because we're -- the market out growth we've had in Auto and so forth has been offset by pressures that we've seen on the top line in both Commercial Transportation and Sensors. Now we do expect both of those -- Sensors won't necessarily return to growth because the product exits in FY '25. But we do expect the Sensors -- the Commercial Transportation business to continue to improve as we move through the year, albeit we're not calling it right now in terms of a time frame for when that could happen, and it's probably in the second half of the year. When that business returns to growth in conjunction with the strong Auto business, I do think you'll see some support there on the incrementals, but we're not ready to call that or put a number out there. And we feel good about where we've been able to hold our head right now. Sujal Shah: All right. Thank you, Guy. If there's no further questions, I just want to thank everybody for joining our call this morning. If you have further questions, please contact Investor Relations at TE. Thanks, everyone, and have a great day. Operator: Today's conference call will be available for replay beginning at 11:30 a.m. Eastern Time today, October 30, on the Investor Relations portion of the TE Connectivity's website. That will conclude the conference for today.

Operator: Everyone, thank you for standing by and welcome to the TE Connectivity Third Quarter Results Call for Fiscal Year 2024. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah : Good morning, and thank you for joining our conference call to discuss TE Connectivity's third quarter 2024 results and outlook for our fourth quarter. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information. We ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will be using certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, during the Q&A portion of today's call, due to the number of participants, we're asking everyone to limit themselves to one question, and you may rejoin the queue if you have a second question. Now, let me turn the call over to Terrence for opening comments. Terrence Curtin : Thank you, Sujal. And I also appreciate everybody joining us today for the call. As I'd like to do before we get into the slides and the details, I do want to take a moment to provide some performance highlights, along with what we're seeing versus our call just 90 days ago. As we've shared in our calls throughout this year, we continued to be in a dynamic global economic environment. I just want to take a few minutes of explaining what that means when you think about where TE is positioned. First off, in our largest market Automotive, we're seeing stability on a global basis. In our Industrial Solutions segment, we continue to see growth in three out of our core businesses, and those businesses are focused on aerospace and defense, energy, as well as medical applications. In our Communications segment, like we talked last quarter, we have returned to growth, and we are benefiting from acceleration in Artificial Intelligence applications. Now, against these growth areas, we are still being offset by ongoing weakness in just the general industrial markets, and we'll highlight where they are throughout the call and the Q&A. Within this backdrop, our sales in the third quarter were in line with our guidance and roughly flat year-over-year. I am pleased that we delivered strong adjusted margin expansion of 200 basis points year-over-year and adjusted EPS that exceeded our guidance. As we look at our performance year-to-date, our teams have delivered record adjusted operating margins and earnings per share, even in a dynamic market environment, which demonstrates our strong operational performance. Our results continue to reflect successful execution against the key initiatives we committed to coming into this fiscal year. We anticipated a slow demand environment overall in our markets, so our focus has been on driving margin and earnings improvement this year. Our teams have driven strong margin expansion year-over-year, and this is most evident in our Transportation and Communications segments. The high quality of our earnings continues to be reflected also in our strong cash generation model, and I'm pleased with the record free cash flow of $2 billion through the first three quarters of this year, and we do expect this to continue into our fourth quarter. Now, let me briefly share what we're seeing in our markets since our call 90 days ago, and what we're seeing in our order patterns, and I'll get into order patterns in more detail a little bit later. First off, in Transportation, our outlook for global auto production is consistent with our view 90 days ago. We continue to see growth in China, and that's offsetting incremental weakness in Europe. In our Industrial Solutions segment, our view remains unchanged. We continue to see three out of our core businesses with growth momentum and continued weakness in industrial equipment end markets. As I said earlier in our Communications segment, our markets are back to growth, and that's in both businesses. Finally, before we get into the slides, I do want to reiterate that our long-term value creation model remains unchanged, and it's centered around three pillars. First off, is our portfolio is strategically positioned around secular growth trends, including adoption of renewable energy, applications for artificial intelligence, and growth in the global hybrid and electric vehicle production, along with further electronification of the vehicle. The second pillar of value creation is that we have operational levers to drive strong margin performance through economic cycles, and you're seeing the results in this quarter, and we have more opportunity as we go forward. Thirdly, we have established a strong cash generation model to return capital to shareholders while investing on bolt-on M&A opportunities as the opportunities present themselves. By executing on these pillars, we expect to deliver double-digit earnings growth this fiscal year, driven by a couple hundred basis points of adjusted operating margin expansion. As we look beyond this year, we are set up for strong performance. We expect to continue to benefit from the secular growth drivers, as well as also expect continued growth in areas like commercial airspace, along with normalization of destocking and industrial equipment. This sets us up for an improved growth trajectory, leading to further operating earnings growth going forward. Now, with that as an overview, I'd like to get into the slides, and if you could look at Slid 3, I'll discuss some of the additional highlights for the third quarter and our outlook for the fourth quarter. Then Heath will get into more detail as he gets into his section. Our third quarter sales were $4 billion, which was in line with our guidance and up 2% organically year-over-year. Orders of $4.1 billion were up year-over-year, and sequentially driven by momentum in artificial intelligence design wins. Adjusted earnings per share was ahead of our guidance at $1.91, and this was up 8% versus the prior year. Adjusted operating margins were 19.3%, up 200 basis points year-over-year, driven by the strong operational performance of our teams. We are expecting fourth quarter sales of approximately $4 billion, including approximately $60 million of year-over-year currency exchange headwinds. On the margin front, quarter four will be another quarter of strong year-over-year expansion, and we expect adjusted earnings per share to be approximately $1.94, which will be up 9% year-over-year, and which includes a $0.10 headwind from both currency exchange rates and a higher tax rate. I talked to you earlier about the performance we've been driving in this market environment, and when you think about what's implied for the full year given our fourth quarter guidance, you really get to see the strong performance. With adjusted earnings per share expected to be up 12% year-over-year, with sales that are essentially flat. So, with that as a brief overview, let me get into some more details on order trends, and they are on Slide 4 of the presentation we posted. Our orders were up 4% year-over-year, and 3% sequentially to over $4.1 billion, and we had a book-to-bill of 1.04. As I talk about orders by segment, I will be talking about orders sequentially, as we believe this reflects business trends better. At the company level, order growth was driven by the Communications segment, which grew over 50% sequentially. Growth was driven primarily by orders for AI applications with multiple customers, and reflects that destocking in both data and devices, and appliance are behind us. In Transportation, you see a slight sequential order decline, but this was really driven by weakness in commercial transportation and our sensors end markets that are tied really to the general industrial market. Our orders in auto were relatively flat sequentially. In Industrial, order patterns continue to reflect ongoing destocking in industrial equipment end-markets. Now, let me get into year-over-year segment results, and I'll start with our Transportation segment on Slide 5. Our auto business grew 4% organically against our global auto production decline of 1%. Our content growth over production was 5 points in the third quarter, with strong double-digit organic sales growth in China, more than offsetting declines in Europe and North America. While we continue to see different production dynamics by region, as well as some shifts in production of different powertrains, we continue to expect content growth in our second half and longer term to be in the 4 point to 6 point. Our growth of our market will continue to be driven both by increased electric vehicle and hybrid production and greater electronification of the vehicle. Turning to our Commercial Transportation business, the 8% organic decline that you see was driven primarily by weakness in Europe. We expect this business to be again down sequentially in the fourth quarter and expect the markets we serve to be down in the mid to high single digits this fiscal year, due to market declines that are happening in the West. In our Sensors business, the sales decline continued to be driven by market weakness and industrial applications, as well as portfolio optimization efforts that we've discussed with you, where we're continuing to organically exit lower margin and lower growth products. For the Transportation segment overall, adjusted operating margins were up to over 200 basis points to 21%, driven by continued strong execution on operational levers. We also continue to invest to support next generation vehicles, whether they're around electrification of the powertrain, high speed Ethernet for data applications in the vehicle, or miniaturized power and signal products to leverage next generation architectural shifts by our global customers. Now, let's get into the Industrial Solutions segment, and that's on Slide 6. In this segment, we continue to see the same trends we've been discussing all year. Sales were down slightly 2% organically. Our aerospace, defense and marine business sales were up 19% organically, driven by growth both in commercial airspace as well as defense markets. In medical, sales in the quarter were up 7% organically, driven by ongoing increases in interventional procedures, and in energy sales were up 3% organically, driven by strength in the Americas and Europe, with continued strong momentum in renewable applications. As you can see on the slide, the pocket of weakness for the segment is in the Industrial Equipment business, where our sales are down 24% organically. While we are starting to see some signs of order patterns flattening, we still expect to see year-over-year declines in this business in the fourth quarter, as our OEM customers and channel partners continue to reduce inventory levels. Industrial segment adjusted operating margins were 15.1%, which was in line with our expectations given current volume levels and business mix. We continue to expect the segment margins to run into mid-teens until the Industrial Equipment business returns to growth. Now, if you could turn to Slide 7 and I'll get into the discussion around the Communications segment. First of all, and you can see it on the slide, I am excited about the return to year-over-year growth and our strong margin performance. In data and devices, we grew 32% organically, and our design wins are reflecting accelerating momentum. I discussed our order momentum earlier, and based upon these wins, we are increasing our near-term expectations of AI revenue to over $250 million this year, and we expect this to more than double as we get into 2025. In our Appliances business, we grew 12% organically, driven by both the Americas and China. From an operating margin perspective, the segment had adjusted margins of 20%. This was up over 600 basis points over the last year, driven by the higher volumes coupled with stronger operational performance. So, with this as a quick summary of our segment performance, let me turn it over to Heath, who's going to get into more details on the financials and our expectations going forward. Heath Mitts : Thank you, Terrence and good morning everyone. Please turn to Slide 8. Before I get into the details of the financials, I want to reiterate something that Terrence said earlier. We are dealing with a slower market environment. We've talked to you about that throughout the year, but our focus this year as discussed has been on improving margins and earnings, and I'm pleased to be able to sit here and say that we have set TE records for quarterly adjusted operating margins and earnings per share in the third quarter, and we feel good about the momentum going forward. Now, the details. Adjusted operating income was $766 million with an adjusted operating margin of 19.3%. GAAP operating income was $755 million and included $5 million of acquisition-related charges and $6 million of restructuring and other charges. Year-to-date restructuring charges were $57 million, and for the full year we continue to expect restructuring charges to be approximately $100 million. Adjusted EPS was $1.91 and GAAP EPS was $1.86 and included restructuring, acquisition and other charges of $0.05. The adjusted effective tax rate was 23% in the third quarter, slightly higher than our guidance due to some jurisdictional rate adjustments. And for the fourth quarter and for the full year, we now expect our adjusted effective tax rate to be approximately 22%. Importantly, as always, I just want to remind you that we continue to expect our cash rates to stay well below our adjusted ETR for the full year. Now, if you turn to Slide 9, we delivered strong margin and EPS expansion along with record year-to-date free cash flow with sales that are roughly flat year-over-year. Sales of $4 billion were down 1% on a reported basis, up 2% on an organic basis year-over-year, and we are continuing to see headwinds from a stronger dollar, which unfavorably impacted sales by roughly $80 million in the third quarter. Adjusted operating margins were 19.3% in the third quarter, expanding 200 basis points year-over-year. This was driven by year-over-year margin expansion in our Transportation and Communications segments. Adjusted earnings per share were $1.91, up 8% year-over-year, driven by strong margin expansion and included headwinds of $0.18 from currency exchange and a higher tax rate. Turning to cash flow. Cash from operations was $1 billion, and free cash flow was $867 million in the third quarter. Year-to-date, we have delivered free cash flow of roughly $2 billion. That's up 36% year-over-year, and we expect to deliver another year of free cash flow converging well above 100%. With the strong free cash generation, we have deployed over $2.2 billion so far this year, with $1.8 billion in return to shareholders and approximately $350 million deployed for acquisitions. Our cash generation model continues to give us both confidence and opportunities to return capital to shareholders while supporting bolt-on M&A activities. Just to reiterate, our long-term capital strategy remains unchanged, which is to return approximately two-thirds of free cash flow to shareholders and use approximately one-third for bolt-on acquisitions over time. Before I turn it over to questions, let me reinforce some of the key points that we discussed today and share how we are thinking about our performance and opportunities going forward. Our team is navigating this environment well. We are delivering margin and EPS expansion while continuing to invest for future growth. We are very well positioned to benefit from the secular growth trends and drive further operating earnings growth. We are demonstrating our strong free cash -- strong cash generation model with a balanced deployment of capital. So, we remain very excited about the opportunities we have ahead of us to drive value creation for all our stakeholders. With that, let's now open it up for questions. Sujal Shah: Thanks, Heath. Brianna, could you please give the instructions for the Q&A session? Operator: Thank you. [Operator Instructions]. Your first question comes from the line of Amit Daryanani with Evercore ISI. Your line is open. Amit Daryanani : Good morning. Thanks for taking my question. I guess, Terrence, really impressive momentum on the IS side, especially with AI centric business. This is clearly a big topic for investors that are focused on. So, I was wondering if you could just talk about what is driving the expectation for higher growth, both for this year and next year, versus what you had talked about 90 days ago. And perhaps if you could also just touch on what does your customer mix look like on the AI side and where is the momentum coming from? Terrence Curtin : Thanks, Amit. I appreciate the question. First off, I'll get into the different elements. We have to realize, this starts with the hyperscalers and cloud CapEx. When you look at it, that just continues to accelerate. It is incremental CapEx, and you are seeing it get put towards AI applications. As you know, we built a strong position with the cloud customers previously, and it's translating into a strong position with AI and the design wins are across customers. There isn't one customer here. It is across the hyperscalers and that's what I get excited about the most on it, the breadth of it. Now, as you said, you can see on the order slide I went through earlier, you saw the acceleration, the Communication orders that were up 50% or so sequentially. When we see these orders and design wins coming in, it does take, we talked 200 last quarter, some of that will schedule in for this year, so that's really why you're seeing the increase to the 250. But with the design wins we've gotten, it gives us confidence to take up -- it's going to at least double on that 250 in the next year with the wins we have. Just to build on who we deal with, these engagements are with the hyperscale customers and realize some of them develop their own AI solutions. We also have to work with the semiconductor companies, including both the processor companies and the other semi-players that make the acceleration chips and other silicon solutions that are so necessary to really make sure you get to these high-speed, low-latency applications. The growth that we're seeing is across this entire ecosystem. It's not just one customer. As I said before, I do think this is a space where a few of us really will benefit from because of the investment needed to scale the engineering and the manufacturing coupled with the technology that needs to happen here. So, I do view the momentum is real. These are real design win and orders, and we'll continue to keep you updated as we have calls. But certainly like that traction going into ‘25 as a growth driver on top of the other ones we always talk to you about. Sujal Shah : Thank you, Amit. Can we have the next question, please? Operator: Out next question comes from Wamsi Mohan with Bank of America. Please go ahead your line is open. Wamsi Mohan : Yes, thank you so much. Clearly this was very outstanding margin performance in the quarter. I’m just wondering, maybe if you could talk about the margin outlook, both in terms of what you are expecting for the segment and how incremental margin should trend in communications in light of this AI momentum. Maybe you could just wrap the rising commodity pricing environment in that. I know you guys hedge, but if you could share some color of how we can think about the impact from that as we look over the next three to four quarters. Thank you so much. Heath Mitts : Yes Wamsi, this is Heath. I'll take this. So, I guess, you heard our prepared comments and some of the color around margins. Our focal point as we entered this year and we were very transparent externally as well as our focus was on margin expansion, which translates into earnings growth as well. We've had some areas of support and some areas of weakness on the top line, but net-net we're hammering through the year. Our focus has been on the non-volume lever. So that's getting returns on some of their past restructuring actions that we've done. Let's make sure that price is sticking in terms of enough to offset the inflationary pressures and then optimizing the portfolio at certain pockets to improve growth and ultimately margins. So, we're running in that 19% range right now, and my thoughts in terms of as we go into ‘25 and beyond, in terms of how we – where those go, our largest opportunities in the industrial segment. So we continue to target high teens, margins and industrial. We are running right now in the mid-teens and have been here for a while, which is kind of in line with where we would expect given the pressure that we see in our industrial equipment business. That is our highest margin piece of the segment. So as we think about that business being down, we're holding our head in the mid-teens due to the performance of the rest of the segment, which would be aerospace, energy and medical. But as we return to growth and particularly the industrial equipment business next year, we would expect some margins to improve and support the overall company margin number. In Communications, I think Wamsi if you look at, when you go back over the past three or four years, this segment's margin is very tightly aligned with revenue, and that may seem obvious, but it's more correlated in this segment than anywhere else that we have. So when we saw outside revenue in both appliances and D&D in 2020 and 2021, parts of 2022, you really saw the margins stick up into the mid-20s, which we said at the time was probably overheated. Then when it corrected back down in ‘23 and earlier part of this year, you saw the margins back in the mid to high teens. So, where we are, we have raised the floor in terms of that variability and we feel good about that. We're now at a position where we're at about $520 million of revenue or generating target margins. And I'll tell you, that's a lower revenue to get to that target margin than we had designed originally and resource the business. We feel good about that. Now, to Terrence’s earlier point, we have won and been awarded several AI programs. There is some investment required there. Now that, some of that's in our rent rates, some of that will be a little bit incremental. That's both on the engineering side as well as our ability to produce and these programs in the time frame that our customers require. But I think as you think about it, going forward, incremental margins on revenue for that segment in that 25% to 30% range is a fair number, which would suggest that margin, as that revenue ticks up in support of those programs, you should see some margin movement as well. So the team has just done a terrific job there. Then Transportation, listen, a year ago we were talking about how long is it going to take for us to get to target margins, which is 20% for that segment. We got there much sooner than we thought. That's largely attributable to the team pulling the levers that they can and really driving some of the price to offset some of the inflationary pressures that we've seen in the last few years. We're sitting at 21% this quarter. I'd still say 20% plus some is a good number to model that. We're not going to sit there and after just three quarters, announce a new target. But I would tell you that the most profitable piece of that business, which is our Commercial Transportation piece, is also the most profitable and it's depressed right now. So that makes improves. We feel good about that. We feel like we're in a good position, certainly as we step into FY’25 starting in October. So, all that being said, we're confident. The commodity situation is always in flux. As you mentioned Wamsi, we do hedge our metals. As those come in, you see that layer in slowly when commodities uptick and when they start to come back down, they are slow to come out. So that helps with our planning, that helps us reduce volatility. As we look forward, the teams are very geared up for -- if we see continued spikes in inflation or anything else, in particular metals groups or resins, we will pull that pricing lever again. I think that's one of the things that has improved in our operational muscle memory going through this process. So more to come, and as we get into ‘25, we'll provide more outlook. Sujal Shah : All right. Thank you, Wamsi. May we have the next question please? Operator: Your next question comes from Joe Spak with UBS. Please go ahead. Your line is open. Joe Spak : Good morning. Thanks for taking the question. Terrence Curtin : Hey Joe. Joe Spak : I was wondering, back to AI, we've been hearing a little bit more about some cross licensing deals between interconnect players for AI. I'm just wondering what you can tell us there. How common is that in other areas of the business? Mechanically, like how would this actually work if it does occur? If you manufacture some of your license, is that a lower margin profile business or is it relatively even? Terrence Curtin : No, Joe. Hey, one is due to the size of this and the ramping that's going to be required, in areas where you have this, dual sourcing and cross licensing is very common. There is IP here that the different players have and we work together on how do we make sure we bring the best solution together to our customers. We have said, we would expect in this area due to the volumes, the ramping, as well as our customers, making sure they have certainty of supply. You would see some dual sourcing elements as well as cross licensing. So no, that is reality in here. In this space of our data and devices space, this is not new. This has existed for a long time. So this is not a new phenomenon. Sujal Shah : Okay, thank you, Joe. Can we have the next question please? Operator: Your next question comes from Joe Giordano with TD Cowen. Your line is open. Joe Giordano : Hey, good morning guys. Terrence Curtin : Hey, how are you Joe? Joe Giordano : Apologies if you went through some of this. I had to join a couple minutes late from another call. But Terrence I'm just curious to hear like your updated thoughts, like maybe over the kind of very near term and maybe over like the next 12 to 18 months around hybrid versus EVs. GM's talking about not building a plant, but they were talking about building. So where do you think that fits and what do you do from a CE standpoint to like adapt and adjust to the changing end market? Terrence Curtin : Yeah, no. So thanks Joe for the question. One of the things that I said in my opening comments were, you know production is very stable in automotive. But I think it's important when you think about EVs, EV production this year, and I say EV, I say battery electric, plug-in hybrid and hybrids. They are up 20% this year. So when you have global auto production flat, all of the electrified powertrains are up significantly. Beginning the year, we would have thought that would have been 25 million units. It's going to be close to 24 million units, whereas last year was 20 million units. So with some of the news that you mentioned, sometimes it makes it feel like electrified powertrains are declining. They are not declining, they continue to accelerate, and you see different trends around the world. I know on this call I always have to remind you, 70% of the electric vehicles made in the world are in Asia. It's one of the things with our global position, it's very important that that's where you see the content outperformance, and you don't see some of the bumps that maybe you read in the West. But in Asia overall, the electrified powertrain continues. So in Asia, battery electrics are up 20%, hybrids are up 20%, plug-in hybrids are up 50%. And certainly China drives that, but we also have to realize when you get into hybrids, which are in the West, it benefits some of our non-Chinese OEM customers, whether they are the Japanese or the Koreans, that have really nice product sets and we benefit from that. What you see in the Americas and Europe, you do see people moving more towards pure hybrids. In U.S., Americas, they are up 40%. So consumers are making choices more towards hybrids, and you also see they are up 20% in Europe. So you continue to see penetration increase, and any of those are good for content for us. So we always tell you a nice engine probably has about $70 on it. A full battery electric is $140, plug-in hybrid about $120, and certainly when you get into a hybrid, its $105, $110. So all of that is good for us, and even as we look forward and we're in planning now, we're going to expect auto production to be flattish, and we expect the trends that you are going to see in EV production probably continue to increase like that 20% next year as we move forward. So it's still a very constructive environment. I just always ask you, make sure you are keeping a global perspective on it, not just the Western view on it, because that's where the majority of the action is. Terrence Curtin: Okay. Thank you, Joe. Can we have the next question please? Operator: Your next question comes from Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney : Yes. Good morning and thanks for taking my question. Following-up on the auto end market, hoping to better understand the ability for TE to see revenue benefit in 4Q and into next year from that content growth you were just describing Terrence. I understand the theoretical content increase TE has on hybrids and BEVs, but at times, companies in the supply chain are affected by new vehicle launch delays, maybe their own key customers aren't selling as many cars, or there's inventory corrections. And so, as you think about all of those cross-currents, I'm hoping to better understand, do you think TE can actually see the 4 to 6 points of targeted outgrowth in automotive show up in its revenue when you think about your own customer exposure and that content potential? Thanks. Terrence Curtin: No, thanks Mark, and let me just start with the punch line. The answer is, yes. We feel very confident with it. I just spent there with Joe a little bit talking about the powertrain differences, and the powertrain is an important content driver, but it's not the only content driver. When you sit there and you think about it. I mentioned it in my prepared comments. When you get data connectivity that's needed in the vehicle for autonomy, that's also needed for all the other data that you need in the vehicle, that creates an additional architecture that also benefits content. And the other thing is, as people continue to look at other features that are added around safety applications, they continue to evolve the architecture around the traditional backbone 1248 volt, to really make sure the vehicle comes to life for the features a consumer expects. And all three of those elements benefit our content. I know we call one electrification and the other one electronification, but we benefit from both of those. And I think you look at this quarter, this quarter with the 5 points of outperformance, we grew in a declining auto production environment. It basically, iView proves it, and we feel confident it'll continue to build moving forward. The other thing that, hey, you will have some lumps of time like you said, due to platform changes, things like that. But one of the great things about TE is because we're essentially on every car in the world, you really never hear us talk about that. It's where our great global position really comes into play, and I think it really is important to our customers as we bring them technology, but also as an investor, you don't get to – you never hear us talking about this customer or that platform impacting us. So I feel very good about the 4 to 6 and feel very good about the design wins we continue to get in automotive. Sujal Shah: Okay. Thank you, Mark. Can we have the next question, please? Operator: Your next question comes from Samik Chatterjee with J.P. Morgan. Your line is open. Samik Chatterjee: Yep. Hi. Thanks for taking my question. I guess I was going to ask this more on a company sort of aggregate revenue level. All through the year, your revenues have been in the sort of $3.8 billion to $4 billion range, even as sort of AI revenues have ramped. I mean, as we go into next year, when we put AI aside, where do you think we are in the cyclical recovery where you should see growth? What drives that confidence? Because when we look at the sort of revenue track record this year, it's been fairly sequentially flat. Outside of AI, how should we think about growth really sort of from a cyclical perspective in some of these end markets? What kind of magnitude of growth should we be thinking about? What drives that confidence? Thank you. Terrence Curtin: So Samik, thank you for the question. I think first thing, AI we laid out very clearly. I think the other thing that you're going to have – that you have to be there is, the 4 to 6 points on top in automotive. We do think we should be planning and we're planning a flattish environment. So I do think you are going to see that. On top of that, I wouldn't be lost on the trends that are really being masked right now in our industrial segment due to the stocking. If the stocking will end, you even see it in our appliance business, it is very important. So you've seen our appliance business return to growth. Some of that is the stocking ending. You are going to see that in industrial equipment. And then some of the other industrial cycles may be a little bit middle to later in the year, but it is very important that as you sit there, the stocking has had a big impact on our revenue this year, earlier in the year probably pushing $100 million of headwind. So they are the types of things that I think build. Some of them are content. Some of those are certainly market, but I think they are the things that get us excited about the growth momentum. And I know I said flattish earlier. I meant flattish production in automotive from a planning, not content. Content will be on top of the production environment. So, just to correct that sentence, I didn't complete my thought, so. Thanks Samik. Sujal Shah: Thank you, Samik. Can we have the next question, please? Operator: Your next question comes from Asiya Merchant with Citigroup. Your line is open. Asiya Merchant: Great. Thank you for taking my call, my question. On the cash flow, obviously a great quarter here. As you guys think about revenues ramping here and especially in the AI segment, maybe if you could talk to us about your CapEx commitment as you look into fiscal ’25, and I think you're talking about AI revenues more than doubling now. Thank you. Terrence Curtin: Sure, and I appreciate the question. First of all, our CapEx runs roughly from a modeling perspective about 5% of revenue. In different times we'll run just under that. In different times we'll run just modestly over there, but that's a good planning assumption. Inside that, in that run rate, you have to assume all of the growth areas that we've been talking about today have been supported. So whether that's the things around the content outperformance relative to automotive, which is largely driven by the electronification as well as the adoption of the various power trains. Some of that CapEx has supported tooling and product lines that we've had to put in place that are in those, so that's not going to be incremental pressure as we move forward. Now, we are ramping up a little bit in CapEx to support some of the AI applications, particularly coming out of Asia. We've opened up a facility in the Philippines. Some of that is in our run rate as well. And there will be other tradeoffs that we make as we do across the portfolio, but I don't see anything that's putting incremental pressure on our CapEx that's going to materially change that planning assumption, because some things that will come on, that will need a support for the AI applications and product lines. There will be other things that come off because we've completed some expansion in other areas, whether that's in industrial or otherwise. So it's kind of always a rolling process for us, but I still think we can absorb this within our CapEx profile. Sujal Shah: Okay. Thank you, Asiya. Can we have the next question, please? Operator: Your next question comes from Christopher Glynn with Oppenheimer. Your line is open. Christopher Glynn: Thanks. Good morning, everyone. Terrence Curtin: Hey Chris. Christopher Glynn: I wanted to ask generally about order patterns and any particular insights into markets under the quarter or under the book-to-bills. In particular, I think you have the positive book-to-bill at Industrial Solutions with still industrial equipment destocking. So it seems like the persistence at the other markets is pretty high visibility, but maybe take that question where you will. Terrence Curtin: Thanks Chris. What you presume about industrial is right on. And in Communications, clearly you see the benefit of the AI orders as well as our appliance business had nice growth as well. So tying back to where we see the stocking ending, you are seeing that strength and getting back to at least market and then some. When you look across the other dynamics that we continue to see, number one is there was a point in time probably three quarters ago we would talk about backlog. Our backlog continues to be strong, and what you see is the service levels, our service levels to our customers come up. You see people saying, hey, I want to work out my backlog a little bit. Why do I need something if it was an eight to 10 week lead time? Why do I need backlog out this far? So we do see that, those effects happening, in those areas where our service levels are very strong. So you know, in places like auto, our service levels have returned above pre-COVID levels. So you see some of those factors. And then in the general industrial spaces, and that is our industrial equipment market. That is our commercial transportation market. In our sensors business that we have pivoted to transportation and industrial, the industrial piece, you just see ongoing weakness that's pretty global and I would also say just sort of moving sideways. So if you peeled those out, you would say, ‘boy, your orders look really strong, really nice position.’ But they are just areas where we're seeing pockets of the stocking. It is both with OEMs as well as distribution partners. And we are seeing some signs that's starting to move sideways, which is a good first sign, but it still seems like it's taking a little bit longer to work through in that general industrial space, but it will come to an end here. They always do. It's just, I can't give you the exact date. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: Your next question comes from Saree Boroditsky with Jeffries. Your line is open. Saree Boroditsky: Hi. Thanks for taking my question. Terrence Curtin: Good morning. Saree Boroditsky: Going back to the AI conversation you previously talked about $400 million in sales next year. I think you just increased that to $500 million. Given this increase, could you just give us an update on the $1 billion sales estimate and what's the timeframe for that? Thank you so much. Terrence Curtin: No. I think when you look at that, clearly with the trajectory that we have, that will probably move in a little bit. We're going to continue to keep you updated on that as we have design wins. You do have an element here. We are taking your next year's up versus the $400 million we just told you 90 days ago. So I think, the $1 billion is definitely confident, but the timing will be split in a little bit and we'll continue to keep you updated on it. Sujal Shah: All right. Thank you, Saree. Can we have the next question, please? Operator: Your next question comes from Luke Junk with Baird. Your line is open. Luke Junk: Good morning. Thanks for taking the questions. Terrence, one of the things you highlighted in your remarks that I thought was interesting around auto investment specifically was miniaturized products for next-gen architectural shifts. Can you just double-click on that trend with respect to potential impacts to content? And it sounds like its more engineering-intensive and maybe margins as well. You know this is an area, of course, that's gotten a lot of attention, architecture that is, in the [inaudible] review of EV’s. So maybe we could just revisit that overall trend for TE as well. Thank you. Terrence Curtin: Yeah. No, it does create content opportunity, and it's one of the things I think is important when you talk about content. Clearly, we get a benefit as you move to high-voltage architectures around the power train, but you have to realize there's a whole other architecture that exists to move data around, as well as power and signal around in the car, and both of those trends impact every vehicle, not just an electric vehicle. So data I think is clear, but as everybody continues to want more features and functionality in the car, whether you get into zonal architecture, whether you want to get into centralized compute, while that simplifies and rationalizes the harness, the interconnects get more miniaturized and much more complex. And in those situations, that does – it is part of the content driver we have. So anytime you think and you sit in a car, forget about the engine running, but every other feature you sit there when you move to a new vehicle that you expect, there's connectivity associated with it, because power and signal and data need to move around, whether it's sensing something on the front end of the car, its sensing something in the braking system, it needs to transmit that power signal and data someplace, and all of that are real hard architectural problems. And our engineers at the design centers where our OEM customers are, that's where we design. It’s really where that magic occurs that drives that content growth. And these are things that don't stop because people are only working on electric vehicles. That's architecture that helps OEMs compete. It also gets people, consumers what they want, and it's where our teams excel. So sometimes I think it's taken for granted when we talk about content, but that's the electronification element of content, and that's why we feel so confident about the 4 to 6, both the electrification and electronification that happens in the vehicle really help drive that content. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: Your next question comes from Colin Langan with Wells Fargo. Your line is open. Colin Langan: Oh, great. Thanks for taking my question. I'm actually just going to follow-up on the zonal architecture question. I know there's been talk that if you go to zonal, there's actually less wires and connectors. I think that's when you put in these big domains. It sounds like you don't see an impact there. Is it really just the wiring that's impacted as you go to zonal, and you are actually still seeing the same or higher content connectors, or is there a little bit of a content loss as you shift from a traditional architecture to the future zonal? Terrence Curtin: No, it's a great question. Actually, when you go from – you get wire reduction and harness simplification. You don't get connector simplification, but you are still going to need a power signal or data transfer that occurs. It may be in a simplified wire structure or a different type of cable, but what you come into when you get into that zonal is you have a much more complex connector. Something that might have been only transmitting one signal, you might have something that's transmitting 400 different signals, and that gets into a higher contact count, more complex connector into that compute, and that's actually areas where we actually drive content increase. When you get into those areas of zonal and things like that, that everybody talks about and has been talking about for a long time, typically you’ll get into more complex, more engineered connectors that drive more increased content for us. It certainly simplifies the harness, but it does not simplify the connectivity. Sujal Shah: All right. Thank you, Colin. Can we have the next question, please? Operator: Your next question comes from William Stein with Truist Securities. Your line is open. William Stein: Great. Thank you for taking my question. Terrence Curtin: Hi Will. William Stein: Hey. In the prepared remarks, I think it was Heath who mentioned the potential for bolt-on M&A a couple of times. We've seen one of your competitors really accelerate M&A investments recently, and in a number of years you guys haven't been very visible. I'll say there may have been tuck-ins that perhaps you didn't announce, or maybe I didn’t get them, but I wonder if you can just remind us of your strategy and tactics when it relates to just your perhaps in-market focus or technology focus, returns, metrics, hurdles, anything that you can help us understand and maybe did you mention is the opportunity for. Thank you. A - Heath Mitts: Thanks Will. This is Heath. I think, and I appreciate the question. Listen, our comment around bolt-on M&A being a focus is not new. We've been talking about that here for a couple of years. When we say bolt-on, it doesn't always necessarily have to mean small though. Bolt-on’s mean they are things that are kind of – are similar to what we do, in markets that we do, in technologies that we understand, and in production environments that we understand. And so those tend to be things like the ERNI acquisition in industrial equipment or the Schaffner acquisition we completed in December, which is also in the industrial equipment business, things that enhance our portfolio and give us an opportunity to drive value through some of the operational and sales synergies. So when we say bolt-on, it doesn't always have to be small. It just means that it's not very far adjacent to us. Now, our focus is across the businesses, but admittedly, there are some businesses that we have been focused on a little bit more internal self-help. And as we progress through those things and that is reflected in some of the margin improvement that you've seen, we will, in certain businesses, be pivoting a little bit more towards M&A focus. I would tell you that the pipeline, particularly in the industrial spaces, and that's not just the industrial equipment, but the industrial spaces in general in that segment, the pipeline is more robust than it has been in a very long time. A lot of cultivation activities, and we feel very good about our ability to see an uptick in transactions there. Now, I'm not about to go on record and try to quote a dollar amount, because although that would be a more satisfying answer for you, these things come in a little bit more lumpy and things outside our control in terms of how processes go and how sellers react. In terms of us being more quiet, I can't speak on that relative to others, but I would say that we are a return-focused company and we are looking – we're not just going to buy growth for the sake of growth. We are looking for things that we are the right owner of and things that have a good financial return for our owners. And so in certain environments in the last few years, we've seen elevated acquisition prices, and we have to be cautious on some of those things. At the same time, we know where our sweet spot is. We know where we can drive value, and we've proven that to ourselves in a few of these transactions we've done in the last couple of years. I think you'll continue to see us talk more about this as a bigger part of our story over the next year or two, and I think a lot of it will be in the industrial space as I look at where the opportunity sits today. I appreciate the question and the opportunity to provide a little more color on that. Sujal Shah: All right. Thank you, Will. Can we have the next question, please? Operator: Our final question comes from Shreyas Patil with Wolf Research. Your line is open. Shreyas Patil: Hey, thanks so much for taking my question. Terrence Curtin: Hey Shreyas. Shreyas Patil: Hey Heath, you talked about the strengths you are seeing in transportation, particularly on the profitability side. Just trying to think about the puts and takes from here. I mean, typically incremental margins are in the low 30’s. Commercial transportation volumes should improve at some point next year, and there are additional restructuring savings in the pipeline coming in 2025 and 2026. So what are we missing as we think about the puts and takes and how margins could actually go from here? And then maybe just to put a finer point on the earlier question on the new automotive architectures, are you seeing wins today in this area? There are a few OEMs that are ahead of the curve, so just curious what you are seeing with them as well. A - Terrence Curtin: Yeah, let me answer the second part, and then I'll let Heath, Shreyas, answer your first part. We're absolutely seeing these wins. We've been working on these designs. In some cases, some designs never made it for decades. So when you think about these architectural changes, we are working on them. Even with the EV move, some OEMs around the globe actually jumped to some of these architectures, because they weren't evolving legacy architectures. So that is part of our content story. We are seeing it. What's great is our teams see that content uplift when you have these moves. But certainly, it's by OEM-by-OEM, and also by the platform design evolutions that they are going through, but clearly see that in our turbines. And I'll hand it over to Heath for the first part of your question. A - Heath Mitts: Yeah, listen Shreyas. When I think about the margin journey that transportation has been on, a lot of it has been self-helped around restructuring. And we have moved, over the last several years, a fair amount of activity in terms of production environments out of Western markets, in terms of where production is, and into places where we can take advantage of our scale, in places like Eastern Europe, Morocco, Mexico, and in parts of Asia. So that has had a nice uplift, and it has not been cheap or painless. The team has executed well, and we appreciate our owners' patience as we've spent some of their money to do some of this restructuring. Now, you do see some of that reflected in the margins. The other piece is around price, and price is something that historically we’ve kind of been – kind of, I don't know what normal is anymore, but if you go pre-pandemic years, we would have said price is kind of minus 1%, minus 1% to 2% a year, particularly in automotive. Certainly, we've tightened that up. Price is not a tailwind, but it's not as much of a headwind, and as we think about where that will track very closely to where we see input costs and inflations there, both on the labor and on the material side. And the team, is new in last couple of years. There's a much tighter discipline there around our thinking. Now, having said all that, you have to remember, it wasn't but this time last year when people were asking the same question you are, but they were asking, when do you get from the high teams up to 20%. And we put a lot of legwork in, and the team has executed really well this year to put us to the point we are. We will continue to evaluate that. I think your 30% incremental is probably a good number. The recovery of the commercial transportation market as you mentioned, is a nice help for us. But you also have to remember that even though commercial transportation has been down from a top line, they've held their head internally on the margin front. And so there's opportunity there, and quite honestly, there's opportunity in our centers business to continue to improve margins as we've exited some lower margin net programs. So when you add all that up, yes, your math would suggest that we are going to move above 20. But give us the opportunity to work through there and contemplate everything before we start issuing new targets. So I do appreciate your questions Shreyas. Sujal Shah : All right. Thank you, Shreyas. If there's no further questions, I'd like to thank everybody for joining us today. If you have additional questions, please contact Investor Relations at TE. Thanks everyone, and have a nice day! Operator: Today's conference call will be available for replay beginning at 11:30 a.m. Eastern Time today, July 24th, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. Thank you for your participation. You may now disconnect.

Operator: Everyone, thank you for standing by, and welcome to the TE Connectivity Second Quarter Results Call for Fiscal Year 2024. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's second quarter 2024 results and outlook for our third quarter. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will provide certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. [Operator Instructions] Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thanks, Sujal, and we appreciate everyone joining us today. As I'd like to normally do before I get into the slides, I do want to take a moment to provide some performance highlights along with what we're seeing versus our call 90 days ago. We continue to be in a dynamic global economic environment. Against this backdrop, the performance of our markets are largely consistent with our expectations, resulting in second quarter sales being in line with our guidance with sequential growth in all 3 of our segments. In addition, we experienced improved order levels with sequential growth in orders in all of our segments, and I'll provide you more details on orders later in the call. Our results reflect execution against key items we committed to coming into fiscal 2024. We highlighted to you our focus on margin performance and the benefits from non-volume-related operational levers to drive margin expansion. Our progress on these are evident in our results as we delivered 13% year-over-year adjusted earnings per share growth, which was driven by adjusted operating margin expansion of 250 basis points. Adjusted operating margins were up in each segment versus the prior year, and we expect to continue to deliver strong margin performance through the remainder of this year. With the improvements that we've made, we expect to deliver double-digit earnings growth this fiscal year, driven by a couple of hundred basis points of adjusted operating margin expansion even in the slow growth environment. The high quality of our earnings continues to be reflected in our strong cash generation model. Through the first half of this year, we delivered record free cash flow of $1.1 billion, which is up over 30% versus the prior year. And we expect to deliver another year of free cash flow conversion above 100%. With the strong cash generation, we deployed over $1.5 billion so far this year, with $1.2 billion being returned to shareholders and approximately $350 million being deployed last quarter for the Schaffner acquisition that will be in our Industrial segment. Our cash generation model continues to give us both confidence and opportunities to return capital to shareholders while continuing to support bolt-on M&A activities. So let me now share what we're seeing in our market since our call 90 days ago. Our view of the transportation end markets remains unchanged from our prior view, with global auto production still expected to grow slightly this year, while we continue to expect weakness in commercial transportation end markets both in Europe and in the Americas. In our Communications segment, we continue to see momentum in high-speed cloud and AI applications and are seeing the impacts of the destocking coming to the end in both of our businesses in this segment. Because of these trends, we expect the Communications segment to return to year-over-year growth in our third quarter. In our Industrial Solutions segment, the picture is the same that we've been saying for the last 6 months. We see 3 out of our 4 businesses continue to have growth momentum. However, our Industrial Equipment business continues to be impacted by destocking. As we think about the Industrial Equipment business, we are seeing early indications pointing to a potential normalization later this fiscal year. And then one other thing I'd like to highlight is that we have seen the dollar strengthen against other currencies since our last earnings call, and this is resulting in an increased headwind to growth and earnings in our second quarter, and this will impact the third quarter as well. And lastly, I want to reiterate that our long-term value creation model remains unchanged and is centered around 3 pillars. First, our portfolio is strategically positioned around secular growth trends, including the adoption of renewable energy, applications for cloud and artificial intelligence and growth in global hybrid and electric vehicle production. And when you think about the vehicle, we not only benefit from the electrification of the powertrain, but we also benefit from the electronification trends that include increased software-defined vehicle as well as increased safety and comfort features. The second pillar of value creation is that we have operational levers to drive strong margin performance through an economic cycle. And our third lever is that we've established a strong cash generation model to return capital to shareholders while investing in bolt-on M&A opportunities. Now with that as an overview, let's get into the presentation. I'd ask you to turn to Slide 3, and I'll discuss some of the highlights for the second quarter as well as our outlook for the third quarter, and then I'll hand it off to Heath who will get into more details in his section. Our second quarter sales were $3.97 billion, which was in line with our guidance and up 3% organically on a sequential basis, with each segment delivering sales in line with our expectations. Adjusted earnings per share was ahead of our guidance at $1.86, which was up 13% versus the prior year. Adjusted operating margins were 18.5%, and this was up 250 basis points year-over-year, driven by strong operational performance. We are expecting third quarter sales of approximately $4 billion, reflecting organic growth on both a sequential and year-over-year basis. The year-over-year growth is expected to be driven by Transportation and Communications segments, partially offset by the effect of a stronger dollar. Adjusted earnings per share is expected to be approximately $1.85, and this is up 5% year-over-year and it does include a $0.15 headwind from both tax and currency exchange rates. And just moving away from the financials for one second. We did just issue our Connecting Our World report, which details our commitments around corporate responsibility. There are a number of initiatives that we're driving internally, and our goals are in line with both our purpose as well as our expectations from our customers. Some of the key highlights that I want to bring up to you is that we did achieve a 70%-plus reduction in both Scope 1 and Scope 2 greenhouse gas emissions over the past 3 years. And we also set our Scope 3 reduction targets, and these have been validated by the Science Based Targets initiative. So with that as a quick overview of the quarter and our outlook, let me get into more details on orders, and that starts on Slide 4. As I highlighted earlier, we are seeing improved order levels. Our orders were up 6% sequentially to $4 billion with sequential growth in each segment. And really, this is the first time in 1.5 years that orders have been above $4 billion, and our book-to-bill is above 1. And we do believe that order patterns are indicating stability in most of our end markets we serve as well as the consistent service levels that we're providing to our customers. Now getting into orders by segment. Transportation orders grew sequentially despite auto production declining sequentially to a little bit below 21 million units in the second quarter. We saw production in China that offset weak -- incremental weakness in North America. And going forward, we expect global auto production to be roughly 21 million units per quarter as we move through the second half of this fiscal year. In our Industrial segment, we saw 7% growth in orders sequentially, and this reflects the continued momentum that is offsetting ongoing destocking in the industrial equipment end markets. And in our Communications segment, our orders grew 30% sequentially, reflecting design win momentum in data center programs, and about half of the increase is driven by AI orders for delivery in 2025 in our data and device businesses. Now with that as an overview of orders, let me now discuss year-over-year segment results, and I'd ask you to turn to Slide 5, and I'll start with Transportation. In Transportation, our Auto business grew 1% organically with double-digit growth in China, offset by declines in North America and Europe. While global auto production levels are consistent with our prior view, we are seeing different dynamics by region. Versus 90 days ago, our expectations of vehicle production have increased in China with a continued strong outlook for EV adoption and expansion in our content per vehicle. In North America and Europe, OEMs are adapting their mix of production to better align with consumer preferences. Factoring in these dynamics, on a global basis, EV and hybrid production are both expected to increase by 24% this fiscal year, and we'll continue to see declines in internal combustion engine production. The increase in the electrified powertrain autos will be driven by increased production in Asia, which is our largest sales region and where our auto team has a strong position. And just to give you a reminder, our content per vehicle is 1.5x higher on a hybrid and 2x higher on a full electric EV versus internal combustion platforms. We have established a global leadership position across all vehicle platforms at all major OEMs and start-ups and continue to expect long-term content growth above production of 4 to 6 points. Now turning to the Commercial Transportation business, we saw a 4% organic decline, and this was driven by the heavy truck market declines in North America as well as in Europe. This was partially offset by a return to growth in China. And we expect this business to be down sequentially in the third quarter and expect these markets that we serve here to be down approximately mid-single digits this year due to market declines in the West. In our Sensors business, the sales decline continued to be driven by market weakness in industrial applications as well as portfolio optimization that we've talked to you about, where we've continued to organically exit lower-margin and lower-growth products. For the Transportation segment, adjusted operating margins were 20.4%, which is slightly above our target levels, and we expect to run at our target margins for the rest of this year. We are continuing to invest in our -- increase our investment in our Auto business to support engineering requirements for next-generation vehicles and whether they're around the electrification of the powertrain, high-speed Ethernet for data applications in the vehicle or miniaturized power and signal products to leverage next-generation architectural shifts. Now let's get into the Industrial Solutions segment, and that's on Slide 6. In this segment, we continue to see the trends that we've discussed for the past few quarters. And while sales were down 6% organically at the segment level in the second quarter, we saw growth in 3 of our 4 businesses. And we expect continued growth in our AD&M, Medical and Energy businesses. In the second quarter, our AD&M sales were up 17% organically, driven by growth in both the commercial aerospace and defense markets. In Medical, sales in the quarter were up 6% organically, driven by ongoing increases in interventional procedures. And in Energy, we saw organic growth driven in the Americas, offset by weakness in Europe, with continued strong momentum in renewable applications. And then finally, in our Industrial Equipment business where we're continuing to see the destocking, our sales were down 28% organically. While we're seeing some stabilization in order patterns pointing to normalization later this year, we still expect to see year-over-year declines in this business for the next couple of quarters as our customers adjust their inventory levels. On a margin perspective, the Industrial segment achieved 15%, which was in line with our expectations given current volume levels and business mix. We continue to expect segment margins to run into the mid-teens until the Industrial Equipment business returns to growth. Now I'd ask you to turn to Slide 7, and let me get into the Communications segment. In Communications, I am excited about a return to year-over-year growth in our third quarter now that destocking trends are largely behind us and momentum continues to build in next-gen cloud applications. Going forward, we now expect to deliver higher growth from artificial intelligence applications where we are increasing our investment to support future growth opportunities. Based upon our design win momentum, we expect to double our AI revenues from $200 million this year to $400 million next year and expect to build on this momentum to achieve annual revenues of roughly $1 billion in the following few years. Just to remind you where we play, we are focused on providing high-speed, low-latency connectivity to meet the needs of artificial intelligence workloads. And we generate 50% more content in accelerated compute platform versus traditional compute servers. Also, we're working closely with cloud customers as well as leading semiconductor companies with reference designs that call out TE Connectivity solutions. This segment had adjusted operating margins of 17.3%, and this was up 100 basis points over last year despite the decline in sales in the second quarter. Our teams are executing extremely well, and we continue to expect to maintain high-teens margin in this segment as we move through the year while supporting investments for growth. As volumes increase over time, we expect to achieve our long-term margin target for the segment of approximately 20%. Now with that as a segment overview, let me hand it over to Heath, who will get into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 8 where I will provide more details on the second quarter financials. Adjusted operating income was $735 million with an adjusted operating margin of 18.5%. GAAP operating income was $692 million and included $3 million of acquisition-related charges and $40 million of restructuring and other charges. For the full year, our expectations are unchanged, and we continue to expect fiscal 2024 restructuring charges to be approximately $100 million. Adjusted EPS was $1.86, and GAAP EPS was $1.75 and included restructuring and acquisition and other charges of $0.11. The adjusted effective tax rate was 21% in Q2. And for the third quarter and the remainder of the year, we expect our adjusted effective tax rate to be approximately 22%. Importantly, as always, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. Now if you turn to Slide 9. Sales of $3.97 billion were down 5% on a reported basis and down 3% on an organic basis year-over-year, which is as expected. Sequentially, we saw 3% organic growth in sales. Adjusted operating margins were 18.5% in the second quarter, expanding 250 basis points year-over-year, and this was driven by margin expansion in all 3 segments on a year-over-year basis. We have been focused on executing on a number of operational levers this year that are not volume-related, and this has enabled strong margin expansion despite the low growth environment that we are dealing with. Adjusted earnings per share were $1.86, up 13% year-over-year, driven by the strong margin expansion. Turning to cash flow. Cash from operations was $710 million, and free cash flow was $543 million in the second quarter. Through the first half of our fiscal year, free cash flow was $1.1 billion, which is up 32% year-over-year. Our long-term capital strategy remains unchanged, which is to return approximately 2/3 of free cash flow to shareholders and use 1/3 for bolt-on acquisitions over time. As mentioned earlier, we expect our free cash flow conversion to exceed 100% again this year. Now before I turn it over to questions, let me reinforce some of the key points that we are excited about and share how we are thinking about our performance in the current macro environment. We are delivering margin expansion, EPS growth, driven by strong execution on operational levers. At the same time, we are investing to support future growth in markets with strong secular drivers, including next-generation automotive, renewables and the artificial intelligence applications that Terrence just discussed. We are seeing an improvement in order patterns and sequential orders growth in all of our segments, indicating stability in most of the markets we serve and giving us confidence in future growth. Our Communications segment is returning to growth in the third quarter, which reflects both the normalization of supply chains as well as our momentum in high-speed data center applications. And finally, we are demonstrating our strong cash generation model with a balanced deployment of capital. So we remain very excited about the opportunities we have ahead of us to drive value creation for all stakeholders. With that, let's now open this call up to questions. Sujal Shah: Dennis, can you please give the instructions for the Q&A session? Operator: [Operator Instructions] Your first question comes from the line of Mark Delaney with Goldman Sachs. Mark Delaney: I'm hoping to better understand the more constructive comments you made on auto, especially as EV industry growth has decelerated and several traditional Western auto OEMs have announced they're planning to focus more on plug-in hybrids at least in the near to intermediate term and shift toward BEVs more slowly than they previously targeted. Could you help better contextualize what underpins TE's more positive view on auto and to what extent auto can keep growing? Or might it be impacted by certain customers needing to take down inventory as they adjust their product mix plans? Terrence Curtin: No, thanks, Mark, and I appreciate the question. And I know one of the things that's important when we do this is I always have to remind everybody our great global position, and we got to keep that in front of us. So first of all, on auto production, what's interesting, even though there's been a lot of moves by various players around the world, if we went back to you back in October and said, where do we think auto production would be, we still think it's slightly up this year. It's going to be around 86 million vehicles made on the planet this year. And we have seen increases in Asia production, both in China as well as outside of China, because we do have a strong position in Japan and Korea as well that have offset some of the weakness that you've seen here in North America as you have some of these consumer preference shift. The other thing that is when you think about what we've always called the e-mobility category, which includes hybrids, plug-in hybrids and EVs because we get very nice content uplift on all of them, we expect it to be about 25 million units this year still. And versus where we were earlier in the year, that's probably only off about 300,000 units when you look at it at a global basis. So net-net, on a global basis, EV production and adoption is still happening. And EVs and plug-in hybrids and hybrids are about 30% of all the vehicles on the planet today that are coming out. And I said it on the call, both categories are going to grow about 24% this year. Now by region, the trends in China are full steam ahead, EV production, EV adoption across all types, whether it's plug-in hybrids, hybrids, and we have a very strong position there. We've talked to you about what we do with the locals. We have a strong position with the multinationals. And as I said on the call, our content per vehicle, as EV adoption continues in China, is just going up. In the Western world, you do have the adapting that I talked about, and it's really creating more of a shift from EVs to PHEVs and hybrids. And we got to realize that shift is important for us because that does help as you move from a nice vehicle to any of the EV categories, we get content increase. And all the regions are expected to see double-digit EV growth this year. So while there's been some things that have shifted around, certainly, as people make choices about what models they like versus they don't like, it's really been driving content growth. Now the last thing is we remain to be confident around our 4 to 6 points of outperformance. And we're always going to caution you like we do every call, please don't look at it on a quarter basis because there's always swings that can occur. But we expect content growth to be in that 4 to 6 points. And it's also important to say content in the 4 to 6 points above production, EV is the biggest driver, but it's not the only driver. Electronification of the vehicle, the data -- Ethernet that goes in for autonomy for -- that's unique for software-defined vehicles, that's a driver as well as all the other electronics that go in. So all of them drive the content increase. And while there may be some shifts between EVs and hybrids, the content growth that we get on either of those categories, whether it's 1.5x or 2, are going to drive content growth for us and why we feel so constructive about the 4 to 6 points of outperformance, and we expect we'll be there this year. So I know it's probably more than you wanted, Mark, but I appreciate the question. Operator: Your next question comes from the line of Luke Junk with Baird. Luke Junk: Terrence, hoping you could just double-click on what order [ patterns ] are telling you right now about market health and especially destocking. I'd be most interested in what it says about the trajectory of Communications from here, especially legacy applications in addition to what you already spoke to with respect to AI as well as we look for that bottom in Industrial Equipment. Terrence Curtin: Sure. No, thanks, Luke, and I appreciate the question. Yes, as I said in my upfront comments, I can't stress enough, this is the first time in 6 quarters or 1.5 years that we have orders above $4 billion and a book-to-bill above 1. And you see the sequential growth in every segment. And destocking, which we always told you, really was in our Communications segment and our Industrial Equipment segment. I would tell you, in the Communications segment, we don't -- we believe destocking is over. Not only from the order activity we see, but I would also say the things where we go through our channel partners, and we've seen orders improve year-over-year there as well as the revenue trends of where they're selling through. So I would say destocking in the Communications segment is over, and you're going to see that segment return to growth next quarter, as I talked about. The one area that we continue to see destocking is in the Industrial Equipment. I think it was evident in our results and the commentary. And that's going to be with us for a couple more quarters. That started later. We're still seeing areas where I do think we're in a bottoming cycle there, both what we see and what our channel partners see. We're starting to see some lights in China and also the Americas, but there's other areas in that industrial space, and Europe has remained weak. So I do think that's very important to keep in front of us, but I do think there's -- we're starting to see some light at the end of the tunnel. And outside those areas, I think you see stability and growth. And I think those sequential order momentums that we see that you can see on the chart really prove that. And that's what we get excited about that destocking is over. Destocking has masked some of our content growth as we work through it. But I do also think as we work through this year and get to '25, it will be a nice tailwind that that's finally behind us. Operator: Your next question is from the line of Amit Daryanani with Evercore Partners. Amit Daryanani: I guess, Terrence, I'd love to kind of get your perspective, AI is still a very big focus for everyone. You just talked about some fairly strong revenue trajectory as you go forward that you expect to see. Can you maybe spend some time talking to us about what exactly are you really providing when it comes to AI solutions? And any sense on where the opportunities right now across processor companies like NVIDIA versus cloud providers that might be running their own infrastructure? And what does the conversion to revenue look like as you go forward from here? Terrence Curtin: Yes, no, and I made some comments, Amit. So I do appreciate the question. And the one thing that's a little bit different that we talked about today on the prepared comments was we typically always talked to you about design win momentum, and that's continued. But we did give you more highlights about where does revenue go for here. And we told you all year, as we were seeing the ramp in AI, we were going to do about $200 million of revenue this year in AI applications. And certainly, 60% of that would be in the back half. That really hasn't changed. But when we look at the design momentum that we have and also expectation of what we're hearing from our customers, like I said on the call, we expect that $200 million to essentially double next year to $400 million. And we actually see a path that could get up to $1 billion a year -- a few years after the [ math ]. So we're actually seeing the traction with the design wins, our teams, the investments we're making to ramp it, both from engineering and operations, are in place to drive it. And like you said, when you have to service this area, there's an ecosystem that's here. And that ecosystem, when you look at our engagements, they're with hyperscale customers, some of who are developing their own AI solutions. We also have to work closely with semiconductor companies, including both the processor companies and the other semi players that make acceleration chips and other silicon solutions. So when you look at it, we have to play with everybody in that ecosystem, and our teams are doing a nice job. And then as important is as you work with them, how do you get on reference designs that then are really ready-to-deploy offerings that do allow further cloud customer deployments. And our sales are across the entire ecosystem, it's not with one. So I like the breadth that we have, and that's really driving the momentum that we have. And from a product perspective, where you start at, it starts with the socket that's right up against the GPU. You can have things that are on the board. And then you also get into things that are really a cable backplane where you have things that are very important to make sure you don't get the latency and you keep the high speed going to really make sure that cluster can really crack at the speeds they need to, to do the [ LLMs ]. So net-net, it's pretty broad in the products we play. And it's just really, in many cases, what we did on the cloud moving up to the next level of performance in this application. Operator: Your next question is from the line of Wamsi Mohan with Bank of America. Wamsi Mohan: Terrence, I appreciate all the comments here on the prior question around AI. If I could just ask a quick clarification on that. How are you thinking about your share in these high-speed, low-latency applications? And for my question, I was wondering if you could comment a little bit beyond fiscal '24. It seems like destocking is coming to an end. Your orders are bouncing back a fair amount over here, and you've mentioned stability in some of the end markets as well. Any early thoughts on how fiscal '25 is shaping up from a growth and margin perspective? Terrence Curtin: Yes. So when you think about share in the AI application, it would be similar to the share we had in cloud applications. So I think when you look at that, and we talked about that a lot, the momentum we had when we went through the cloud during COVID and the momentum we had across a broad set of customers, I think you can expect similar share-type thoughts on that for the AI applications and once again being broad. When you look at 2025, I guess the first thing is it will be nice not to talk about destocking. So that has been a headwind. I know we're not the only one that dealt with it. But that will be something that turns, and you're starting to see it in CS, and that will help IS. So I do think that will turn to a headwind to be -- honestly, to a tailwind as we get rid of that. And what's nice is we're going to start seeing that in Communications already here later this year. And I do think we have to wait towards the end of our fiscal year to get there with the Industrial Equipment business. The other thing as we look at 2025, there's going to be -- if you just start with Transportation, you're going to continue to have electric vehicles, the broad category that we put everything in, continue to grow in the world. And I think you can continue to look at 4% to 6% growth on top of that. I wouldn't say we view it's going to be auto production is going to boom in '25, but I think you're going to continue to see an area where auto is below peak where we are today. And then we're going to get the content benefit on top of it that I think we've proven to you. The AI element is a big driver as we go into next year. So we quantified that for you. And then the other area that I just think has been masked a little bit by what's been going on in Industrial Equipment is, remember, our 3 businesses that are in Industrial, they continue to have growth momentum, whether it's renewables, whether it's what we're doing in medical around interventional procedures, whether it is the recovery in commercial aerospace as well as what's going on in defense. So those types of growth that we're seeing this year, we do think they're going to remain in the growth into '25. So I do think '25 does set up nicely. Heath, I don't know if you want to talk from a margin perspective at all. Heath Mitts: Sure. Wamsi, we appreciate the question. Obviously, we're in the early stages, we're not ready to guide for our FY '25, which starts October 1. But I do feel good about where -- the progress that we've made on margins. We've talked a lot to this audience about our target margins, which we really look at it by segment. The Transportation margins, target margin of 20%, we got there a little sooner than we even, internally, we were expecting. The price actions have been effective and they've been sticky. The footprint consolidation work that we've done and then we've exited some low-margin product lines, and the health of that business is very strong. The auto side of that, that is driving most of that. But even our Commercial Transportation business within that, which is, as you know, a high-margin business, is holding its head even in a negative growth environment. So we feel good about where we are achieving in FY '24 and where our jumping off point is for end of '25. Communications is really -- the margin side of Communications is really a volume story. And again, if you had asked me 6 or 9 months ago where we'd be running margin-wise at roughly $440 million of quarterly revenue, I would tell you we'd probably be in the mid-teens. And as I sit here today, we've been consistently in the high teens this year. So we've effectively raised the floor, and our team has done a nice job within that segment of raising the floor so we get to a more of a high-teen type of look. And once we budge up over the $2 billion annual revenue rate for that segment, I think we're going to be pushing towards that target margin of 20% for the segment. So we feel good as we think about that. And as a reminder, Terrence alluded to this, we are hiring to support some of the high-growth areas, and that's embedded in our run rate. We're not going to call that out as a headwind to us, but we're not starving these businesses, and that's been an exciting area to see. The Industrial business, we're hovering in the mid-teens. I expect improvement of significance next year as we go in, but a lot of that is tied to the destocking within the Industrial Equipment business going away. And Terrence has talked a fair amount already on this call about the time frame of that towards the end of fiscal '24. So I do think there's good opportunity as we go into '25. The other 3 business units within the Industrial segment have been performing well, but it's hard to make up for the drag on the Industrial Equipment business that's been down double digits this year. So if you add all that all up, we're going to exit this year in [ 18 ] and change of operating margins up a couple of hundred basis points year-over-year. And we expect to be able to start making normalized improvement on that as we move forward. We talk to The Street about in our operating model of somewhere between 30 and 80 basis points of margin improvement each year. Certainly, we feel good about that as we start planning for FY '25. Operator: Your next question is from the line of Samik Chatterjee with JPMorgan. Samik Chatterjee: I'll ask on Communications, if you don't mind. You mentioned the capacity investments you're making in the Communications segment, particularly around the AI demand you're seeing. If you can sort of give us some more color about what's the typical lead time between you investing -- starting to invest in capacity now? Is that for revenue in fiscal '25? Or is that sort of beyond fiscal '25? What's the typical lead time between starting the manufacturing and getting back to a revenue point? And then just a side question in terms of like what do you see customers ask you for in terms of where this manufacturing footprint is? Given the geopolitical situation, is there a preference that customers are expressing about where you invest in capacity, [ granted ] whether it's the Western world or somewhere else? Terrence Curtin: Thanks, Samik, for the question. A couple of things, I think, that's important. As we've been seeing this, we have been investing, and we've expanded operations in Mexico as well as the Philippines as well as the existing locations we've had. So from that viewpoint, there was existing. And also the sites that we have, I think, position us well for the geopolitical options that some of our customers want to have. So when you look at that, I wouldn't say this is just starting. These investments, some of those we started to make a few years ago as we were thinking about capacity coming along, and we're going to continue to build on that. And that's for the footprint capacity as well as like Heath said, there's also been engineering capacity and ramping as well, and we'll continue to do with the line of sight of the programs we work on. Let's face it, these are programs that we work on with our customers in tandem as they're trying to work their architecture to make sure that the connectivity that's needed works in their applications. So that's one of the real positives that we have working in this ecosystem, and you're going to see us continue to capitalize on it. And like Heath said, it's included in our run rate. Operator: Your next question is from the line of Joe Giordano with TD Cowen. Joseph Giordano: So on the AI side, as you kind of build out and invest to support the growth plans of your customers in this space, how do you weigh -- like obviously, very robust demand and on the near term with like, can we -- is this -- are these growth outlooks on a multiyear period even feasible? Like can the grid handle building all these things? Like how do you weigh what you need to invest in now because of what your customers are saying versus like your view on is this even achievable for a market over like a short, couple-of-year period? Terrence Curtin: When we work here, Joe, we work with our customers on the programs that they're coming out with. And then on the next generation, I would tell you, we do work with our customers on their understanding of that market outlook. But honestly, we're focused on nailing the solution with our customers on what the technical requirements they have. So I would tell you, that's what we focus on. That's the way we invest as we work with our customers. So from that viewpoint, I think that's always been our mindset. And it's one of the nice things about our model that we get the benefit of working with our customers as they understand the opportunity and the ramps that they expect to hit and how do we need to support that. Operator: Your next question is from the line of Asiya Merchant with Citigroup. Asiya Merchant: Just if you could drill down a little bit on pricing. I think comments in the past have talked about maybe normalization of pricing and especially as we look at auto production moving towards, at least this year, being a little bit more weighted towards Asia versus North America and Western Europe. How do you guys think about pricing and the margin impact from pricing normalizing, say, as we go into fiscal '25? Terrence Curtin: No, sure. I think when you look at pricing, first off, and you see it in the margin this year, we recovered finally the inflation that we had during the mega wave of inflation. And we caught up on that. And our approach always was, was we were covering cost with our customers. When you still look at this year, nothing has changed with what we told you before, we expect pricing to be neutral this year at the TE level. So yes, we are doing targeted price increases where we have to, where we continue to have material inflation on certain metals. Certainly, we're doing things to make sure where we can be competitive. And I don't think you assume that margins go down on a different pricing environment. So I think you sit there as we look forward, a big element of where pricing goes is going to be around where the material environment is, where's copper, gold, resin trading, the input costs that were the things that we recovered, and they will be the bigger driver of where pricing goes from here. Operator: Your next question is from the line of Saree Boroditsky with Jefferies. Saree Boroditsky: You talked a lot about maybe a line of sight to the end of Industrial Equipment destocking by year-end. Could you just talk through the underlying demand environment there? And then how do you think about the tailwind from destocking then as we get into 2025? Terrence Curtin: Sure. Thanks, Saree, and welcome to the call. First off, being the demand environment is cloudy because we have had both with -- and in our Industrial Equipment business, just to take a step back and remind everybody, about 50% of our revenue goes through our channel partners and 50% goes directly to the OEMs. So it is an area where channel partners play a bigger role. I would say when we look at the end-demand environment, there are pockets where you continue to see strength, that wouldn't surprise you, certainly in the process side. But there's other areas that right now, it is still foggy because we have customers that are working off buffer stock that they built up when they were worried about being able to get component supply as well as our channel partners are doing the same. So right now, we're in the middle of that destock period. But what we are seeing is we're seeing order patterns start to move sideways. They aren't decelerating. We're seeing that both direct and with our channel partners. And we're also seeing certain regions where we see that work-off occurring. So I think what you're going to have probably for the next couple of quarters, we're still going to have those impacts as that works off. And then as we get into '25, you'll actually see that business get back more in line, growing a little bit above the underlying market of factory automation. Operator: Your next question is from the line of Steven Fox with Fox Advisors. Steven Fox: Terrence, I was wondering if you could talk a little bit about how TE Connectivity's products into EVs help on the cost front for your customers? I mean, Tesla, obviously is talking a lot about that lately. And on the alternatives, does it create any kind of competitive risk as some of your customers realize that they really need to get some of these EV prices down in the next couple of years? Terrence Curtin: Well, I do think there's an element that one of the things that we do that even starts before the product is how we work with our customers when they are trying to sit down and do value engineer of how do you get a sub application to a lower cost point. That's very important, Steve, as we move through generations in every part of TE. And that's just not on where does our product cost come in, how do you assemble a car, how do you put the car together, how does that make sure it has the quality? And any time you get into somebody looking at a next generation, and that could be a battery pack, that could be the connectivity on the motor, it could even be a next-generation inlet, so all of those are things that create opportunities where our stickiness and global position play really well. And that we have such a strong position in China, I would tell you, certainly, you have a cost point that is always a better cost point. And how our global teams bring that to other OEMs around the world due to our strong position is something that we get excited about because, I know I say this on this call, probably every other call, automotive is a scale business. And one of the things that is very important is how does EV scale, how do you bring our technology to do it that helps it scale, and that's the opportunity that we've always been excited about with EVs. And having some of the consumer choices that are being made will also allow our customers to get focused to make sure they're making where their platforms go. So net-net, that's what our engineers like to do, improving the innovation they can bring, but also how do you sit there and make sure how we're making it more productive for the world. Operator: Your next question is from the line of Colin Langan with Wells Fargo. Colin Langan: Just want to ask, on the auto side, growth was 1%. I think the target is 4 -- and I think the market is fairly flat in the quarter. The long-term target is 4% to 6% outperformance. Why the underperformance versus the target in the last couple of quarters? Terrence Curtin: Twofold. We're probably running about 3 points above production right now. I would say, Colin, in the second quarter, global auto production was negative. So the [ reason there ], we always tell you, don't look at an individual quarter. Next quarter, I think you're going to see a very nice outperformance. And for the year, we expect to be in the 4% to 6% range. But on any quarter, you get into a lot of little things that some quarters will be above the range. I still feel good about the 4% to 6%, though. Operator: Your next question is from the line of Christopher Glynn with Oppenheimer. Christopher Glynn: Just wondering if you could talk about the kind of complexion and forward kind of drivers, touch on the mix for the commercial vehicle platform. I know you kind of said kind of similar levels for passenger vehicle would be appropriate way to think about next year. And we can see that, that makes sense. Commercial is a little more disparate and complex. So I wonder if you could elaborate a little bit on how you see that market unfolding as you work through some mixed markets this year. Terrence Curtin: Yes. So to your point, I'm going to -- I might go down here a little bit on how we look about the commercial transportation because, obviously, that market has 3 major drivers to it. Certainly, the on-road truck and bus, what's happening in agriculture equipment and also construction equipment, they're the 3 big levers. And when you think about that globally and production and our revenue, about half of our revenue is truck and bus. What we're seeing on truck and bus right now is Americas and Europe, weak. Actually, China and Asia is recovering. So they were weak last year. So what we're actually seeing is very much a China-positive market that we expect will continue; certainly Western World down. And we even said in the call, we expect next quarter will be down a little bit sequentially due to some of these dynamics. On the ag and the construction side around the world, that is slow everywhere around the world. Certainly, you get into financing rates and things like that, that's a little bit different. And we expect that, that will run through this year. And we are thinking that early next year, we'll get into a more constructive environment than we're in right now. But right now, we think, if you take all of them together, the global market is probably a minus 5% this year, plus or minus a little, and we would think that will get more constructive into '25. Operator: Your next question is from the line of Matt Sheerin with Stifel. Matthew Sheerin: I had a question, Terrence, on the energy markets within your Industrial group. You've had strong growth there over the last few quarters, but it looks like it slowed in the March quarter, and you're hearing of some pockets of weakness from other parts of the supply chain. What's your outlook there, both near term and in terms of long-term position? Terrence Curtin: Yes, no, sure. Thanks, Matt. And on energy, what I would say is we're still very constructive on it. I think what you see in our results here is we continue to see the U.S. and Americas very strong. We also see global renewables where we play, and we do utility scale renewables, we do not do residential renewables, we see that strong. The one pocket where I say we see a little bit of softness is around the utilities in Europe. I do think that's an element of the business that I talked about on my prepared comments that we've been a little bit of where I think utilities are bringing down inventory a little bit. But certainly, with the grid maintenance that everybody is investing in around the world, I think that will return to growth. So we're still constructive on global energy. And our business is very much -- Europe and the United States are the bigger elements of where we play. Operator: Your next question is from the line of Shreyas Patil with Wolfe Research. Shreyas Patil: As we look out past this year and we think about some of the growth drivers in electrification, AI renewables, you've also got typical recoveries in parts of communication and eventually industrial equipment, how do we think about the sustained organic growth for TE overall? In the past, you've talked about 4% to 6% organic growth over time. I'm just curious how to think about what the reasonable framework for the company should be at this point. Terrence Curtin: I still think that's the right way to think about it. Certainly, we're going to have cycles. You take a year like this year where we are more flattish than growing at the 4% to 6%, but there will be areas, exactly around the point you made, where you could have some destocking or type effects that may be a headwind 1 year that will come back and be above that in the future. But I do think the 4% to 6% is the right way to think about when we think about the portfolio that's constructive. Operator: Today's final question will come from the line of William Stein with Truist Securities. William Stein: I'm going to ask yet another question about AI. Terrence, my industry checks reflect that there's really about 3 companies that have meaningful content here, and TE is 1 of those 3. There's a couple or 2 others. Can you talk about the competitive dynamics among these 3, maybe your defensibility and your opportunity to push into their spaces? And also what makes the 3 of you more capable than others that sort of protects -- that maybe protect you against new entrants into this very attractive category? Terrence Curtin: No, thanks, Will. So first off being I think there's an element here when you deal with high speed, the 3 of us all have a very good capability. And when you sit there, we're all different. I mean some of us have different scale than others, but I do think that is the uniqueness. When you're getting to the speed levels of where these chips are going to, GPUs are going to, TPUs are going to, you're dealing with speeds that are very unique. That is a very technical innovation that I think we all do well. And so I think it is a competitive space between us. I also think that you continually move up the technology curve. And you also have ramps that our customers expect to bring them to life for all, very important to our customers. And that's why we even said earlier to the question that I answered, I expect our share to be similar to what it was in the cloud. So I think it's very important how we make sure what we do in the connectivity space, really make sure we enable the AI path because we do play an important role in it to really make sure it comes to life. And that's what we get excited about, Will. So it's a great opportunity we have. Certainly, it's a great opportunity for our industry to capitalize on as well. Sujal Shah: Okay. Thank you, Will. I'd like to thank everybody for joining us this morning on the call. If you have any additional questions, please contact Investor Relations at TE. Thanks again, and have a nice day. Operator: Today's conference call will be available for replay beginning at 11:30 a.m. Eastern time today, April 24, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity First Quarter Results Call for Fiscal Year 2024. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's Q1 2024 results and outlook for our second quarter. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website te.com. Finally, during the Q&A portion of today's call, due to the number of participants, we're asking everyone to limit themselves to one question and you may rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence R. Curtin: Thank you, Sujal, and we appreciate everybody joining us today. And I do also want to wish everybody a Happy New Year. As I normally like to do before we get into the slides, I do want to take a moment to discuss our performance this quarter along with what we're seeing in our markets versus our last call 90 days ago. We continue to be in a slow global economic environment. Against this backdrop, the performance of our markets is largely consistent with our expectations and it resulted in our first quarter sales being in-line with our guidance of flat revenue growth. Our Transportation segment once again grew year-over-year driven by content growth, and this offset the declines that we saw in our Industrial and Communications segments. Our team’s execution was strong in the quarter with 20% year-over-year adjusted earnings per share growth, and this was driven entirely by adjusted operating margin expansion to 19%, and this was on flat sales. This margin performance demonstrates we're successfully executing on a number of structural margin improvement levers across our segments. Those levers drove margin expansion through the second half of last year and are resulting in the further step-up of margin performance, particularly in our Transportation segment. We expect to deliver strong margin expansion this year that will be driven by our Transportation and Communication segments based on what we're currently seeing in our markets. And just as important is the quality of our earnings and you see this in our record first quarter free cash flow of $570 million which builds on the strong cash performance from last year and that we expect will continue. During the quarter, we deployed approximately $1 billion of capital that included returning $600 million to shareholders as well as $350 million to acquire Schaffner. And Schaffner expands our product portfolio and factory automation. Our cash generation model continues to give us both confidence and opportunities to return capital to shareholders, while supporting ongoing bolt-on M&A activities. So, let me now share what we're seeing in our market since our call 90 days ago. As I mentioned already, on an overall basis, markets are playing out as we expected, and we also had orders growth of 4% year-over-year and this was across all three segments. We are seeing sales growth across the majority of our businesses, but we do have a few business units that are continuing to be impacted by inventory destocking by our customers and we'll highlight these during the call. Our view of the Transportation end markets remain unchanged from our prior view with global auto production expected to grow slightly this year. And while we're seeing some puts and takes in production by region, China production and EV adoption is stronger, and this is offsetting some weakness in Europe and in North America. In our Industrial Solutions segment, three out of our four businesses continue to have growth momentum, and we expect to continue to see sequential growth in each of these three businesses as we go forward. You see our strong positioning in renewable energy in both solar and wind applications. Commercial air sales continue to grow as production increases for both single and twin aisle platforms, and our medical business is benefiting from increases in interventional procedures. When you compare versus 90 days ago, the one market where we've seen incremental weakness is in our Industrial Equipment business. Destocking began a few quarters ago in this business and we now expect it to continue into the second half of this fiscal year. And lastly in our Communication segment, we continue to see destocking but what's really nice it's now just occurring in pockets. And we do expect to see growth in the second half of this year in our Communications segment driven by our wins in artificial intelligence programs. As we look forward, our long-term value creation model remains unchanged and is centered around three pillars. The first is our portfolio is strategically positioned around secular growth trends including growth in electric vehicles, adoption of renewable energy and applications for cloud and artificial intelligence, just to name a few. Second, we have operational levers to enable margin expansion despite a slow economic environment. The drivers encompass strong operational execution including footprint consolidation, portfolio optimization benefits and price actions that we implemented to offset higher input costs. And third, we've established a strong cash generation model to return capital to shareholders while investing in bolt-on M&A opportunities. So with that as an overview, let me get into the slides and I'd ask you to turn to slide three, and I'll discuss some of the additional highlights for the first quarter and our outlook for the second quarter and then Heath will provide more details in his section. Our first quarter sales were 3.83 billion, which was in-line with our guidance as I mentioned. In Transportation, we saw 5% organic growth driven by content expansion in our auto business. In Industrial, we saw growth in Aerospace, Defense and Marine, Medical and Energy, which was more than offset by weakness I talked about in industrial equipment. And finally, in Communications, it was down as we expected, but we are well-positioned for growth in the second half driven by AI applications. Adjusted earnings per share was ahead of our guidance at a $1.84 and this was up 20% versus the prior year. Adjusted operating margins were 19% and these were up 290 basis points year-over-year driven by strong operational performance, and the margin performance was the driver of our EPS being ahead of guidance. As we look forward to the second quarter, we're expecting our second quarter sales to increase over the first quarter to $3.95 billion with the sequential growth being driven by the Industrial segment partially offset by a slight decline in Transportation. Adjusted earnings per share is expected to be around a $1.82 and this will be up 10% year-over-year in the second quarter with approximately 200 basis points of adjusted operating margin expansion versus the prior year. So to move away from the financials for a second, and before I get into orders, I do want to highlight that we were pleased to be included in the Dow Jones Sustainability Index this quarter for the 12th consecutive year. This designation continues to demonstrate TE's dedication to sustainable business practices that do provide value to our customers and that they expect and are aligned with our commitment to our owners. So now let's talk about orders and I'd ask you to turn to slide four. At the total company level, we had orders of $3.8 billion and this was up 4% year-over-year and consistent with our expectations. And what was really nice, this is the first time since after the COVID crisis in 2001 we've seen all three segments have year-over-year order growth. We continue to see stability in our overall order levels with year-over-year growth in each of the segments, and with backlog remaining at near record levels, and this gives us confidence in our second quarter outlook. Transportation orders grew 4% year-over-year and reflects stability in overall global vehicle production. In the first quarter auto production came in a little bit over 22 million units and we saw stronger production in China that offset some of the weakness in Europe and North America. Going forward we expect global auto production to be roughly 21 million units per quarter as we move through this fiscal year. In our Industrial segment, we saw growth in orders both year-over-year as well as sequentially. The order strength is driven by our AD&M Medical and Energy businesses, and we saw the weakness in Industrial Equipment end markets and this was across all regions of the world. And in our Communication segment, our orders grew 3% year-over-year, and like I said earlier, we do see destocking by our customers now only occurring in pockets in certain applications. So with that as an orders overview, let me now get into the year-over-year segment results that we saw in the quarter and that's on slides five through seven of your slide deck, and you can see the details on those slides. So starting with Transportation, overall the segment had sales growth and it was up 5% organically year-over-year driven by our auto business. Our auto business grew 8% organically with 13% growth in Asia and 7% growth in Europe and this more than offset a decline in North America. Our performance continues to be driven by content growth from our leading global position in electric vehicles as well as electronification trends within the vehicle. Our global outlook for electric vehicle growth is unchanged, and it's important to note that over two-thirds of EV production will occur in Asia. We are very well-positioned to capitalize on this growth due to our strong content and share in local Chinese OEM platforms that is driven by our innovation. Overall, our growth will continue to be driven by content outperformance that leverages our leading global position in the auto market. In the Commercial, Transportation business, we saw 1% organic sales growth and this was driven by Asia and it was partially offset by declines here in North America. And in our Sensors business about half of the sales decline that you see on the slide was driven by the portfolio optimization efforts we've been talking to you about, where we're continually to organically exit lower margin and lower growth products. The rest of the decline in Sensors was driven by weakness in sensor applications and industrial markets, partially offset by growth in automotive applications. For the Transportation segment, adjusted operating margins were nearly 21%. We expect Transportation segment margins to run approximately at our 20% target margins for the rest of this year. As you know, we've been driving several improvement and in our operations. We have been able to optimize our factory footprint through our restructuring programs and are getting cost savings from these actions. We are also seeing improvement in our EV product margins as volumes increase and in our Sensors business we have been driving margin expansion improvement through portfolio optimization which I mentioned earlier. Also I'd like to highlight that our teams are continuing to effectively manage pricing to offset higher input cost. We've been talking to you about all these actions and I'm pleased with you that the team successfully executing on them and delivering the strong results that you see. So that is a backdrop of Transportation. Let's move to the Industrial segment. And in the segment sales were down 5% organically in the first quarter, but we did see growth in three of our four businesses and we expect to see continued sequential growth in AD&M, Medical and Energy as we go into quarter two. In the first quarter our AD&M sales were up 13% organically with increased production of both single and twin aisle platforms in the commercial air market. In Medical, sales in the quarter were up 16% organically, driven by ongoing increases in interventional procedures. And in our Energy business, we saw growth in renewable applications and these were partially offset by slower utility demand in Europe. And finally, you can see on the slide, in the Industrial Equipment business, our sales were down 26% organically. And in this business, we're seeing the destocking that began a little bit later in the cycle. So we expect this inventory digestion to continue. And this is a trend that is similar to what you've been hearing from other companies. From a margin perspective, for the Industrial segment, adjusted operating margins were 15% with the impact from the volume decline in Industrial Equipment. And we expect to continue to see segment margins running in the mid-teens until this destocking environment improves. So let me turn to Communications. Organic sales were down 17% year-over-year and we expect the second quarter sales to be similar to the first quarter level. Starting in our third quarter, you will begin to see favorable year-on-year growth in this segment. We are well-positioned to grow in our artificial intelligence programs and now expecting $200 million of contribution in fiscal '24 from AI applications. And in these applications for artificial intelligence, let's face it, we're focused on providing high speed, low latency connectivity to meet the needs of the artificial intelligence workloads. And as we've mentioned to you before, we generate 50% more content in an accelerated compute AI platform versus traditional compute servers. Also we continue to work closely with cloud customers as well as leading semiconductor companies to ensure reference designs that call out all our solutions. On the margin front for the segment, adjusted operating margins were 18.7% and they were up 170 basis points despite the decline in sales. Our teams are executing extremely well and we now believe we'll be able to maintain the high-teen margin in this segment as we move through this year. So with that as an overview of performance, let me turn it over to Heath, to get into more details on the financials and our expectations going forward. Heath Mitts: Well, thank you, Terrence, and good morning, everyone. Please turn to slide eight, where I will provide more details on the first quarter financials. Adjusted operating income was $731 million with an adjusted operating margin of 19.1%. GAAP operating income was $698 million and included $8 million of acquisition related charges and $25 million of restructuring and other charges. For the full year, our expectations are unchanged and we continue to expect fiscal '24 restructuring charges to be approximately $100 million which is well below the levels we've been running in prior years. Going forward, we expect that restructuring charges will be driven by actions to improve efficiency around future bolt-on acquisitions. Adjusted EPS was $1.84 and GAAP EPS was $5.76 for the quarter, which included a benefit of nearly $4 related to a one-time non-cash non-U.S. tax benefit, a change in the Swiss tax rate and the impact of intercompany transactions. Additionally, we had restructuring, acquisition and other charges of $0.07. The adjusted effective tax rate was 21.2% in Q1, slightly higher than our guidance due to an increase in the Swiss tax rate that I just mentioned. For the second quarter and for the full year, we now expect our adjusted effective tax rate to be approximately 21%. And importantly, as always, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. Now let's turn to slide nine. Sales of $3.83 billion were flat on a reported basis and down 1% on an organic basis year-over-year. Adjusted operating margins were 19.1% in the first quarter, expanding 290 basis points year-over-year despite flat sales. And as Terrence mentioned earlier, this was driven by margin expansion in our Transportation and Communications segments. Adjusted earnings per share was $1.84 up roughly 20% year-over-year driven by the strong margin expansion. Turning to cash flow. Cash from operations was $719 million. Free cash was a first quarter record of $570 million. Also in the quarter, we deployed roughly $600 million to shareholders through share buybacks and dividends and also utilized roughly $350 million for the Schaffner acquisition. Our long-term capital strategy remains unchanged, which is to return approximately two-thirds of free cash flow to shareholders and use one-third for acquisitions over time. Before I turn it over to questions, let me reinforce some of the key points that we discussed today and share how we are thinking about our performance and what we expect to be a slow macro environment. We are continuing to take action on the things we can control to improve our financial performance and you see this reflected in our strong results for Q1 as well as our expectations going forward. On the topline we continue to benefit from secular growth trends and you see this in the outperformance we are delivering versus some of our key markets we serve. You have been seeing the benefits of our global leadership position in electric vehicles, but other growth applications like artificial intelligence are just getting started. Below the topline we are successfully executing on multiple operational levers, which have been discussed earlier on this call. As we move forward, our focus continues to be on margin expansion and earnings growth despite the slow macro environment. Finally, we remain excited about the opportunities we have ahead of us to drive value creation for all stakeholders. And with that, let's open up the call for questions. Sujal Shah: Thank you. Can you please give the instructions for the Q&A session? Operator: Thank you. [Operator Instructions] Our first question comes from the line of Mark Delaney from Goldman Sachs. Please go ahead with your question. Mark Delaney: Yes. Good morning, and thanks very much for taking the question. Can you speak in more detail about what is better or worse than you'd previously been anticipating with respect to the quarter and outlook? And on the broader topic of what areas are changing versus your prior views, do you still think your auto business can outgrow auto production by mid-single digit percent or shifting EV production plans from auto OEMs impact that? Terrence R. Curtin: Hi, Mark, thanks for the question. Let me start with the first part. As we said on the call, things overall pretty much came in as we expected here in the first quarter. And when you think of the topline, I think really the two moving parts we saw, one was that was better and one was that was a little worse. And the one that was better was we saw actually auto production was a little stronger, it was little bit over 22 million units and that's really driven out of China. And you all know the great China position we have and certainly capitalize on it. So that was a little bit better. The area that was a little bit worse is, our Industrial Equipment business. We highlighted back in our September quarter that we started to see some destocking, I would say that got incrementally worse both through our channel partners. We saw that which is where we indirectly touch customers and we also saw that to get a little bit deeper in Europe probably to call out a region a little bit. So they were on the topline, what was a little bit better or worse. On the bottom line and I know Heath, talked about and I talked about it, margin performance by our team was better and it was both in Transportation and Communications and that drove the EPS fee, and we had a little bit of a higher tax rate that the margin covered that. The second part of your question around auto content outperformance, I said on the pre-remarks that we do believe EV production is going to be up about 25% this year. It's really going to be driven, two-thirds of EVs are made in Asia. That's our largest region in automotive for our revenue and we're going to continue to capitalize on it. So while there are some places in North America and Europe you hear maybe the growth rates won't be as high, Asia had been making up for it and you will get the 4% to 6% outperformance that we always talked to you about. We feel good about that. Sujal Shah: Okay. Thank you, Mark. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Wamsi Mohan from Bank of America. Please go ahead with your question. Wamsi Mohan: Yes. Thank you. Good morning. Terrence, maybe just a follow-up on your point about very strong margins, right, you really had very standout margins both at gross margin level and at operating margin level. Can you maybe parse a little bit about the impact that you saw from these actions you have taken, I think you alluded to a series of those restructuring footprint, EV mix and so on. And what do you think is sustainability of that and how that translates into segment margins for the rest of the year? Thank you so much. Terrence R. Curtin: Hi, Wamsi, thanks for the question. I'm going to let Heath take that. Heath Mitts: Sure. Wamsi, listen, there's we've talked here for a while about some of the journey that we've been on and we've taken some outsized restructuring charges over the past few years. Many of you have pointed out, it's not lost on us, but we're starting to see in a more meaningful way some of that footprint consolidation come into, to the benefit of our margins and obviously translates into earnings and most of that you do see in gross margins. So, Terrence, in the call, he mentioned execution, which we include footprint in there. There's also portfolio optimization moves that we've made in terms of Jettison low margin product lines and you'll continue to see a little bit of that as we move forward. Last year, we talked a lot about the price actions that we've put in place and those have stuck, and we continue to be very diligent on that. And then quite candidly in some of our businesses where we see stability versus where we've been running in the last few years that really creates an operating environment where you can take advantage of lower cost structures. And I think it's important as we think about the volatility that we've had over the last several years that has started to stabilize and where we play as part of many supply chains out there when we start seeing order patterns that are a little bit more consistent with our suppliers performing more consistently. It allows us to run our factories more consistently and you certainly saw that. The first quarter was probably a little overheated in Transportation because of the tick up in auto production north of 22 million units, but even as we bring down that to closer to the 21 million unit a quarter level, we still feel confident that we can run at the target margins for that segment Transportation being target margins of roughly 20%. So, we are making that statement on this call here today. For the Communications segment, we have been able to, I'll say improve the margins on a little bit lower revenue. We're not committing that we're going to be at 20% here yet which is the target margins for Communications at these revenue levels. This thing tick up, you should continue to see us in the high-teens from an operating margin perspective. And then Industrial, Industrial is right in the mid-teens and we would expect it to run in the mid-teens throughout the rest of this year. There's a couple of things at play there. Obviously, the elongated destocking situation in our Industrial Equipment business which is not just the largest piece of that segment, but also most profitable piece, does have the impact and we've talked about that in the last couple of quarters. And then we start layering in acquisitions that does have a dilutive impact. And the acquisitions are terrific opportunity for the growth of that business and opportunity that it presents for our stakeholders at the same time bringing the deal in generally comes in with diluted margins that we have to absorb and that's no different than what the Schaffner acquisition that we bring into it. So when you add all that up, Wamsi, we feel good that as we move through the year our operating margins at the TE level will have an eighteen handle in front of it, plus or minus will be humming better than we did in 2023 and feel good about the opportunities to move forward from that as we continue our journey. Sujal Shah: All right. Thank you, Wamsi. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Amit Daryanani from Evercore. Please go ahead with your question. Amit Daryanani: Thanks a lot. Good morning, everyone. I guess my question really is around there's been a fair bit of worry around what end demand trends look like on a broader level. And I understand your commentary and what you're seeing is very stable compared to a lot of the semiconductor companies I think right now. But I'm hoping you can talk and help us understand, orders in December quarter are down sequentially in aggregate has been flat for [CIS] (ph). Is that a concern that perhaps that second derivative is starting to shift negatively? I'd love to understand how do you think about orders being down sequentially versus your broader commentary that things are fairly stable? Thank you. Terrence R. Curtin: Yes, sure, Amit. Thank you for the question and couple of things. First off being our orders were up in all the segments year-over-year by 4%. And I think you also not only have to look at orders, but we continue to have a backlog that's about $6 billion. So, I think we've communicated pretty consistently. We expect as the environment gets better that backlog will work down. I'll tell you we aren't seeing cancellations. So, I know some of the semi companies talk about that, but we have to realize, our products are very different than semiconductors. Lead times are a lot shorter and really the element during COVID, was we couldn't hit or lead times consistently we did not really extend lead times. So, when we look at the orders in the quarter like I said on the call they came in where we expected except for, Industrial Equipment was a little weaker. Otherwise, they came in where we thought they would be coupling the orders with the backlog. And I think you can continue to expect, we're probably going to backlog below one as the backlog continues to work down to get a little bit more normalized with service levels improving. I think from the backdrop when we think about Transportation. We do expect global auto production to come down from a little bit over 22 million units in the first quarter to 21 million units, and we think it will run at 21 million units for the year per quarter for the rest of this year to get to about 85 million units in total. In Industrial, you see sequential order increase which really is being driven by AD&M, Medical and Energy. So, you're continuing to see that and that supports why we believe we're going to have Industrial Solutions segment revenue increase. And in Communications, what's nice is we are seeing stability even though there are some pockets around enterprise applications, pure telecom applications. We aren't seeing a slowdown in artificial intelligence and cloud, but there are some pockets out there in the telecom and the enterprise that are still working some things off, but it feels like there's light at the end of that tunnel. So, I think the last thing is our guide for the second quarter is going up to $3.95 billion of revenue and it's really based upon both the orders of $3.8 billion plus the backlog that we see. And I think we've laid out how we're thinking about the world for the rest of the year. Sujal Shah: Okay. Thank you, Amit. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Christopher Glynn from Oppenheimer. Please go ahead with your question. Christopher Glynn: Thank you. Good morning. I had a tuning question about some of the channels. So, with the Industrial Equipment organics pretty steep. You seem to reference just the channel partners, really they are curious if you could juxtapose the actual end market on that specifically. And then in auto, any excess inventories in certain regions of the world, so curious? Terrence R. Curtin: Thanks, Chris and good morning. So, let's break this apart because, yes, in the comments we do talk about destocking. We do not see destocking of our product in the automotive space at all. Our service levels are 90% plus on the ship to request, supply chain is flowing and honestly I think you see it in our results. So, in automotive we do not see destocking of our products. When you come to the destocking that we talk about and Chris you said it right, I think you have to think about TE's world and there's the world where we service our customers directly and then there's the world that we use our distribution partners to cover where we can't do directly. And in TE at the total company level, 80% of what we do, we cover directly. And honestly our revenue on that 80% in this quarter we just closed was up low-single-digit. So, that is where our supply chain is completely tied into our customers. And that's an indicator we look at around destocking. Now the piece that goes through our channel partners, and they are working down inventory that was down 14% in the quarter. And that's where you truly see that you see the biggest impacts in Industrial Equipment, you see it in appliances, you see it also in our data devices business where those business have upward to 50% of their revenue that go through distribution partners to get to their customers. So, that is really where we see the destocking occurring. One of the things that was nice this quarter, we saw that that inventory did not go up, leveled off, we do see in appliances, it has improved. I talked about D&D, it's in pockets, and Industrials later to the party of destocking, and I think that will take a little bit longer. But it's also the element ties back to Amit's question, when we're looking at our direct business levels with our customers, where we touch them directly, we have low-single-digit organic growth you exclude what goes through the channel partners. And I think, we'll continue to have destocking with us here especially in the Industrial Equipment business and that drives that big decline of organic growth, but that will get behind us at some point. And I think it also shows those areas that Heath, talked about where we're benefiting from electric vehicle, where we benefit from other content drivers is really allowing us to basically absorb the destocking we're doing and stay relatively flat. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Chris Snyder from UBS. Please go ahead with your question. Chris Snyder: Thank you. I wanted to follow-up on some of the earlier questions around EV penetration and auto outgrowth. The Q1 outgrowth came in below target levels despite still supportive price is what we would consider normalized. It sounds like there's not much destocking headwinds in there. So, is there -- is this just some pressure from softer EV penetration? Are there mix headwinds? Is it just that we shouldn't think about this on a one quarter basis? And then lastly, if China took share of global auto production in the quarter, is it fair to think that that's a headwind to outlook because I know it's a lower content than the U.S. and Europe? Thank you. Terrence R. Curtin: Yes, so a couple of things, Chris. First off on the content outperformance, I appreciate you saying what I'm going to say. Please don't look at it on an individual quarter basis. You will see times when it's way ahead. You'll see times when it's behind and I really think you have to look at it over a period of time because there is interplays between where we are and certainly getting to the OE. So, net-net you will see it, it does get into being on every platform in the world. Those are types of things you're going to get on a quarter a little bit off. We were about 300 basis points of outperformance in the quarter. So, it was a little bit below what we said, but also what I said on the call was we expect to be in that 4% to 6% range for this year is important. On your other part of, hey there's been a lot of noise around EV adoption and production. Our view of it's the same. And I just, I am going to stress as always, I know sometimes because we hear about U.S. car companies and European car companies. I'm going to ask us to really take it up a level and remember global car production is what matters to TE. There's going to be about 85 million cars made in the planet this year. The majority of them will be made in Asia. And I would also tell you when you look at EV adoption two-thirds of EVs are driven in Asia. And this is where our strongest region is, when you also think about those 20 million electric vehicles, whether that's a full battery electric, a plug-in hybrid, hybrids like a Prius that don't need to plug. You really got to sit there and go. Those 20 million units are bigger than USR and automotive production in the United States. So, I really ask us when we think about EV trend that need to be a global lens. And I was just in China last week, and when you're in China, you see EVs all around you, you can tell by their license plate color, they're green, they're different color than a normal license plate. And you see that where that adoption is going and you see it not only full battery electric, you see it in plug-in hybrids. And what's great is, we have share that is similar with the local OEMs as you do with the multinationals, and you see that in our growth and you also see when China production goes up, our revenues are a little bit stronger. So, the content of 4% to 6% hasn't changed. Our view of what EV adoption does for our content on a full battery electric it's about 2x, on a plug-in hybrid or hybrid is about 1.5 times are normal $70 that we would have on a nice vehicle, hasn't changed. And I think what's really great is our global business is really making sure we're bringing the innovation to life, and also serving our customers with their innovation to make it happen. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Steven Fox from Fox Advisors. Please go ahead with your question. Steven Fox: Hi, good morning. I was wondering if you could just dig into the Schaffner acquisition a little bit more in terms of what it adds to the industrial portfolio and what kind of sales and margin profile we should expect going forward from it? Thanks. Terrence R. Curtin: Yes. Thanks Steven, good morning. And Heath and I'll hamming, this one. So, first off Schaffner, when we talk about bolt-on M&A for us is where areas that around areas we really want to be focused on from an application, we can drive value for our customers, but also can we acquire things that drive value for you as owners? And Schaffner is a great example of it. It is going to be in the factory automation space. Schaffner was a Swiss company and one of the things they do there, one of the global leaders in electromagnetic filter solutions and to keep it simple, it really is how do you have filters that when you're bringing power into factory automation application through the motors and the drives, you really keep that pure from interference. We already had a product line that did this. It was very much a U.S. product line with Schaffner, they were shown in Europe had a nice Asia presence and it really brings it together and that gets us deeper into factory automation. The revenue of it is about $40 million a quarter. It is something that we will improve the profitability up to the levels that we say. And Heath, I don't know if you want to add more to it. Heath Mitts: No. I think Steve this is right down the middle of the fairway in terms of how we look at bolt-on deals and I kind of compare it and similar to the ERNI acquisition that we did in 2022 which was another industrial -- another business that rolled through our Industrial Equipment business unit within that segment. From a -- although it's going to contribute $40 million a quarter or so out of the gate, our focus is obviously driving where the value creation opportunity is and that's on getting the cost structure in-line with where we would think about things in a TE world as well as really focusing on the cash on cash return here. It's not going to be contributing much to EPS in the first year, no different than ERNI did, but following a similar trajectory to ERNI, it does really fit well within our margin expansion strategy and our ability to create cash on cash returns for our shareholders. So, I'd say in general it's, these are the nice size of deals we’d like to do and it's a fragmented space still, so there's still opportunity to add things in this space, even if we have absorb some dilution in the margins at the segment level. Sujal Shah: Okay. Thank you, Steve. Can we have the next question, please? Operator: Thank you. Next question comes from the line of Joe Giordano from TD Cowen. Please go ahead with your question. Joe Giordano: Hi, guys. Good morning. Terrence R. Curtin: Hi, Joe. Good morning. Joe Giordano: Hi, I just want to ask on the AI side within Communications. So you mentioned you have like a 50% content lift in these AI type applications now. I'm just curious how much of what's being built for AI is simply replacing stuff that otherwise would have been built before AI? So it’s like, if you're doing $200 million of AI related content in 2024, is that essentially like replacing what would have been like $133 million of content of older type stuff and like the more of than last year? Terrence R. Curtin: So couple of things, Joe. What you're talking about is more cannibalization that goes into where capital gets deployed. I would say you're still going to see servers deployed that will support AI. What we're trying to really get out there is, what is the increased content to support the workload? So when you sit there, I won't assume that it completely cannibalizes everything, but what's really nice with the innovation that we bring and how these workloads are set up on the GPUs and the TPUs, it really creates a higher revenue level that we expect as AI continues to ramp. And when you think about our year and I said it on the call early on, we think we're about $200 million this year of AI revenue. It will continue as program launches occur, build throughout the year and probably 60% plus will be in the second half versus what's in the first half. And we'll get the growth in our Communications segment in the second half of our year. Sujal Shah: Okay. Thank you, Joe. Can we have the next question, please? Operator: Thank you. Next question comes from the line of Samik Chatterjee from J.P. Morgan. Please go ahead with your question. Samik Chatterjee: Hi, thanks for taking my question and Happy New Year as well. I was actually going to follow-up on the previous question on Communication and AI. You're now indicating a $200 million contribution from the AI piece of the business, you raising that, I mean, now from $150 million. What’s the driver of the raise? Is it more capacity or demand? And then you've talked about a $1 billion order booked in the past. How has that pipeline continued to expand? And as you see that revenue come through, what are the implications on margins for the Communications segment? Thank you. Terrence R. Curtin: So, hi, Samik, thanks for the question. First off being when you look at that it is the increased element is demand and wins. To the second part of your question the $1 billion is in excess of $1.3 billion. So, we continue to have momentum on that. And as Heath, sort of said, when we think about margins as that comes in, we're going to be in the high-teens for that segment. So, even on a little bit lower revenue than we said before, we're going to be in the high-teens this year in the Communication segment as that comes in. Sujal Shah: Okay. Thank you, Samik. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Luke Junk from Baird. Please go ahead with your question. Sujal Shah: Sorry, Luke, are you there? Why don't we go to the next question and we'll have Luke rejoin. Operator: Thank you. Our next question comes from the line of Matt Sheerin from Stifel. Please go ahead with your question. Matt Sheerin: Yes, thanks. Good morning. Terrence, I wanted to circle back on the Industrial sub segments. You really just called out the factory automation, industrial automation area, it's being weak on the destocking, other markets growing. But we are hearing from other suppliers and EMS companies have some slowing demand and inventory issues across pockets of medical and even some of the renewable energy areas. Could you give us a read on what you're seeing in terms of inventory and is that more of a direct to OEM sales so there's not as much noise in the channel? Terrence R. Curtin: Yes, Matt, thanks for the question. Couple of things, first off being in Medical, and that is a direct sale, it's very similar to how we serve automotive. There's not much it goes through the channel there, not much it goes to EMS either. So, where we served that’s market is very much the big interventional players of the world and you can see like our growth was double-digit very strong and in-line with where interventional procedures are growing double digits. So, we don't see that. In the Energy where we play in service in utilities and on the renewables, I would tell you we saw wind can slow a little bit more due to financing and I would say then I would say destocking, but we continue to see acceleration in solar applications and any weakness that we've seen in the energy business has really been around utility spending primarily in Europe. We did see a little bit of slowness of utility spending on their grids in Europe and that's why you saw the growth rate being a little bit lower than what we expected to be middle and longer term in that middle high-single-digit. Sujal Shah: Okay. Thank you, Matt. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of William Stein from Truist Securities. Please go ahead with your question. William Stein: Great. Thanks for taking my question. I think you all have done a very good job on the margins this quarter, posting some pretty solid upside. You've explained it a little bit, but I'm hoping you can linger on this a little bit more. We know you had these aspirational goals. You had this significantly better than expected or better than guided quarter. And maybe that's sort of the question that I have. Is this a matter of having achieved some goals earlier than you expected, some things you thought might take several quarters, wind up being realized earlier? Or are we just looking at a higher level of profitability and we'll continue to see some improvement from this point? And what changed, you've been pursuing these, all the things you talked about, you've been pursuing them for a while, suddenly we get this upside. Did something change in this regard in the quarter? Thank you. Heath Mitts: Sure. Well, listen, I think certainly we went into the quarter expecting auto production builds of about 21 million units and we stated that last quarter. We came in north of 22 million and it shows that when you get the cost structure and the fixed cost base and the number of rooftops in the right location to the right number that you can really leverage that incremental volume. And that's really what we saw on the Transportation side within the, there’ll be auto business there. So, as we come back down to about 21 million units a quarter production, global production, we do expect to be able to hold to that target margins. But there's a lot of different levers involved there. It's getting the cost structure right and then obviously having a more stable environment to be able to plan towards and deliver towards. And all of those things came together nicely in the quarter, but I feel good about these volume levels that we'll be able to hold to our target margins. And I think that's just part of this journey that we've been on. If you go back last several years even coming through the pandemic driven market, we've been running well below 85 million units globally in terms of auto production. And now that we're starting to get back up to that we're starting to see the benefit. We’ve said that getting to target margins for our Transportation business would require a couple of things one of which was a bit more volume market support there and we're certainly starting to see that. So, we're able to get there a little faster. Some of that was market support. Some of it was getting the cost structure in place a little bit faster as we've taken some facilities off in within our auto world offline in Western Europe and seeing the benefit of that. When you get into communications, we're running a little bit hotter there. But again it's having that structure in the right place and being able to execute. So, I wouldn't call out and give relevant to size of the segment that can swing out around a little bit. But we feel good about where we are margin wise. And most of this upside that you're referring to is driven out of the Transportation business. Sujal Shah: All right. Thank you, Will. Can we have the next question, please? Operator: Thank you. We have a question from Luke Junk from Baird, once again. Please go ahead with your question. Luke Junk: Great. Can you hear me now? Sujal Shah: Yes. Terrence R. Curtin: Yes, we can Luke. Thanks for coming back on. Luke Junk: Okay. Yes, great. Sorry about the technical issues there. Terrence, just hoping you could comment on your ability to hold the line on neutral pricing in Transportation Solutions, especially in automotive this year. I guess if we look around the neighborhood, there are some companies talking about getting back to price downs. Just for TEL specifically, if you could talk about some of the factors that are helping me to keep that neutral pricing outlook that you had outlined earlier? Terrence R. Curtin: Hi, Luke, thanks for the question. I think when you look at it, I think one of the things we got to start with is what's happening with input cost and certainly we are not seeing a massive inflationary environment, but we're also not seeing a massive deflationary environment. Copper very important from a conductor and important connector and important moving both data and power around vehicle or any application, it's still up year-over-year. Certainly other things, we have freight down, but net-net, we're still seeing a pretty net neutral world. When it comes to input cost and you know how hard we worked to recover the inflationary costs and some of the things that help the margin that we're talking about today. But very honestly, we're talking to our customers about where the costs are and as we went through this our strategy has always been with our customers to recover the cost and that's what we did. So, I think there will be an element, we’ll be very driven on where the input costs at will dictate pricing. And that's been our approach and we've been very consistent as we communicate that to you across all our businesses. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: And the next question comes from the line of Shreyas Patil from Wolfe Research. Please go ahead with your question. Shreyas Patil: Hi, thanks so much for taking my question. I guess maybe following up on the last question. Maybe just to clarify, do you feel that if we were to eventually get to maybe a normalization of pricing, I think typically For TEL, you see price downs of maybe 1% or 2%. At the moment, it appears maybe pricing is up 1%, there's enough restructuring or other cost actions where you can still sustain that 20% margin that you're talking about going forward? And then maybe also just curious how to think at a high level about the relative profitability in the auto business between the EV and kind of existing ICE product? Just as we think about if potentially there were to be some kind of slowdown globally in EV adoption? Thanks so much. Terrence R. Curtin: Sure. Couple of things. Yes, no, First off being, in whatever our normal environment is assuming there's deflation we can drive certainly there would be productivity we would want to get back to our customers to make sure they're competitive. That was the environment we always articulate when we said we would be around 20% margin. So we never said when we've always talked to you about this, we need price increase to get to our 20% margin. The pricing we've done is to recover cost in a pretty dramatic inflationary environment over the past two to three years and we did it on a lag. So, it did impact our margin early on when we saw the acceleration. So, I don't think that we start seeing deflation again materials, you could see a little bit of price back, but we're not there yet. And I'm sure we'll continue to talk about it. On ICE vehicles versus EV vehicles, I think there's two elements we have to be honest about. Half of our content that is on an electric vehicle is the same content that is on ICE vehicle. So, the profitability of those products are same whether it's an ICE vehicle or an electric vehicle because that's a low voltage architecture that carries over and doesn't drive the powertrain. For the element that is the high power products, we've been scaling that up and what we've said is we're going to continue to move the profitability of those product lines up to the segment average. We've made tremendous progress. It's still at lower scale than the ones that go over 85 million vehicles. But the progress that the team made has also been the contributor to where our margin is in Transportation. So, the team has done a nice job as we scale that versus when we were just investing and there were very few electric vehicles made. So, we saw the opportunity to increase there but the gap is closed significantly. Sujal Shah: All right. Thank you, Shreyas. Can we have the next question, please? Operator: Thank you. Our next question comes from the line of Asiya Merchant from Citigroup. Please go ahead with your question. Asiya Merchant: Great. You guys have done a great job on margins. And most of the questions on that have been answered. If I could just talk about your free cash flow generation, how we should think about that going forward given margins are expected to be here at this level? And any thoughts you can have on M&A as you guys think about it for the remainder of the fiscal year? Thank you. Heath Mitts: Sure. First of all, thank you for the question on cash flows, always near and dear to my heart. We did have a good start to the year with our free cash flow which was further momentum from the strong free cash flow we had in FY2023 and sets us up well on the balance sheet side. As we -- our guidance for the year which is really not a specific number for cash but it's really unchanged which is that we feel good about the 100% cash conversion to net income that we had achieved largely in FY2023 and how we maintain that momentum moving forward. So, we've done some things and sometimes we had flat working capital at different periods of time but the rigor is there and our ability to maintain particularly payables receivables inventory levels in addition to our CapEx spending and then what we have to fund for restructuring tends to be the different levers that we that we pull. But we feel good with where the momentum is relative to that and where we're going to land for the first half of our fiscal year. In terms of the M&A environment, that's again largely unchanged. There's things that are active out there. Some things are more interesting than others. The Schaffner deal because it was a Swiss public company it was announced early on and we got that across the finish line here in December. But there's a lot of other things that are more private in nature that are going through various processes that you know again things that we have to make sure that it's the right strategic fit for us that we're the right owner for it even if it fits our strategy and then that the numbers work. And at any given time, you probably expect us to be looking at about a half a dozen deals. Not all of those get close to the finish line. So but it is an active environment we have seen as we've moved through the count, moved across the threshold in the calendar year that activity is starting to pick up some. So, I'd like to be able to think that we can get another deal or two done in our fiscal year. But as always, you have to stay tuned. Sujal Shah: Okay. Thank you, Asiya. Can we have next question, please? Operator: We have no further questions at this time. Sujal Shah: Okay. Operator: I do apologize. We do have one final question from Mr. Colin Langan from Wells Fargo. Please go ahead with your question. Colin Langan: Great. Thanks for taking my question. Just one follow-up, you didn't talk about tax. I think you mentioned on the call the rate is about 21% going forward was a bit higher than you've seen historically. How should we think about that going forward? Is that a permanent rate, is that impacting some of the changes on global minimal tax or can that be kind of brought down over time? Heath Mitts: Well, Colin thanks for the question. The change from our original guided rate last quarter was went into our fiscal year of 20%. We've increased that to 21% and that was very specific to the Swiss tax rate going up sooner than what we had anticipated. And so we have to absorb that and put it through our financials as well. As we move forward there's a lot of moving parts relative to the global minimum tax that different jurisdictions will be enacting at different time periods. Some of those are more meaningful than others. There's tax planning that you would expect us to have underway that we would think about not just from how things that we can do to work down our ETR but also probably more importantly how do we protect ourselves from the cash tax rate. And so there's nothing to report there today because there's a lot of unknowns out there. But there's a lot of activity underway to try to anticipate and look around the corner there. So, to answer your question I think 21% is a good rate to work on going forward and we'll continue to work to mitigate any pressures. Sujal Shah: All right. Thank you, Colin. Thanks, Colin. We appreciate everyone joining us this morning, if you have additional questions, please contact Investor Relations at TE. Thanks again, and we hope everyone has a nice day. Operator: Thank you. Today's conference will be available for replay beginning at 11:30 A.M. Eastern Time today, January 24th, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. You may now disconnect.

Operator: Everyone thank you for standing by and welcome to the TE Connectivity Fourth Quarter and Final Year Results Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's fourth quarter and full year results for fiscal 2023 and outlook for our first quarter of fiscal 2024. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. I also want to remind you that our Q4 results in fiscal 2022 included an extra week. In this call, year-over-year income statement and orders comparisons for Q4 and fiscal 2023 are made excluding this extra week. You will find related reconciliations in the press release and presentation tables. Finally, during the Q&A portion of today's call, we're asking everyone to limit themselves to one question, and you may rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal and we appreciate everyone joining us today. And to start off, I am pleased with what -- that we delivered revenue in line with our guidance and earnings per share that was ahead of guidance, driven by strong execution by our teams across our segments in what continues to be a dynamic market environment. Before we get into the slides, I do want to take a moment to discuss our performance for the full year, along with what we're seeing in the markets versus our last call. When we look back on fiscal 2023, we set out to accomplish three key initiatives that we shared with you. First was to continue to demonstrate the strategic positioning of our portfolio through alignment to secular growth trends. Second was to deliver strong free cash flow with a focus to drive down inventory levels. And lastly, to improve our margin performance through both cost reduction and pricing actions to offset inflation. As Heath and I will discuss on today's call, our teams executed successfully on all of these initiatives during the year, and it sets up for a good jumping off-point as we enter 2024. When we think about the performance of the portfolio, our results demonstrated continued growth in the Transportation and Industrial Solutions segments, which offset market weakness in Communications and headwinds from a stronger dollar. We generated growth above the market and a number of our businesses as we continue to benefit from secular trends, including increased global production of electric vehicles, adoption of renewable energy, and applications for cloud as well as artificial intelligence. We delivered record free cash flow of $2.4 billion for the year which represents over 110% conversion, and we also returned $1.7 billion to shareholders for the year. We drove down our inventory levels in response to improvements in our supply chain. And at the same time, we improved our service levels to our customers. Our cash generation model gives us both confidence as well as opportunities to return capital to shareholders and support bolt-on M&A activities which is aligned with our use of capital strategy. We also worked to drive margin expansion in the second half of 2023, and we delivered on this commitment. We improved our exit rate on adjusted operating margins to above 17% as we close the year, despite our Communications segment being in the bottom of the cycle. Now, let me share what we're seeing in our market since our last call 90 days ago. And on an overall basis, markets are playing out as we expected. We have most of our key end markets on a growth or recovery trajectory with a few markets continuing to cycle as we previously discussed with you. Our view of Transportation end markets remains consistent with our prior view with global auto production remaining stable. Our growth will continue to be driven in Transportation by content outperformance that leverages our leading global position in this market. In our Industrial segment, three out of our four businesses continue to have growth momentum. You see our strong positioning in renewable energy with growth from both wind and solar applications. Commercial air sales continue to grow as this market recovers, and our medical business is benefiting from increases in interventional procedures. And in our Communications segment, while sales are down significantly versus last year's cyclical peak, we saw a sequential growth in orders in our fiscal fourth quarter due to early ramps of artificial intelligence programs and we continue to expect volume growth from AI applications as we move through 2024. And finally, I do want to reinforce that the way that we think about long-term value creation remains unchanged. It is built on the pillars of secular growth trends that will drive increased content in the markets where we position TE, strong free cash flow generation with discipline around how we deploy capital and certainly levers up to enable margin expansion as we move forward. So, with that as an overview, I'd answer that you turn to Slide 3, and I'll get into the presentation and I'll discuss some additional highlights for the fiscal fourth quarter as well as the full year, and Heath will get into more details during his section. Our fourth quarter sales were $4 billion, which was in line with our guidance. Transportation segment organic growth of 5% was offset by declines in Communications due to the ongoing market weakness that we've been discussing. Adjusted earnings per share was ahead of our guidance and up 2% versus the prior year at $1.78 with adjusted operating margins of 17.3%. Cash flow from operations was a very strong $1.1 billion and free cash flow was $945 million in the fourth quarter, and both of these were quarterly records for the company and I think this just reinforces a strong execution by our teams, I already highlighted. For the full year, sales of $16 billion were flat on a reported basis, and we had organic sales that were up 3%, and this 3% organic growth was driven by our Transportation and Industrial segments. Adjusted operating margins were 16.7% for the full year. But on the margin side, the real highlight was that we expanded adjusted operating margins by 120 basis points from the first half to the second half of the year due to our team's execution. As we look forward into the first quarter of fiscal 2024, we are expecting that first quarter sales will be $3.85 billion and adjusted earnings per share to be around $1.70. On a year-over-year basis, we expect sales to be flat with organic growth in our Transportation and Industrial segments. We do expect adjusted EPS expansion of over 10% in the first quarter and strong margin expansion as well year-over-year. So, if you could turn to Slide 4, let me discuss order trends and what we've seen. We continue to benefit from markets with strong secular growth trends, and this is offsetting weakness in markets that are cycling or being impacted by inventory destocking. At the total company level, we continue to see stability in our order levels. Orders of $3.9 billion in the fourth quarter were consistent with order levels for the past several quarters, and our backlog remains near record levels. Transportation orders grew both year-over-year and sequentially, reflecting ongoing stable global auto production. Industrial order patterns reflect some seasonality across this segment as well as ongoing destocking in the Industrial Equipment end markets And I ask you to keep in mind that 50% of our Industrial Equipment business does go through the distribution channel, and we expect that destocking here to continue for the next couple of quarters. In the Communications segment, while we continue to see our customers work down inventory in their supply chain, we had our second consecutive quarter of sequential order growth which is being driven by new orders for artificial intelligence applications. So, with that as an overview of orders, let me now get into year-over-year segment results in the quarter. that are shown on Slides 5 through 7, and you can see the details on each one of those slides. So, starting with Transportation. Our sales growth remained strong. It was up 5% organically year-over-year, and it was driven by our automotive business. In our automotive business, we grew 9% organically with growth in all regions. Our performance continues to be driven by our leading global position in electric vehicles, electronification trends within the vehicle as well as positive impact from pricing. In fiscal 2023, electric vehicle and hybrid-electric vehicle production grew globally by approximately 40%. Most of this growth was driven by Asia, and we expect this region to continue to be the growth driver for electric vehicles. As you know, we generate approximately 2x the content in electric vehicle platforms versus combustion engine vehicles. So, we expect our content per vehicle to continue to expand as we move forward. Overall, we expect auto production next year to be about 21 million units per quarter with continued growth in hybrid and electric vehicle production. In our Commercial Transportation business, we did experience a 7% sales decline, which was in line with what we expected and was driven by market weakness in both North America as well as China. And in our Sensors business, we saw growth in automotive applications that was offset by weakness in industrial applications. At the margin level for the Transportation segment, adjusted operating margins were 18.4% as we expected and up 170 basis points year-over-year as our teams executed on the cost and price actions that we've been highlighting to you. Now, let me discuss the Industrial Solutions segment. And while sales were flat in the fourth quarter, I think what's really nice as you look at the slide is that we have three businesses that are continuing on a very good growth trajectory. Our Aerospace, Defense and Marine sales were up 14% organically, with ongoing improvement in the commercial air market. In Medical, sales in the quarter were up 19% organically, driven by ongoing increases in interventional procedures. And in our Energy business, as you know, we positioned this business around renewables, and you're seeing the benefit of this again this quarter with 6% organic growth. Finally, in the Industrial Equipment business, our sales were down 21% organically driven by the continued inventory digestion in the distribution channel, a trend that is similar to what you're hearing from other companies. Adjusted operating margins were 15.9% in the quarter, reflecting the impact of expected volume declines in the Industrial Equipment business. So, let's turn to Communications, and while our organic sales were down 27% year-over-year, they were up 9% sequentially to $463 million. We are seeing the benefits from the early ramps of artificial intelligence programs, which will strengthen as we move through 2024 and beyond. Adjusted operating margins were 15.3% for the segment and an increase of over 100 basis points sequentially. And as we see destocking and AI increases in volume, you'll see margins expand in this segment as we move through 2024. So, with that, let me turn it over to Heath, who will get into more details on the financials as well as our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 8, where I will provide more details on the fourth quarter and fiscal 2023 financials. Sales of $4 billion were flat on a reported basis year-over-year. Adjusted operating income was $699 million with an adjusted operating margin of 17.3%. GAAP operating income was $635 million and included $57 million of restructuring and other charges and $7 million of acquisition-related charges. For the full year, restructuring charges were approximately $260 million, which were in line with expectations. Our restructuring efforts over the last several years have enabled a more efficient operating footprint, while continuing to localize to support our customers in the regions of the world where they operate. I expect restructuring charges to decline significantly in fiscal 2024 and to be approximately $100 million for the year. Adjusted EPS was $1.78 and GAAP EPS was $1.75 for the quarter and included a noncash tax-related benefit of $0.16 related to a decrease in the valuation allowance. Additionally, we had restructuring, acquisition and other charges of $0.19. The adjusted effective tax rate was approximately 19% in both Q4 and fiscal 2023, which was as expected. For Q1 and for fiscal 2024, we expect our adjusted effective tax rate to be roughly 20%. And as always, importantly, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. Turning to Slide 9 for additional information on our full year performance. Fiscal 2023 sales were $16 billion, while sales were flat year-over-year, we had 9% organic growth in Transportation segment and the Industrial segment grew 5% organically despite the softening in the Industrial Equipment business. However, the growth in these two segments was offset by roughly $1 billion of headwinds from the cyclical weakness in the Communications segment that we've discussed, combined with the impacts from the stronger dollar. Stronger dollar negatively impacted sales by approximately $430 million versus prior year. And due to the further strengthening of the dollar against other currencies, we expect year-over-year currency exchange headwinds of approximately $250 million in fiscal 2024. Adjusted operating margins were 16.7% for the full year with margin expansion of 120 basis points from the second half of the year -- I'm sorry, 120 basis points from the first half to the second half of the year driven by both cost reduction initiatives and price increases. And this was most evident in our Transportation segment, our margins expanded over 200 basis points from the first half to the second half, exiting the year in the mid-18% range. At the company level, we exited the year with adjusted operating margins of 17.3%, and we expect to expand from this level in fiscal 2024. Adjusted EPS was $6.74 and included a $0.45 headwind from currency exchange rates. Turning to cash, we generated record free cash flow of approximately $2.4 billion in fiscal 2023, and with roughly $1.7 billion returned to shareholders through share buybacks and dividends. Free cash flow was up 35% year-over-year with over 100% conversion to adjusted net income, and we expect to generate approximately 100% free cash flow conversion going forward. I am pleased with the progress our team has made in reducing inventory levels through the year, which contributed to our strong free cash flow. Our cash generation model, coupled with our strong balance sheet will enable us to continue to be aggressive with capital return to shareholders while pursuing bolt-on acquisitions, including the Schaffner acquisition that we expect to close at the end of this quarter. Before I turn it over to questions, let me reinforce some of the key points that we discussed today. While markets remain dynamic, we are continuing to take action on the things we can control to improve our financial performance. We worked hard to get to a better exit rate on margins at the end of the year but we still have work to do to get to our business model of margin targets. We do expect to make progress on further margin expansion and EPS expansion this year. Most of our end markets have a growth or recovery trajectory and we expect the destocking that we have seen to improve as we go forward. Our balance sheet is solid. We are demonstrating our strong cash generation model, and we remain excited about the opportunities we have ahead of us to drive value creation for all stakeholders. So, with that, let's open it up for questions. Sujal Shah: Audra, can you please give the instructions for the Q&A session. Operator: Thank you. [Operator Instructions] We'll take our first question from Mark Delaney of Goldman Sachs. Mark Delaney: Yes, good morning and thanks for taking my question. There's been so many crosscurrents and various end markets including in the UAW strike, inventory destocking in industrial and content opportunities like AI and electrification. So, I'm hoping you could help us better understand in a bit more detail key trends by end market and what you expect going forward, including your assumptions by end market in 1Q guidance? Terrence Curtin: Sure. Thanks Mark. So, let's talk about quarter four first a little bit because we went through a lot there and I think when you look at on the top line, it came in exactly as we expected. What was a little bit better than we would have expected, certainly, automotive, where we had growth in all three regions of the world as well as in our D&D and our Communications segment was a little bit stronger due to the ramps of artificial intelligence that I mentioned in my comments. The area that was a little bit weaker was Industrial Equipment. And we highlighted for you last quarter, we were seeing some inventory destocking around channel partners. I would say that was a little bit worse and we think that's going to be with us for a little bit. And then certainly, we were head on EPS, and that was really driven on the conversion side in all operational. When you look at quarter one and our guide, in many ways, it's going to look a lot like quarter four. We're going to continue to have growth in Transportation. Three strong markets in industrial with the inventory stocking and Industrial Equipment. And then you still have some tough compares that we have in the Communications segment, but net-net, it's going to be flat on the top line year-over-year, and you're going to see margin that looks like the fourth quarter, and you're going to see really nice EPS growth year-over-year, that's 10%. So, orders have been coming in as we expected this quarter to 3.9, have been stable even with some of the destocking we're seeing, orders are staying stable. And I think that just shows the trends that you highlighted as we go into 2024. So, thanks for the question, Mark. Sujal Shah: Hey thank you, Mark. Can we have the next question please? Operator: We'll go to Wamsi Mohan at Bank of America. Wamsi Mohan: Yes, thank you. Good morning. Terrence, can you sort out some of the puts and takes in autos, given all the recent news around the D3 companies paring back on EV ambitions and potentially slower adoption rates of EVs? And also, you didn't explicitly call out the UAW strike. Did you not see any impact? Or is it yet to come in terms of any impact from that? Thanks so much. Terrence Curtin: Thanks Wamsi for the question. And you really had two very different questions there. So, let me take the latter part first, around the UAW. UAW impact on TE's negligible both in what, in the fourth quarter as well as the first quarter. And just to remind everybody, our global position is what's special about our automotive business. 80% of our business is outside the United States. And let's face it, that has no impact from the UAW. So, when you sit there, I don't -- we did not talk about it because it did not have a significant impact, and we don't expect it to have a significant impact in the first quarter. Now, let's move on to your EV question. And probably similarly, I'm going to remind everybody that we need to make sure when we think about EVs. EVs got up to 20 million units produced globally this year with two-thirds of those EVs made in Asia. And once again, reinforcing our global position. And EV adoption is never going to be a complete straight line up to the right. But what's really nice is you see with 20 million units made and on the road, the technology is working. It is being adopted. And the other thing you have is you certainly have consumers have choices and some EVs consumers are going to like, some EVs they're not going to like. And I think when you think about our opportunity, it is to build upon how the content opportunity that goes up that you saw this year -- and when as EVs grow next year, we're going to continue to get that. And in a full electric vehicle, we get 2x the content of a combustion engine. If it's a hybrid vehicle, it's about 1.5x. And we expect you're going to continue to see electric vehicles grow globally again next year. Maybe it won't be a 40% clip like this year, but it will increase next year. And let's face it in Asia, the biggest market is China. And China EV sales this year are up over 30%. On top of that, I'll remind you that China local OEMs have over 50% market share. They've continued to gain share versus Western OEMs. And what's really nice for TE, our content on a local EV by China OEM is strong, and our market share is strong. So, we don't have the phenomena we only are with the multinationals and not the local OEMs. So, feel very good about our position. I feel that EV trend is going to continue to have production growth globally as well as you're going to see that benefit like you saw this year and for the past couple of years, it's going to drive top line growth opportunity for TE as well. Sujal Shah: Okay. Thank you. Wamsi -- thanks Wamsi. Can we have the next question, please? Operator: We'll go to Steven Fox at Fox Advisors. Steven Fox: Hi, good morning. I was just wondering if you could dig in a little bit more into free cash flows. Obviously, you guys overperformed over 10%. Can you just talk about some of the dynamics that went into that? And then the expectations for cash flow this year, any of the dynamics and maybe talk a little bit about use of excess cash. It seems like it's -- the strategy is the capital allocation is consistent, but you did do an acquisition during the quarter. So, maybe that was [indiscernible]. Thanks. Heath Mitts: Well, Steve, thanks for the question. This is Heath. I'll take it. So, we talked a fair amount about free cash flow during the year, and it was during our fiscal 2023, and it was a focal point for us internally as well as what we've talked to you about. We know that we had to deal with the supply chain issues in the prior couple of years and we had to buffer some inventory as part of that. As we went into this year and as demand flow and so forth begin to stabilize and then our supply chain with our vendors begin to stabilize some. It allows us the opportunity to get really focused on driving working capital down despite some of the market conditions. So, I'm pleased with how we did, how we finished the year, but also provides some confidence as we go into FY 2024, which we're in right now, starting here in October that we're going to be able to maintain that momentum. The 112% conversion that we did in FY 2023 was a little rich, If I am being honest, it's a little bit richer than I would have thought we would have finished, but proud of our performance. As we think about 2024, I'm confident we can cover around a 100% mark in terms of cash conversion, which is a bit of a step-up from where we historically have trended. And it does avail a lot of optionality for us. You mentioned, Steve, that our capital allocation strategy is unchanged, and that is absolutely true. You should expect that we will continue to be diligent with the cash flow that's available to us. We will get back to our shareholders as appropriate and step up repurchase activity where it makes sense and when there's dislocations in the market relative to valuations. And so I don't think there's anything there that's different. You mentioned the acquisition we have coming up at the end of December. That's about a $300 million use of cash that will come off the balance sheet. But we also expect to be generating cash as we go along here in the first quarter as well. So yes, it's very, very positive momentum along those lines. Hopefully, I answered your question. Sujal Shah: Thank you, Steve. Can we have the next question, please? Operator: We'll move next to Chris Snyder at UBS. Chris Snyder: Thank you. I wanted to ask on supply chain inventory levels. You guys have been pretty consistent around destock headwinds for data appliance and industrial equipment. So, I guess maybe for those three sub verticals, can you just talk about where are we in the respective destock cycles. And beyond those three, is there anywhere else maybe where you're starting to see more risk around destock relative to three or six months ago? Thank you. Terrence Curtin: No, thanks for the question, Chris. And I think let's talk about destocking a little bit. So, first off, is, as you all know, being a Tier 2, this is not a phenomenon that isn't uncommon. And after you get strong cycles, you will have this. But I do think there's -- when you think about these three -- there is one thing they have in common, which is close to 50% of their sales go through our distribution partners. And let's face some of these are fragmented markets that they help us cover. So, when you think about the three, that's about -- while it's big for their business units, total TE is only about 20% goes through the channel. And the one thing I want to highlight maybe the last part of your question is where else are we seeing it? Actually, for the 80% of our business that we touch customers directly, it's very stable, and we're growing. So, when you think about the 80% that we aren't highlighting, it's really -- that's where we touch the customers most directly, and we have growth. Now, we have these destocking pockets that certainly very much with our distribution partners that, hey, they fill the need when maybe we weren't delivering as consistently as we should have during the supply chain challenges he talked about. So, when you look at those three, what I would tell you where we are, what hitting we're in -- and hey, this is best guess stuff. What's nice is in both D&D and appliances, usual our orders have increased sequentially. So it feels like we're stable at the bottom. And what's nice in D&D, you see the driver of AI as those move up. In regard to industrial equipment, that started later. We started to highlight that to you over the past couple of quarters. I would say we're more in the middle of innings of that. And I think both of them will be around in the first part of next year. But then I also view that they'll turn into a tailwind once they get behind us, and we don't expect major destocking elsewhere into how we have our direct relationship with our customers. Sujal Shah: Thank you, Chris. Can we have the next question, please? Operator: We'll move next to William Stein at Truist Securities. William Stein: Hey thanks for taking my question. I understand you're only guiding for a quarter, but I'd like to sort of give you an opportunity to help us sensitize our models as we consider what the trajectory will be in 2024 in terms of revenue growth and margin expansion? Thank you. Terrence Curtin: Thanks Will. And I guess one part of it, let me talk about it maybe how we think about some of the trends we position ourselves out, knowing that we aren't guiding beyond the first quarter, and I'll let Heath maybe talk about margin. So, first one is similar to this year, where we have the secular growth trends, they really were the things that helped us cover some of the destocking, things that we dealt with and I think they'll be evident again next year. So, first off, if you start with our largest segment, Transportation, we're sort of viewing auto production is going to be around 21 million units a quarter, so mid-$80 million production. And I think what you're going to see is our business model that we've shared with you once again demonstrated this year, we continue to expect four to six points of outgrowth versus the market due to the content we're going to get, and that's going to be driven by our leading position in EV, also ongoing electronification trends in the vehicle that will benefit from. And so that's where we sort of see Transportation. In our Industrial segment, and I know I mentioned it on the call, we have three markets that have really good growth momentum. We expect them to continue. You get places like comm air. We're still in recovery mode. And [indiscernible] as it grows, we have more content on that, so that’s good. And then in Communications, I would tell you the growth will really be driven by these AI ramps that we've highlighted to you, and we think they'll build up as we go through the year and they can be well over $100 million of incremental revenue contribution through the year. Now, one thing I just talked about, back to Chris' question on destocking, de-stockings affecting three of our businesses, that's going to be with us in the early part of the year. That will come to an end. I mean you can probably make as good of a judgment as I can on when that will end. So, that's certainly there. And then the only last two pieces that probably I would highlight. First one being, and Heath talked about it, the dollar strengthening is going to be a headwind into next year. We have a big headwind this year, probably going to be about $250 million next year. And then the last thing I would just say is right now, with where input costs are in the world, we would expect pricing at total TE to be net neutral next year. There are elements where metals and things like that are still elevated. There are some places where you have the deflationary impacts and no different than what inflation drove us to do in pricing. Input costs will be the driver of price going forward. So, with that, I guess that's some of the ways that you can think about it. Sujal Shah: Okay. Thank you, Will. Can we get the next question, please? Operator: We'll go next to Amit Daryanani at Evercore. Amit Daryanani: Good morning. Thanks for taking my question. I guess I have one and, I guess, Terrence and Heath, either one of you. You've also made some really good progress in terms of expanding your operating margins in the back half of fiscal 2023. But I'm curious, as you think about the exit rate of operating margins across the three segments. Can you maybe talk about what does it take for TEL to get to your target margins across those three segments -- the delta from where you are to targeted you made. Is it volume? Is it cost optimization? Would love to get a sense on the path from here towards those target margins. Thank you. Heath Mitts: Okay. Amit, this is Heath and I'll certainly take this. We highlighted on the call, and you just referenced it as well, that we exited the year in a better position over the second half of fiscal 2023, than our first half performance. And just candidly, we were not pleased with our margin performance in the first half of the year, and there was a lot of work involved to get those up as we exited. However, we are still well below our target operating margins at the company and at the segment level. Transportation made good strides this past year, and we feel good about the momentum there. But the business model target for Transportation is still 20%. So, we're still trending below that and we know there are some things that we still need to do. There's still a little bit of self-help left there but some volume support coming out of auto production would be healthy. And then the other thing that's a drag on Transportation margins is -- our commercial transportation business is in the downside of a cycle, and that's obviously a very profitable business for us. So, as we think about that, I think we're going to make good progress in Transportation margins in FY 2024. As we move forward, but we've got some work to do. Industrial segments, the business model target is high-teens operating margin. Obviously, we're trending right now in the mid-teens. There's some reasons for that, the biggest of which is our Industrial Equipment business, which is our highest margin business. is obviously at the bottom of the cycle. And Terrence just talked about that. We do believe, as we work our way through FY 2024, that we'll see those segment margins improve as some of this destocking gets behind us, assuming most of that's over through the first half of our year. Communications, listen, we've all written the rollercoaster of communications here the last several years. And when the business was growing outsized volume and outsized margins. We're on the other side of that now. And this is a very volume-dependent business. But when we're running kind of in this $450 million-ish quarterly run rate for the segment. We're going to be hovering in the mid-teens. When you start to see that begin to normalize some of the destocking gets behind us, you will see this business get up into the high teens with a 20% type of target margin there. There's not as much activity here in terms of rightsizing our footprint within Communications. That has been largely behind us. but there is some volume dependency within that. And then the other thing, keep in mind, and this just builds off what Terrence just talked about, the three businesses that are hitting the destocking, which is our Data and Devices and Appliances, which are within the Communications segment as well as our Industrial Equipment business, where that destocking has happened is not with our direct customers, just with our distribution channel partners. That's also some of our most profitable business. And so as you start to see in your modeling out the year, as you start to see some of those things normalize and some of the destocking go away, you would expect that mix of profitability to help us as we work our way through the second half of the year as well. Sujal Shah: Thank you, Amit. Can we have the next question, please? Operator: We'll move next to Samik Chatterjee at JPMorgan. Joe Cardoso: Hey, good morning and thanks for the question. This is Joe Cardoso on for Samik Chatterjee. As it relates to your AI opportunity, and maybe this is more of a medium-term question in nature, but there has been increasing discussions or debates around the various architectures these cloud providers can take beyond just GPUs or underlying switch fabrics as it relates to TEL's business and where you participate in these AI deployments I was hoping if you could just touch on that topic and discuss the breadth of the company's portfolio? And whether you see yourself agnostic to whatever route your customers decide to take on their future architectural decisions there? And if there's any areas of the portfolio that you think you could bolster or are you looking to bolster going forward? Thank you. Terrence Curtin: Thanks for the question. And one of the things that's great about the space we play in is when somebody makes an architectural decision as they're building an AI cluster, that's where connectivity comes in and is very important depending upon what is that architectural decision. And that creates a lot of customization. So, as everybody is trying to figure out how to get the compute power, also the thermal elements and maximize the design. Really, the things you just highlighted are things we really get excited about. And it's where companies like ourselves, we really need to be playing with both the semi players as well as the cloud architects as well to really say, as they make these happen and certainly bring them to market at pace. So, when you think about all the accelerators that you hear on every semiconductor call, really, they are the things that we get excited about and even in our quarter we just had, you saw earlier ramps than even we expected. And I think, if anything, we're probably going to be more pleasantly surprised and negatively surprised as we go forward. The other thing that's nice, like even that we see on that, I know last quarter, we talked about $1 billion of pipeline wins even in just where we've gone to up to $1.3 billion in just three months. And their programs are going to be out over three, four years, and that will ramp but everything when you think about how are you moving in these clusters data around, that has a need for connectivity and that connectivity and what we do is very high speed because if you have latency around that connectivity, that is a problem for an AI cluster. So, I feel really good with the traction and where our teams are playing to get these wins. And I think it's going to be one of the drivers as we move off from destocking as we get CS back on the growth here, will be something that we're going to continue to talk to you about. Sujal Shah: Thank you, Joe. Can we have the next question, please? Operator: We'll go next to Joe Giordano at TD Cowen. Joe Giordano: Hey, good morning guys. Terrence Curtin: Hey, good morning Joe. Joe Giordano: Yes, I just want to follow-up on the AI discussion there. One, can you just let us know how revenue in this quarter in AI specifically looked relative to last quarter? And then just more broadly, how do you think about AI cannibalization of business you otherwise would have had on a more standard offering? Like if there's -- I'm guessing this is a mix positive for you like on a content standpoint, but if your customers have a finite dollar spend available to them? How much -- is this like a transition of spending rather than like an increase in total spending? Terrence Curtin: Well, certainly, you're going to have -- there's only so many dollars when you win a CapEx budget. It's pointed here. And what's really nice is the content elements incremental. You still need a lot of servers and stuff to make an AI cluster work from a compute side. So, yes, there is some cannibalization, but is a net-net positive, Joe, when you look at it. And really, when you look at I know when we guided, we probably said we would have thought the segment and Communications would have been flat with the quarter before. All the upside in the quarter was due to AI application and ramps. So, when you look at that build is very important, probably as we start the new year, we'll have a little bit of lumpiness just due to how the calendar works. But I think through 2024, you're going to continue to see that AI number work up and ramp as we continue to ramp for our customers. Sujal Shah: Okay. Thank you, Joe. Can we have the next question, please? Operator: We'll move next to Luke Junk at Baird. Luke Junk: Good morning. Thanks for taking the question. Terrence, just wondering if you could put a finer point on how you're thinking about our growth potential in auto in 2024. I guess I'm especially thinking about EV-related impacts amid maybe some flattening overall in adoption but set against what has been generally rising content for you, maybe even a little upside versus that 2x multiple? And maybe more importantly, just your overall breadth and auto and EV that could limit your impact to any one customer? Thank you. Terrence Curtin: Yes. So, you have a lot of questions in that question. So, I'm going to try to do my best there. So, thanks for the question. I think the first thing is let's talk about 2023 out growth. I think that's important that we all get aligned about it. Our auto business grew over 12% in 2023 versus auto production of 3%. So, you saw 900 basis points of outperformance. And I think you got to take that into two buckets. Two-thirds of that 9% were content, one-third was the pricing that we did. So, I do want to make sure we're all just baselined on that. As we look forward, we feel very good about the 4% to 6% over production. And I think to the point you said you never hear us talk about one OEM or one platform other over another. That is something when you look at what we do. Our view is, hey, EVs are always something that needs to scale. Automotive is a scale business. There is a lot of customization going on right now. But we really sit there as the agnostic supplier being a Tier 2 of how do we bring the best connectivity solution for the globe to really make sure this technology gets adopted. And I think you continue to see that with the outgrowth we've had, so I don't think that's going to change by any means, and it's why you see the growth, and that's something we work very hard on to make sure we're everywhere in the world. And that's why we always like to say other than a few exceptions where we're not allowed to play by governments, we're essentially on every card in the planet. And that's a special position that where our engineers design with the customers, where their design centers are and we're bringing solutions to really make sure we continue to help bring EVs to further penetration globally. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: Next, we'll go to Scott Davis at Melius Research. Terrence Curtin: Hey Scott. Scott Davis: I wanted to dig a little bit more into the cost structure. I mean you guys have done a fair amount of heavy lifting on I would imagine fixed costs are kind of lower than they were just a couple of years ago. But when you think about the ebbs and flow of your cost structure going into 2024, apples-to-apples kind of fixed cost plus you got some labor inflation. Is your cost position similar in 2024 as it was in 2023? Or is it actually lower? Heath Mitts: Well, it's a good question, Scott. And there's a lot of buckets there that I can think about no different than everybody else in the globe. You mentioned labor inflation, which is real and it's always going to be part of our equation. So, that has a little bit of variability to it. But when I think about kind of our fixed cost base, we're obviously going in with a little bit lower based on some of the restructuring that we have done, and that's around rooftop consolidations, particularly in Europe. As we've continued to move more of our operating activities out of Western Europe and into places where the supply chain has migrated for our customers, that could be Eastern Europe, that could be Northern Africa and Morocco, certainly some more activity in parts of Asia. And then within North America, it's a little bit more focused to Mexico. So, that has that element and gives us more confidence as we jump into it. And then you kind of get into the inflationary pressures for everything else. And I would say not getting worse but not dramatically coming down. There's buckets of areas like freight spend that have come back in line as certain capacity on certain types of freight have increased and allowed for some pricing competition. So, that's been healthy. But when I think about the input cost around metals and resins, it really depends on where the world is and what we're buying. We're still dealing with a fairly inflated environment there for a lot of the things that we have to buy. And so when I think about it versus 2023, I'd say it's stable. But I wouldn't say that, that's our biggest driver in 2024 in terms of margin expansion. We've got a lot of material productivity activity underway that we have a lot of confidence about. But that's not pricing coming down. That's just the efforts of our team to source different ways in different parts of the world. So, there's a lot of buckets there, Scott, net-net, if I just trying to sum it up, I'd say we're in a better position in 2024 than we were this time last year, staring at our overall cost structure. But we've got work to do, and we still need to offset the inflation around labor and so forth. Sujal Shah: Thank you, Scott. Can we have the next question, please? Operator: We'll go next to Christopher Glynn at Oppenheimer. Christopher Glynn: Thanks. Good morning. Was curious about the non-auto parts of transportation commercial, what are you seeing in terms of cycle there? What do you expect for next year, maybe first half, second half split? I know you're very broadly based across platforms, customers and applications and commercial. And then just Sensors, I think you have a little bit of attrition, ski-rationalization -- data play on that, please. Thank you. Terrence Curtin: So, let me break those into two pieces there. So, let's talk about what we've seen this year in Industrial Transportation. And really -- and then I'll talk about probably how we're thinking into next year. First off, in commercial transportation this year, both in North America and Europe and commercial transportation is -- I want to remind everybody, it's heavy truck, construction equipment, ag equipment, for TE globally. It's in all those applications, which we have a leading share. And we saw Europe and North America actually have nice production growth this past year and certainly drove our growth but China was very weak. And China was very weak in 2023, especially around construction equipment. So net-net, while we would say, if you took the number of units made on the planet of all those different types of vehicles, it was flat. China was very weak and really Western World offset that. And let's face it, when we think about China into next year, we expect construction to be flat again or weak next year, maybe some recovery in the truck and bus side. We do expect in the early half of this year, we do expect Europe and North America to slow, and we've seen that. You see that in our organic growth here. So, we do expect at least for the first half, that's going to be a market that is slower going into next year. And we will have content outperformance, I will buffer some of that. But it's also nice that China, we probably have the weakness of China is more behind us than in front of us. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Terrence Curtin: I am sorry, you also asked about Sensors. I apologize. On Sensors, there is pruning that we're doing. I know when I made my prepared comments, we talked about growth and automotive and declines in industrial, next year, there will be about a $50 million exit rate of where we're really getting that focus as we improve the margin there and make sure that the wins that we get in automotive and industrial applications, really where we're positioning that business longer term as we've been talking to you about. So sorry, I didn't touch the Sensors piece in my first comments. Sujal Shah: Thank you, Chris. Can we have the next question, please? Operator: We will go next to Shreyas Patil at Wolfe Research. Shreyas Patil: Hey thanks a lot for taking the question. So, looking at the Industrial Equipment business, I mean, you talked about the destocking trends but curious what you're seeing in terms of CapEx deployments. We have heard from some automakers deferring EV investments, and I believe that has been an important driver supporting the business. And then also, if you can talk about the payback on restructuring investments. I believe you had sizable restructuring that should be in 2021 and 2022. So, should we start to see the payback from that into 2024? Terrence Curtin: So, let me take the Industrial Equipment piece because there is, hey, as supply chains improved, I do think you see throughout the industrial equipment, and that's a very broad and fragmented space, as we've always talked to you about. You see everybody tightening up their buffer stocks. And we're in the middle of that. You also see areas where you see CapEx continuing to roll. You see EV battery plants. You just sold Toyota, their expansion to their North Carolina campus. So, you see pockets like that. But certainly, you see warehousing certainly around consumer electronics remains weak in Asia. There is a lot of automation that goes in there. So, I do think it's a very mixed picture depending upon where your focus on in Industrial Equipment, I do think you see strong backlogs by our customers. And I do think we have to work through the destocking and see what the CapEx levels are running once we get through the destocking. Heath, why don't you talk about the restructuring? Heath Mitts: Sure. On the restructuring front, I think a good rule of thumb is about a two-year payback on the restructuring charges that we take in terms of when you see those pay for themselves in the P&L. So, it's a little bit longer in Europe, a little bit shorter in other parts of the world, but it averages out to about two years on average in terms of the payback and certainly layering that in to the P&L as we move forward into 2024 and 2025 for the charges that we took in 2023 would -- is one of the things that gives us some confidence here. Sujal Shah: Thank you, Shreyas. Can we have the next question, please? Operator: We'll take a follow-up from Wamsi Mohan at Bank of America. Wamsi Mohan: Hi, thanks for taking the follow-up. I think you mentioned in your remarks, you're expecting $250 million headwind for revenues for fiscal 2024 from FX movements. What should we think about the EPS impact commensurate with that? And Terrence, I think you mentioned a very strong 10% EPS growth in the first quarter. price actions will ramp year-over-year in the second half. So just curious how you're thinking about stockability growth first half versus second half next year? Terrence Curtin: You broke up on that, Wamsi, a little bit. Can you repeat the key questions that you had there? I'm sorry, you broke up on our end. Wamsi Mohan: I'm sorry. So, first question was around the headwind from FX on revenue. It was $250 million for the year. Wondering what the EPS impact is. And then just the first half versus second half profit growth for next year, you noted 10% in 1Q, but you wrap on some of your price initiatives in the second half. Terrence Curtin: Yes. Thank you. Sorry about that. Thank you for repeating yourself. Heath will take those. Heath Mitts: And Wamsi the $250 million of FX, the way we're looking at is about $0.20 of EPS headwind that we have and from an earnings per share perspective related to that foreign exchange. And of course, that's as snapping the line in the sand where rates are more or less today. And as rates change throughout the year, we'll continue to update you on those assumptions. In terms of first half to second half, the second half of -- and we're going to -- I'm referring to fiscal 2023, the second half certainly did benefit from some of the pricing catch up that we needed to do, particularly in the Transportation business and the team did execute on that well. As we pivot into the first half versus second half of I think we're not guiding out that far, but you should expect our margin performance to -- as we've implied in our guidance for the first quarter to be somewhere in the mid-17 similar to the last quarter, the Q4 quarter, you should expect us to continue to grow from there in the first half to the second half, some of that related to some of the destocking normalizing, as I mentioned earlier on the call and then some of the other initiatives otherwise. Sujal Shah: Okay. Thank you, Wamsi. We don't have any further questions. So, please contact Investor Relations at TE if you do have additional questions. Thank you for joining us this morning and have a nice day. Operator: Today's conference call will be available for replay beginning at 11:30 A.M. Eastern Time today, November 1, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. You may now disconnect.

Operator: Ladies and gentlemen good morning, and thank you for standing by. Welcome to the TE Connectivity Third Quarter 2023 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [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. Sujal Shah: 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. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today’s press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. I also want to remind you that our Q4 results in fiscal 2022 included an extra week. In this call, year-over-year comparisons for the fourth quarter and fiscal 2023 are made excluding this extra week. Finally, during the Q&A portion of today's call we're asking everyone to limit themselves to one question and you may rejoin the queue. if you have a second question. Now, let me turn the call over to Terrence for opening comments. Terrence Curtin: Thanks, Sujal, and thank you everyone for joining us today. Before we get into the slides and as I typically do, I want to take a moment to discuss our performance this quarter, within the backdrop of the market environment, along with what we're seeing versus our last call, 90 days ago. I am pleased with the execution of our teams in the third quarter, with revenues that were in line and EPS that was ahead of our guidance, due to strong performance across all three segments. Our Transportation and Industrial segments grew year-over-year, which essentially offset the expected declines in our Communications segment. Our adjusted operating margins expanded 130 basis points sequentially, without the benefit of any volume growth. We delivered on the actions that we've been driving to ensure margin expansion occurred, as we move through this fiscal year. Also, as important, you're going to continue to see the benefits from the strategic positioning of our portfolio around secular growth trends, including increased global production of electric vehicles, adoption of renewable energy and applications for cloud and artificial intelligence. In the quarter, our orders of $4 billion are not only indicating stability in transportation and industrial, but also in our Communications segment as well. I view the older trends to be a real positive and they're reflecting the improving supply chains and reinforce our fourth quarter guidance, which I'll get into more details in a moment. As we've been sharing with you, one of the key areas of focus this year has been working capital management as supply chain performance improves. Our strong free cash flow performance reflects our focus, both in the quarter as well as you see it year-to-date. Cash generation is an important part of our business model and year-to-date free cash flow was up 40% versus last year. Also, our capital strategy continues to remain disciplined and we've returned roughly $1.2 billion of capital to our owners so far this year. Let me now provide some additional color on our markets and other updates since our last call. So, on an overall basis, our markets are playing out as we expected. We have most of our key end markets in a growth or recovery trajectory and we have a few markets that continue to cycle and these we previously discussed with you. Our view of transportation end markets remain consistent with our prior view and we continue to expect auto production to remain roughly flat at approximately 20 million units per quarter globally. Our growth in the transportation area will continue to be driven by content outperformance and our leading global position in electric vehicles. Turning to our Industrial segment. We have three businesses that continue to have strong growth momentum. You continue to see our strong positioning in renewable energy with growth from both wind and solar applications. In commercial air, sales continue to grow as this market recovers and our medical business is benefiting from increases in interventional procedures. In our communications segment, while sales are down significantly this year versus last year's cyclical peak, our order trends are indicating stabilization at the current levels. And finally, I do want to reinforce that the way we think about long-term value creation remains unchanged. It's built on the pillars of secular growth trends that will drive increased content in the markets where we position TE, strong free cash flow generation with discipline around how we deploy capital and leverage to enable margin expansion as we move forward. While our orders are indicating stability, we continue to see strong opportunities to expand sales, margins and earnings per share as we move forward. So at this time I want to get into slides and we'll discuss some additional highlights. And if you could turn to slide 3, I'd appreciate it. Our third quarter sales were $4 billion and this was in line with our guidance and down slightly year-over-year on a reported and an organic basis. We saw organic growth of 7% in our Transportation segment and 2% in our Industrial segment. Our communications segment declined due to the expected market weakness that we've been talking to you about. Adjusted earnings per share was ahead of our guidance at $1.77 with adjusted operating margins of 17.3% and these margins were up 130 basis points sequentially as I already mentioned. The margin improvement from quarter two to quarter three was driven by our Transportation and Industrial segments as we are delivering on our commitment to expand margins from the first half to the second half of this year. Our earnings per share performance that was ahead of guidance was driven primarily by the stronger margin performance. As we look forward, we are expecting our fourth quarter sales to be approximately $4 billion and adjusted earnings per share to be around $1.75, which are both similar to our quarter three levels. Also similar to our third quarter we do expect year-over-year sales growth in our Transportation and Industrial segments and a decline in our Communications segment. Just moving away from the financials for a moment. I do want to highlight that we issued our corporate responsibility report, which we call connecting our world and we've issued this report for over a decade. There are a number of initiatives that we're driving internally and our goals are in line with our purpose as well as expectations from our customers. Key highlights in the report versus prior year includes an over 30% reduction in our absolute Scope 1 and 2 greenhouse gas emissions and currently I want to highlight that 50% of the electricity in TE comes from renewable sources. I also want to note that we communicated our commitment to the science-based target initiative, which enhanced targets for greenhouse gas reduction by 2030 that are inclusive of Scope 3 emissions. So with that as a quick background on slide 3 let's move to slide 4 and I want to talk about our order trends. On the slide you can see the details on the moving pieces, but I do think the key takeaway is that our orders are reflecting stability in all three of our segments. And this is nice to say after some of the order patterns we've had over the past couple of years. And these orders reflect and reinforce our guidance for the fourth quarter. When you look at our transportation and industrial orders they're both roughly flat from the second to third quarter. The real highlight in where you see the changes in our communications segment where orders increased 5% sequentially. And this is the first sequential increase in our Communications segment orders since the first quarter of fiscal 2022. So with that quick overview of orders, let me now discuss the year-over-year segment results that are laid out on slides 6 through 7 and you can see the details and I'll just talk about the high points. In our Transportation segment, sales growth remained strong and it was up 7% organically year-over-year with organic growth across all of our businesses. Our auto business grew 9% organically and we had growth in all the regions of the world. The strong performance continues to be driven by our leading position in electric vehicles as well as electronification trends in cars and positive impact from pricing. While auto production is staying flat at about 20 million units per quarter production of hybrid and electric vehicles are continuing to grow and right now reflect about 25% of total global auto production in our fiscal 2023. As you know we generate approximately two times the content in electric vehicle platforms versus a combustion vehicle. So, we expect our content per vehicle to continue to expand as we move forward and the increased adoption of electric vehicles. Elsewhere in this segment, our Commercial Transportation business we saw 2% organic growth in the third quarter and in our Sensors business our 4% organic growth was driven by automotive applications as we see increased volumes from new design wins. At the margin level, in the segment, adjusted operating margins were 18.6% in the quarter and this was up 130 basis points year-over-year and 200 basis points sequentially as a result of operational performance including the benefit of price increases. Now, let me move over to the Industrial segment. At the segment level sales increased 2% organically year-over-year, where we had strong organic growth in three out of the four businesses in the third quarter. In our AD&M business, our sales were up 13% organically and we're benefiting from the ongoing improvement in the commercial air market. In Medical, sales in the quarter were up 11% organically, driven by ongoing increases in interventional procedures. Turning to our Energy business. We continue to see momentum with 8% organic growth driven by renewable applications. The addressable market for TE and renewable applications has a double-digit CAGR and we're helping to enable utility scale solar and wind farm deployments. Through our broad product portfolio, we are helping our customers reduce installation as well as maintenance costs and we expect our sales from renewable applications to be up double-digits again this year. What's really nice in this business is that the current quarter continues to demonstrate the growth momentum that we've been delivering in this business, which has had an organic sales CAGR of 8% since 2019. And finally in the Industrial segment. In our Industrial Equipment business, our sales were down 10% organically and this sales decline was driven by inventory digestion in the distribution channel and is being driven by improvements in the broader supply chain that we're all feeling. In the Industrial segment adjusted operating margins were 15.8% and these margins reflect the impact of the expected volume declines in the Industrial Equipment business. And I want to highlight that we remain committed to achieving our high-teen margin target for this segment. Now, let me turn to the Communications segment and in this segment, our sales were down 37% organically to $424 million and it was slightly lower than we expected. Versus last year's cyclical peak, Appliances and our Data and Device businesses are being impacted by market weakness and the ongoing consumption of inventory across our customer supply chain that we previously discussed with you. Despite this weakness in sales we maintained adjusted operating margins in the mid-teens range at 14.2%. Based upon the order trends I talked about earlier we believe communications revenue will be roughly flat to quarter three levels in the fourth quarter with adjusted operating margins remaining in the mid-teens. Now, with the Communications segment, I do want to look beyond the near term for a moment and really talk about what we get excited about especially in our D&D business as it continues to have strong design win momentum in next-generation AI platforms. When you think about where we play we focus on providing the high-speed low latency connectivity to meet the needs of these next-generation data centers. Last quarter we mentioned that we secured $1 billion in wins for AI and certainly related server applications. And I just want to highlight for you this number continues to grow. We expect meaningful ramps of AI programs, as we move through fiscal 2024 with 50% more content in an accelerated compute AI platform versus a traditional compute server. The other key highlight is, we're working closely with cloud customers as well as leading semiconductor companies with reference design to call out our TE Connectivity solutions. So with that, as a wrap-up, let me turn it over to Heath, who will get more details on the financials as well as our expectations going forward. Heath Mitts: Well, thank you Terrence and good morning everyone. Please turn to slide 8, where I will provide more details on the third quarter financials. Adjusted operating income was $692 million with an adjusted operating margin of 17.3%. GAAP operating income was $630 million and included $53 million of restructuring and other charges and $9 million of acquisition-related charges. Year-to-date we have taken $208 million of restructuring charges, and we continue to expect full year restructuring charges to be approximately $250 million, as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was $1.77 and GAAP EPS was $1.67 for the quarter and included restructuring and acquisition and other charges of $0.10. The adjusted effective tax rate was 18.2% in Q3. For the fourth quarter and for the full year we now expect our adjusted effective tax rate to be approximately 19%. Importantly, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. We can get you to turn to slide 9. Sales of $4 billion were down 2% reported and 1% on an organic basis year-over-year. Currency exchange rates negatively impacted sales by $42 million and adjusted EPS by $0.05 versus the prior year. Adjusted operating margins were 17.3% in the third quarter expanding 130 basis points sequentially, despite lower sales driven by margin expansion in our Transportation and Industrial segments. We have continued to drive productivity and cost initiatives and have implemented the price increases that we discussed in prior calls. Our pricing is now fully offsetting the impact of higher input costs. Turning to cash flow. In the quarter we once again demonstrated strong cash generation model of our business, with cash from operations of $779 million. Free cash flow for the quarter was approximately $615 million. And through the first three quarters of the year, free cash flow was approximately $150 million which is up 40% year-over-year and roughly a $1.2 billion return to shareholders through share buybacks and dividends. As you may recall, I indicated that we would look to drive our own inventory levels lower, as we saw performance improving in our supply chain. We have been able to deliver improvements to working capital which has contributed to our free cash flow performance this year. As a result of our actions and strong profitability, we expect free cash flow conversion to approach 100% this year. We continue to remain disciplined in our use of capital and our long-term strategy remains consistent which is to return approximately two-thirds of our free cash flow to shareholders and use about third, for acquisitions overtime. Before I turn it over to questions, I want to reinforce that the strategic positioning of our portfolio is enabling us to deliver strong results from secular growth trends. In our Transportation segment, we expect to deliver high single-digit organic revenue growth this year. In our Industrial segment, we expect double-digit organic revenue growth in three of the four businesses for the year. In our Communications segment, we continue to generate strong design win momentum in AI and cloud applications. We are delivering strong operational performance including the work we have done on our cost structure and price actions to offset inflation, enabling our first half to second half margin improvement and EPS expansion as we expected. Overall, this sets us up for a strong finish to the fiscal year and a good step-off point as we enter fiscal '24, which as you know, begins in October. We remain excited about the opportunities we have ahead of us to drive long-term growth, margin expansion and value creation for all stakeholders. So now let's open it up for questions. Sujal Shah: Avi, can you please give the instructions for the Q&A session? Operator: [Operator Instructions] We will take our first question from Chris Snyder with UBS. Your line is open. Chris Snyder: Thank you. So our Q3 top line only met the guide, but despite a higher level of auto production, so can you even just talk about some of the offsetting headwinds there? And then also what some more color on what really drove the strong step up in margins. Obviously, a step up was inspected, but this was much more significant. And then just lastly, any clicks and takes into Q4 at the segment or end market level. Thank you. Terrence Curtin: Sure. Thanks, Chris and thanks for the question. First off, when the first part of your question, you know, we met our overall guide on the top line, and you're right in transportation, we were a little stronger, but you know, communications was a little bit weaker. You know, we've been talking for many quarters now about, hey, as we go through some of the supply chain correction and market weakness around cloud, we thought we'd be in the 450 to 500 range and we thought this past quarter we'd be closer to that 450 and you know, our communication segment came in a little bit below that and our transportation revenue, which was stronger, really made up for that. So on your first party of your question on really the margin front, you know, let's just to move it up a little bit, you know, we knew we had to do margin opportunity as we marched through the year. We had the price cost element that as we talked about in automotive, that was going to be on a lag basis. We did get those in place. I think you're seeing the benefit of that and we said we could get our transportation segment back up to where it's at today as we get later in the year and that that's been accomplished. I also think there's been good operating performance in our industrial segment, even in light of, you know, our biggest and, you know, higher profitability business unit there, industrial equipment, you know, has some destocking occurring. So I think that was very good performance there. And the other element is as communications is cycling down here in both businesses, we've been able to maintain the mid-teens margin even on lighter revenue. So I do think, you know, to my prepared comments, I am pleased with the execution that we know we teed up for you all earlier in the year, you know, came through. Now when we go to next quarter, really with the order trends that we're seeing, it does look like, you know, the segments will be very similar next quarter to where they were this quarter. You know, auto production is going to be flat, you know, we expect transportation revenue looks similar to quarter three, similar to IS and CS right now with where we see the order patterns, we expect margin to be similar. So the guide is very consistent with what we just did and that's some of the stabilization that I talked about. And you know, on the EPS side, we're just a little bit lower in quarter four and that's really due to tax and FX. So, you know, it's nice to be able to show some of the stabilization, as we wrap up quarter three and go into quarter four. Sujal Shah: Thank you. Chris, can we have the next question please? Operator: Our next question comes from the line of Wamsi Mohan with Bank of America. Your line is open. Wamsi Mohan: Yes, thank you. It's really nice to see the operating margin improvement here in transportation that you guys alluded to earlier. But I was wondering if you could Terrence maybe double click on some of your inventory comments. How much more inventory digestion do you think is ahead of us, especially in industrial equipment and how much more correction do you think is also left in in data devices? Thank you. Terrence Curtin: Yeah. Thanks, Wamsi. And thanks for the question. I guess the first thing is, you know, I know we talked about the stocking and the same benefit we're driving in cash flow as supply chain gets better. It is important. We're not in a bubble where not only our supply chains are getting better, but our broader customer supply chains are getting better. And I think really where you see it in our results are the three business units we have, two in CS and one in IS where we feel it the most. And that's really where we have distribution channel involved and certainly, things aren't as much of a direct, direct relationship. So in transportation, we don't feel there's any supply chain to work off. We don't see impacts of destocking and you see that in our performance and you see the growth in all three businesses. In the other businesses, while TE does do about 20% of its revenue through distribution, the business, as you mentioned appliance and D&D in sees as well as industrial. They do about 40% to 50% of their revenue through distribution. And what we've been seeing is we do see a broader supply chains improve, we see our distribution channel partners adjusting their inventory levels to get to more normal demand. And let's face it. If lead times, people are hitting lead times and people don't need to go to distribution to find something to complete a build, they won't have to do that. So it is a natural effect in our business when you have this, but I think we have to realize it is a good sign that supply chains are improving. I think where we are, certainly, industrial has gotten to it a little bit later. I think we still have a quarter or two that we need to work through in these businesses is our best guess, and guess what, that is a guess. But I do think there'll be a point in time where our revenue in those businesses, especially go through distribution, will get closer to demand. But right now, we're building less on what demand is as inventory works down. Sujal Shah: Okay. Thank you, Wamsi. Can we have the next question, please? Operator: Yes. Our next question comes from the line of Steven Fox with Fox Advisors. Your line is open. Steven Fox: Hi. Good morning. I was wondering if you could dig in a little bit more into the cash flow numbers. Like you said, you're up a lot. How sustainable you see cash flow going forward? And maybe what does it mean in terms of your capital allocation? It seems like it's not changing right now, but how does it influence you in a rising rate environment? And then within that, if you could touch on just the M&A environment, that would be helpful also. Heath Mitts: Sure, Steve, this is Heath. I'll take this question. First of all, we're pleased with our cash flow performance this year. Year-to-date, our free cash flow is $1.5 billion, which, as I mentioned earlier, is up 40% year-over-year, and we've had pretty consistent results as we -- each quarter as we work through the year. A little -- a big chunk of that to answer your question about sustainability of the space performance builds on what Terence just talked about and that's stability. And if you think about -- there are times, particularly over the past couple of years, when we've had to flex our working capital, particularly inventory to handle all of the volatility that's out there in the various supply chains, both uncertainty from our suppliers as well as differing order patterns from our customers. And the last thing we're going to do is be in a position to hold our customers up. So we've had to flex inventory. So now with the visibility improving, that's tied to some of the supply chain improvement out there, we've had the ability this year and particularly through the first half of this year to reduce inventory levels, bring our days on hand to back more in line. There's a little bit of work to do in a couple of our businesses. But for the most part, we're getting to a better place. And that working capital management has really driven our ability to drive free cash flow improvement year-over-year. So we feel good about that. We feel good in general about our ability to sustain that going forward. In terms of overall capital allocation, which was the second part of your question, was that we're fully funding capital expenditures. We have not cut that back demonstrably -- most of our CapEx goes towards new products and new applications, and that is still real, and that is still happening, whether that's on the EV side or some of the AI opportunities or things within our Industrial segment. So, that's been fully funded. That is unchanged. And then when we start thinking about outside of investing in ourselves, the opportunities out there around the M&A environment Listen, it's always going to be a bit dynamic in terms of what's coming to market and what's available. And we always take the approach that are we the right owner for something that fits strategically well for us and then do the financials work. And I feel like I say that's just about every quarter. But at any given time, we're looking at about half a dozen things. And most don't get across the finish line for one reason or another, but we're active in that process. And there's been some things that that you'll continue to hear us talk about. Over time, I still believe that M&A will take up about a-third of our free cash flow. But it's lumpy. It's not a straight line in terms of the linearity of how that's deployed. So, short answer, no change in our capital allocation strategy. We feel good about where we are from a balance sheet perspective and it allows us to play offense going forward. Sujal Shah: Okay. Thank you, Steve. Can we have the next question, please? Operator: Yes. Our next question comes from the line of Matt Sheerin with Stifel. Your line is open. Matt Sheerin: Yes. Thank you, and good morning. Terence, I wanted to drill down a little bit more on the opportunities in AI in your comments. It sounds like you've got a strong relationships with key customers and the semiconductor suppliers. But could you talk about the competitive landscape and the edge you have over competitors? And could you also size up the market opportunities for us perhaps as a percentage of your overall cloud revenue? Terrence Curtin: Sure, Matt. Thanks for the question. Thanks for the question. And let's face it, we like data anywhere because typically you need a connection to occur. So when you think about the core of what we do, whether it's data, power, or some sort of signal, that's where we see opportunities. And anywhere data goes is an opportunity for us. When you think about AI, though, there's one thing to move data, but when you think about the high speeds that this is at, as well as the low latency you need, it's really an extension of what we've been talking about from a cloud perspective. There's one thing to have a data connector. There's another thing to have a high speed that can handle what these GPUs are throwing off, as well as make sure that you not only have to compute, you also have to move the data. You also have to store the data. And how does that all stay in sync? And that's really, there is a number of us in the world that do that very well because you're at the cutting edge of technology and you not only need to design with the people that build the architecture, you need to be very close to the semi-companies that are making these next generation chips that everybody's all excited about. So when you look at it, I sort of view it's the next step of where cloud went. And we're just taking it up a level of speed. And certainly with the adoption of AI that we all hear about, it's exciting for us. So from a product set, when you look at what we do, we have sockets that actually the GPUs and the CPUs go into. You do need something that takes that semiconductor and connects it into the board. Our high-speed backplane products that actually make sure how the signal moves around. And then you get into things like DAC cables and so forth that actually make sure you're connecting different parts of the rack and boxes together. And we've had opportunities in all of those, similar to we talked in cloud. And what I really like is our position that our team has built, that is both with the semi-customers as well as the ones that are working on the architecture, which are also the cloud guys, really has positioned us well. And like I said, we have over a billion dollars of wins. They probably will go out over a four to five-year period as they ramp. And the momentum is still building on the wind side. So once we work through some of the market correction we're working through in a place like D&D, I think you're going to continue to see the ramp of these programs probably be more in the middle of our fiscal 2024. That will be more visible to you. Some of it's in our revenue already, but the launches will be more in 2024 based upon the launch schedules of our customers that do the architecture build out. And we're really excited about the wins we have and also the problems we're trying to solve with our customers, which is really, in essence, what our engineers do. Sujal Shah: Okay. Thank you, Matt. Can we have the next question, please? Operator: Yes. Our next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney: Yes, good morning. Thank you very much for taking my question. I realize the company only formally guides one quarter at a time, but given that we're now in your fiscal fourth quarter, I'm hoping you can provide some early thoughts on fiscal 2024 and how you're currently thinking about trends by end market for next year. Terrence Curtin: Thanks, Mark, and I also appreciate you giving a caveat that we only guide for one quarter. So anything I'm going to give here will be qualitative about what we see and, some insight because I think I probably talked about some and Heath talked about some already. So first of all, it starts off, it is nice to see the stability that we're starting to see in orders and communications that pick up. So I do think the comments start with that sort of as a backbone. It is important that some of the destocking we talk about in some of our businesses that will work off. I can't tell you the exact date that will be done. But that will -- while that's a headwind now, that will be something as we get into next year will be a tailwind for those businesses. I also think when you look at transportation specifically, our transportation growth this year is going to be driven by automotive is in the low-double-digits. That's on pretty low production growth and it has the content that we've always talked to you about and then a little bit of price on top of that, really, you should expect on top of what auto production is we'll be in that 4% to 6% next year, because we won't have the additional price increases unless material would go up more. And so in transportation, we still see content being the driver into next year. I think the only thing that we're watching real time is in our commercial transportation business. We see some signs in China and North America, that being a little bit slower. So that's one market we're going to keep an eye on. And then when you get into the Industrial segment, you think about the three units that I talked about on the prepared comments. Commercial aerospace is not going to be slowing down in the recovery, and it's one area that we're still playing catch-up in. Medical interventional procedures we feel good about and you're seeing the strong growth there. And renewable applications, we would continue to expect strong growth momentum there. And once we work through the destock and industrial equipment, we'll get back to some of the growth that we've been showing you. And then in the Communications segment, it really is around the destocking and then the AI programs kicking in. So having the stability, I think you see the secular content drivers. We still expect there would be a slow global economy. But really, when you look at these content levers that we've been talking about, will really be the drivers as we get into next year and hopefully, the inventory destocking winds down. Sujal Shah: Okay. Thank you, Mark. Can we have the next question please? Operator: Our next question comes from the line of William Stein with Trust Securities. Your line is open. William Stein: Great. Thanks for taking my question. First sort of a supply chain question. You've given us a pretty good bit of information already about where you're seeing destocking and such. But like to draw the comparison to some of the semiconductor suppliers who in this cycle was very effective at taking that extended lead time situation as an opportunity to constrain what they were delivering into the channel so that they didn't run into this problem. And I wonder if there are any lessons learned from that? I know every cycle is a little bit different. But as you think about this going forward, is that a potential opportunity to improve the business to constrain what you ship into those guys so you don't wind up in the situation. Terrence Curtin: So a couple of things, Will. I just want to give a contrast between semi land and what we do, because I do think there is an important difference. Semiconductors had some lead times that were well out over a year. I would tell you, when you look at what we do, our lead time typically on average could be six weeks to 12 weeks. And while we had supply chain challenges, I think the bigger challenge was not as extending lead times. It was meeting lead times. And when I think about the service levels we're at today, which our direct customers feel other than maybe in the aerospace market, our service levels are back to pre-COVID levels from a shift to request element. So I do think there's a big difference on lead times and certainly the semiconductor fab process is very different than the connector process. But I do think while we are around the same trends and we may have stocking and destocking effects, the lead time disconnect between a semiconductor and a connector is very different and ours is much shorter. We did constrain demand in certain areas where we knew we were ahead. You take our clients business, we did not add capacity for our clients business to be permanently at a $1 billion run rate. We were trying to manage through our various channels. So, I think you're always going to have elements of a little bit of stock and destock where you have more channel activity. Let's face it. We build the orders. When we're getting orders we don't say, well this is a real order and this is a fake order. Every order is real, because there is a customer that's asking for something someplace. So I actually feel pretty good how we manage through it. I'm also pretty proud when you look at our communications segment with where their margin is running on how much their revenue is all I think it also proves we've improved the profitability substantially in that segment when we're at maybe a cyclical low that really gets us back to where we can take the margin back up to what we talked about when we target for the segment more like 20%. So there are lessons we think about. I'm not sure it relates to the semiconductor processes as much as how we manufacture. Sujal Shah: All right. Thank you, Will. We have the next question, please. Operator: Our next question comes from the line of Christopher Glynn with Oppenheimer. Your line is open. Christopher Glynn: Thanks. Good morning guys. I had a question about the TS margins. So you have the price fully realize some wraparound into next year. And you also have called out some operational improvements as well. I'm curious, if you could talk about a view of fundamental incremental margin expectations over the next year or two for the TS segment? Heath Mitts: Hey, Chris this is Heath. Listen I think TS has done a lot -- the transportation segment in general, but particularly the automotive piece of this as well as the sensors piece of this has done a lot of heavy lifting on the cost structure. And that's largely moving production in a meaningful way away from higher cost locations into lower cost jurisdictions. And we are starting to see the benefit of that in many cases we're also following -- we're part of a supply chain that's also following that trend. So not necessarily unique to us that following our customers to where we need to be to support them. The impact of that on our cost structure is something that has been gradually layering in catching up on inflation with some of the price increases that we've done over the past a couple of quarters has certainly benefited us. And as I think about as we go into next year, the difficult thing to call on that is what auto production number is going to be. We're not terribly bullish as we go into next year that auto production globally is going to ramp possibly [ph]. I guess, more to come as we all get smarter on that by region. But you know the content story, and we do expect the category of EV and hybrid to grow very nicely again just as it's shown in the past couple of years and our content on that. So I feel good about our ability to outperform the market as we've always done and that will lead to some margin opportunity for us. When I think about incrementals we target in normalized times roughly a 30% incremental and more to come on that as we get through into next year, obviously, as you mentioned we'll have some price wraparound for the first half of next year. So I appreciate the question. Sujal Shah: Okay. Thank you, Chris. We have the next question, please. Operator: Our next question comes from the line of Joe Giordano with TD Cowen. Your line is open. Joe Giordano: Hi guys, good morning. I appreciate all the color on the AI stuff today, but I did have one kind of follow-up there. How do I think about that business replacement for a business that you would have been doing in the absence of AI, like, if I think about your whole data and device business where -- what does that business look like on a normalized basis now? Like it was a $1.5 billion business higher now it's run rating at $1 billion where is like the right pedaling? Terrence Curtin: Yeah, I think there's a couple of things. You do have the destocking and certainly I would say the one area where I know I talked about distribution a lot there is still a lot of server and semiconductor inventory on the planet that needs to work through. So I do think you're going to have us being below that level right now as that clears out. I would also say just realize just because AI is happening doesn't mean every server and cloud application is obsolete. It is different architecture, but you're still going to get the benefits of those. So I think we're going to get back to normalization in the supply chain, which is driving it. And then you will see AI add on to some of the cloud element. It is not a full cannibalization by any means. And you shouldn't think about it as cannibalization. And we're in the early innings really on AI. I know, I talked about the wins we've had, but the engagements we have are still very strong and you'll start seeing them next year go. Terrence Curtin: Thank you, Joe. Clear. Next question, please. Operator: Our next question comes from the line of Amit Daryanani with Evercore. Your line is open. Unidentified Analyst: Hi. Terrence Curtin: Hi, Amit. Unidentified Analyst: This is Abdullah speaking for Amit. And I just wanted to focus on industrial. I think last call you mentioned industrial to be - 150 margin expansion in the second half and you saw a really nice expansion I think of 130 this quarter despite revenues being down I think in the segment $50 million or so. So I was just curious what could be here and what the varies puts and takes on? Heath Mitts: Yes. Again this is Heath on the margin question for IS. Listen, I mean, you've got four very distinct businesses within this and you're always going to have a little bit of noise quarter-to-quarter. I think we talked about last quarter some of the mix with the downturn in the industrial equipment business, which is our highest margin component of that segment certainly impacted us. We were able to make up some ground here in our fiscal third quarter with some cost actions as well as just improved profitability in some of the other businesses. So it's a bit of a mix. As you think forward I think listen at this kind of revenue range and with this current mix of what we're talking about the operating margins for the segment probably start with 15. I don't necessarily know that we would dip back down into the 14s like we were last quarter. But this -- as we think forward I think it's in the 15s. And then I think the important piece here is that we are still committed to high-teens operating margins within this segment. We do have a couple of acquisitions that we need to digest that we've taken on over the past year or so. Those have come in with considerably lower margins, but have a really, really strong opportunity to create value through some of the margin improvement and growth opportunities that we've already identified and are implementing that's still running below segment average. And as we get those acquisitions layered in I think that will also have a meaningful impact. So we feel good about our trajectory there. But there's no doubt that we're running a couple of hundred basis points lower than where we want to be longer term. Terrence Curtin: Okay. Thank you, Abdullah. Can we have the next question, please. Operator: We will take our next question from the line of Samik Chatterjee with JPMorgan. Your line is open. Samik Chatterjee: Yes. Hi. Thanks for taking my question, I guess I had a question on Industrial Solutions as well but more sort of looking at it from a mix perspective just wondering how you think about what this business mix looks like in four years to five years, or how do you want it to look like in four years, five years because from the outside it does look like you have secular drivers in ADM, Energy and Medical whereas industrial equipment I understand sort of the better margin on it but doesn't appear from the outside to have the same drivers in terms of secular growth. So is there a way we should think about how this mix transitions in this business by subsegment of time or where your focus of investment will be as you look at this business? Terrence Curtin: Well, I think, when you look at the business I think it's important to say where you've seen our investment first. You have seen us been very focused on building out the industrial equipment business unit because we like the factory automation trends that are there. And even if you went back probably three years, four years that was not always the largest business unit. So we have done M&A there. We like the opportunities that are there. We also like the challenges that are there that what are customers trying to solve? You're typically trying to solve getting data off a factory floor in a very harsh environment and getting it back to the compute that turns that into intelligence. So I think you're going to continue to see areas in that space where we continue not only to invest, but also thinking continually about where we can do M&A in that spot. In the other areas that you sit there energy has become much more of a secular driver than we've had and it's where we've really focused around renewable energy. We actually did a small M&A earlier this year. And I think that's an area that we would also continue to look at on top of the secular drivers we have there to say how do we continue to build out that. In aerospace, I would say we're capitalizing on the recovery it's a space that I would say the content is really set because those platforms are won. I don't see there being big secular changes to the platforms right now. We certainly have EVOTL and things like that, but they're further out then your horizon to really create value. So I think it's really more of an execution story. And in medical I think you see the consistent growth and I think you're going to continue to see as we're benefiting from interventional. So I think what's nice about the segment is all four of them have growth drivers in them today. We couldn't say that five years from that five years ago. And I think what you're going to continue to say they all give us different options as we continue to build out those businesses and we'll have times where we do have a little bit of a mix or one has a little bit higher margin than the other, but that's just going to be a factor as we build it out. Sujal Shah: Okay. Thank you, Samik. Can we have the next question, please? Operator: Our next question comes from the line of Luke Junk with Baird. Your line is open. Luke Junk: Good morning. Thanks for taking my question. Just wondering if you could comment on the pace of AI-related awards that you're seeing. Just wondering how quickly the billion plus in awards that you've referenced have come together how quickly that could get $1.5 billion or $2 billion? And then related to that in terms of book-to-bill, could you just give us some additional color on overall communications book-to-bill of 0.96, just how that splits between data and devices and appliances and to what extent AI is impacting the data and devices side? Thank you. Terrence Curtin: Yes. On the -- let's take the last question first. Data and devices is above one. And certainly appliances to below one. I would tell you on both of those where the orders go through distribution the book-to-bill is well below one and the direct customers are above one. So it sort of shows you some of the dynamics. And even in the appliance market, I would say, inventory at the OEMs and at our direct relationships seem to be in check where they need to be where that lower market is. When you look at the wins and an AI to go back the wins are coming fast and furious. And it's one of the things I have to give our team credit for as we were dealing with a market that was turning how do we really make sure we capitalize on those wins. So when you sit there the pipeline has moved up even since the last time we talked we're well over $1 billion now. I think it's really going to be around how these programs ramp and certainly the architecture size. So it wouldn't surprise me that we continue on these calls to update you. But there's no pause in the AI platform. In some cases similar to the EV platform that we had in auto no matter what's happening in the cycle they're accelerating. And I think we'll be able to give you ongoing updates as they ramp. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: Our next question comes from the line of Shreyas Patil with Wolfe Research. Your line is open. Shreyas Patil : Hey, thanks so much. So maybe just coming back to Transportation Solutions. If I think about where we are now you mentioned the price increases are fully offsetting material inflation. So you're generating and you're generating about an 18.5% margin, there is going to be some additional outflow potentially some benefits from restructuring. So how do we think about that bridge to the 20% margin target? Are there other headwinds we should be considering as it does seem that is something that could be achieved potentially at some point next year? Heath Mitts : First of all, I don't want to commit to anything for 24 until we get closer to 24. So I think we've got to be careful with that. Obviously, we're pleased with the improvement from our first half to our second half both in the third quarter reported results as well as how we feel about how we're going to finish the year in the mid-18s. Our target margin for TS is still 20% and that is unchanged. Obviously, we're approaching 19% now. I want to be careful that we don't commit to something for next year because as I mentioned on an earlier question we got to see where revenue comes out as well. And the thing that we have to keep a very close eye on within this segment is commercial transportation, which is an important piece of the segment. We didn't talk about it too much today, but Terrence had mentioned on an earlier question that we do -- that is our highest margin component of the segment, and we do expect some pressure there next year particularly in China. And so as we think about it it's not just an auto story, it's also the combination of commercial transportation which is a $1 billion business as well as is our sensors business. So more to come on that. But our goal and I feel comfortable over the next couple of years for sure getting to sustainable margins closer to target. Sujal Shah: Okay. Thank you, Shreyas. Can we have the next question please? Operator: Our next question comes from the line of Guy Hardwick with Credit Suisse. Your line is open. Guy Hardwick: Hi, good morning. Just wondered, if you could differentiate in industrial equipment between sales into distribution sales to original equipment manufacturers. How sharply different are the trends or maybe they're not at all? And I had a follow-up question as well. Terrence Curtin: Hey Guy, it's Terrence. If you look at it to our direct customers, our book-to-bill is running a rent closer to one. Through distribution is probably running more like 0.8. The only color I would add to you, the industrial equipment business in Asia, which includes the Japanese equipment makers for factory automation who support a lot of things in China and certainly in China. That continues to be weak, both in direct, as well as indirect. But the backlogs of our OEM customers are strong. I would tell you in some cases, we see them working off some inventory, as they were making sure their supply chain they were protected, but there are different trends between our direct relationship and what we're seeing from -- in the distribution channel. And in that business, it's close to 50-50 between the channel and what we do direct. Guy Hardwick: Thank you. Could you give us an update on your Chinese auto business particularly in electric vehicles? I mean, potentially this market could be 40% NEVs by the end of the year. If there's enough then how TE's position particularly versus local competitors and whether you're fully participating in the growth, particularly one or two very strong domestic players who've done very well of late? Terrence Curtin: Yes. So, a couple of things. Thanks for the question. So, just -- I'm going to talk, in TE about -- we have about $3 billion of business in China overall, of which two-thirds of that is automotive. I mean, so when you really think about China and TE, the biggest play we have is around EV and Guy, you’re right on. If you want to really participate in EV adoption globally, you have to participate in China or they're the biggest driver of it. And 70% of global fully battery electric vehicles that are adopted on the planet are produced this past year are basically in China. And the thing that I would tell you is, our market share with the local Chinese OEMs versus the multinationals is similar. And you have to realize today, well over 50% of production in China is local OEMs. So, the old days of the multinational brands owning the market, that's no longer the case. And when you look about our content story, our content story is being driven, not only with the multinationals with the local Chinese OEMs and we have a very good share position, content per vehicle when you look at it overall in China, it's pretty similar between the two, whether it's a multinational or a local Chinese OEM and honestly the growth we talked about and our CPV growth is really driven by, we're positioned well with both of them. So I know sometimes people say, well, I'm only with the multinationals. Not in that's not true with TE. TE's on essentially every car in the planet I always say. And what's really nice is what our team has done to really make sure they're penetrating both types of OEMs in China and it's been very important to our growth. And our China automotive business as I said in my prepared comments, all regions in automotive grew this quarter. And also for the year, we'll have growth in all regions. So, certainly we see sluggishness in China outside of automotive. We've actually seen auto production starting to ramp back up again and our positioning there is very strong. Sujal Shah: Okay. Thank you, Guy. And I'd like to thank everybody for joining us on the call this morning. If you have any additional questions, please reach out to Investor Relations at TE. Thank you, and have a nice morning. Operator: Ladies and gentlemen, today's conference call will be available for replay beginning at 11:30 a.m. Eastern Time today, July 26 on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity Second Quarter 2023 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity’s second quarter 2023 results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today’s press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, during the Q&A portion of today’s call, we are asking everyone to limit themselves to one question and you may rejoin the queue if you have a second question. Now, let me turn the call over to Terrence for opening comments. Terrence Curtin: Thanks, Sujal. And I do appreciate everyone joining us today to cover our results for our second fiscal quarter along with our outlook for our third quarter. Through the details on the slides, I want to take a moment to discuss our performance this quarter within the backdrop of what remains a dynamic market environment along with what we’re seeing versus our last call 90 days ago. We continue to operate in a world with cyclicality and certain end markets as well as impacts from foreign currency exchange and inflation. At the same time, [Technical Difficulty] so the strategic positioning of our portfolio around key secular trends, these include global growth in electric vehicle adoption, momentum and renewable energy adoption, growth in interventional medical procedures and wins in the artificial intelligence space. Growth from these trends are enabling us to offset the impacts from [Technical Difficulty] we delivered 8% organic sales growth that was above our guidance and adjusted earnings per share that was ahead of our guidance as well. We remain on our journey to expand margins through a combination of growth, price increases and cost reduction actions. As we discussed back in the first quarter, our plan was to drive margin improvement from the beginning of this year as we enter next year. We are executing to this plan and you see this in the sequential margin progression in our Transportation segment in the second quarter and the sequential margin expansion at the company level that’s implied in our third quarter guidance. You all know that an important part of our business model is strong cash generation. With supply chain [Technical Difficulty] driving our inventory levels down and along with our team’s strong operational performance, inventory reduction helped to drive free cash flow improvement of over 35% year-over-year in the first half and enabled us to continued strong return to capital back to our owners. So let me now provide some color on markets that we’re seeing and other updates [Technical Difficulty] with the macro environment we’re experiencing, it is driving uneven impacts across our portfolio. We have some markets that are growing, some that are remaining very stable and some that are cycling. And this is truly evident as we go through our second quarter results today where all our businesses in the Transportation and Industrial segments grew [Technical Difficulty], while both of our business in the Communication segment declined. Our view of the transportation and markets remained consistent with our prior view and we continue to expect auto production to remain roughly flat at approximately 20 million units per quarter as we move through the second half of our year. Our growth will continue to be driven by content outperformance and our lead [Technical Difficulty] electric vehicles. In our Industrial segment, when we spoke to you last quarter, all of our businesses were strong and our second quarter sales results reflect this. We continue to see strength in three out of our four businesses. Our commercial air business continues to recover. Our medical business had record quarterly sales and our energy business [Technical Difficulty] momentum in renewable applications. In our Communications segment, orders and sales remain weak due to both the market weakness and inventory corrections across our customers’ supply chain. Last quarter, we talked about being in a $450 million to $500 million quarterly revenue range and we now believe we will be at the lower end of this range for the next couple of quarters [Technical Difficulty] is to get worked off by our customers. And finally, before I get into slides, I do want to highlight the way we think about long-term value creation and that it’s remained unchanged. It is built on the pillars of secular growth and increased content around the markets where we have positioned TE. Strong free cash flow generation, a disciplined [Technical Difficulty] and levers, which will enable margin expansion as we move through this year as well as longer-term. So with that as a quick overview, let me get into the slides and discuss additional highlights that are on Slide 3. Our sales in the second quarter were $4.2 billion and it was head of our guidance driven by the [Technical Difficulty] we saw organic growth of 12% in the Transportation segment and 15% in the Industrial Solutions segment with organic growth in all businesses in these two segments. In our Communication segment, the decline was in line with our expectations. On a reported basis, sales were up 4% year-over-year and included approximately [Technical Difficulty] exchange headwinds. In the quarter, our orders grew 10% sequentially to $4 billion and I will talk more about order trend dynamics by segment on the next slide. Adjusted earnings per share was ahead of our guidance at $1.65 and included a $0.17 of currency exchange and tax headwinds versus the prior year. Adjusted operating margins came in at 16%. Free cash flow for the first half of the year was very strong at approximately $850 million with nearly $800 million being returned back to our owners. And we do expect continued strong cash generation in the second half along with strong free cash flow conversion this year. We are expecting our third fiscal quarter sales to be approximately $4 billion and adjusted earnings per share to be around $1.65. Our guidance represents a sequential decline in sales, a flat earnings per share, which implies margin expansion from the second to third quarter. We continue to be confident in margin expansion as we move from the first half,largely driven by our Transportation segment. And just moving away from the financials for a second, we are pleased that we were named among Fortune’s World’s Most Admired Companies. This is the sixth consecutive year that TE has received this recognition, which measures a number of criteria including a company’s investment value and product quality [Technical Difficulty] responsibility. So let’s talk about orders and let’s move to Slide 4 and we’ll talk about order trends as well as what we’re seeing in the markets. The sequential growth of our orders to $4 billion reflects increased stability in the supply chain as well as our team’s ability to improve the service levels to our customers. I think the key [Technical Difficulty] is that we’re continuing to see stability in Transportation, overall strength in the Industrial market and continued weakness in Communications. Looking at orders by segment, our Transportation orders grew 12% sequentially and this reinforces the stability I mentioned. In the Industrial segment, we saw sequential [Technical Difficulty] businesses with continued momentum around renewable applications in our energy business, improving trends in commercial air and as well as our medical business where we continue to see recovery. One change that we’ve seen since last quarter is that order patent are indicating moderation in certain industrial equipment end markets. In segment, orders reflect a continued weakness in the data and devices that we’ve talked about for a few quarters now as well as the expected moderation of the appliances market. So with that brief overview around orders, let’s get into the year-on-year segment results that are highlighted on Slides 5 through 7 and you can see the details on each of these slides. Starting with Transportation, sales growth was strong up 12% organically year-over-year with organic growth across all businesses. Our auto business grew 14% organically versus auto production that was up low-single digits versus the prior year. The outperformance was driven by our leading position in electric vehicles, electronification trends in the vehicle [Technical Difficulty] from pricing. As we previously discussed, we were lagging in the recovery of inflationary pressures, but we’ve implemented price increases, which help us enable margin expansion as we go forward. While overall auto production is expected to remain flat for this fiscal year, we continue to expect production of hybrid and electric vehicles to be approximately [Technical Difficulty] in 2023. And as you know, we generate 2x to content and EV platforms versus ICE vehicles. So we expect our content per vehicle to continue to expand as we move through this year. In commercial transportation, we saw 7% organic growth driven by North America and Europe, partially offset by declines in China. We remain excited about our leading global position at electric vehicles for commercial transportation market. We continue to make significant progress with design wins at all the key truck, bus and specialty vehicle OEMs. We are providing a broad range of high voltage connectivity products, which are enabling our customers to solve fundamental challenges that they face in the EV space. These [Technical Difficulty] 1,000 volts throughout the vehicle, increasing the speed of battery charging and withstanding the harsh environment that’s expected in a heavy truck application. Turning to our Sensors business, we had 9% organic growth, which was driven by automotive applications as we see increased volumes from our new design wins. [Technical Difficulty] adjusted operating margins were 16.6% as expected. While the dynamics of price versus inflation caused year-over-year impacts to margin, we saw an 80 basis point sequential improvement in the quarter reflecting the progress that I mentioned. We expect adjusted operating margins to improve sequentially again in the third quarter in the Transportation segment to get back into the high teens in the second half of the year. Now moving to the Industrial segment, sales increased 15% organically year-over-year with organic growth across all businesses. Our Medical business sales in a quarter was a record at $200 million and it had 26% organic growth. The interventional medical market was depressed following COVID, but now’s back up to pre-pandemic levels and it’s nice to be talking about growth in medical again. In our energy business, we continue to see the growth momentum with 28% organic growth and this is entirely driven by renewable applications. We continue to drive growth both from wind and solar applications and the addressable market for TE and renewable applications has a double-digit CAGR and we’re helping enable utility scale solar and wind farm deployments around the world. When you get into these renewable applications, we provide switch gear and high voltage connectivity products and just to give you a little bit perspective, when we talk about high voltage and energy, these are mentioned in kilowatts, kilowatts, not volts like we talk about in the car. And it’s very important that the application knowledge we bring on these higher wattages are very important to enable these renewable applications. And through the – through our broad product portfolio, we are helping our customers reduce installation and maintenance cost. And you can see our strong positioning playing out in the growth of the renewable applications. And now in our energy business, it’s going to represent nearly 25% of our total revenue. Turning to our aerospace, defense, and marine, our sales were up 19% organically with ongoing improvement in the commercial air market. And finally, in the industrial equipment business, our sales were up 3% organically with growth in Europe, partially offset by weakness in the Americas and China. Adjusted operating margins for the segment came in at 14.6% and this reflects an impact from business mix as well as the impact from acquisitions and divestitures. We expect margins to expand sequentially into the third quarter and continue to target high teens margin for our industrial segment. Now let me turn to the Communications segment, where our sales were down as expected at 20% organically, but within the $450 million to $500 million range provided last quarter. The appliance market is down as we expected and declined across all regions. In data and devices, we were down due to market weakness and supply chain inventory digestion as I discussed earlier. Communications adjusted operating margins were 16.3% as we expected. As I mentioned earlier, we expect quarterly segment sales to be at the low end of the range we gave and closer to the $450 million and we think it’s going to be there for the next couple of quarters. And we do think adjusted operating margins at this lower volume will be able to maintain in the mid-teens. As we look beyond the near-term, I do want to highlight that our D&D business continues to have strong design win momentum and next generation platforms that’s serving the cloud data center market. When you get into the rising complexity and artificial intelligence, it drives low latency architectures that need both high performance processing as well as interconnect. I’m pleased that we’re engaged with the key ecosystem providers, including leading semiconductor and cloud companies. We have already generated over $1 billion of new design wins in AI and server applications and expect new programs to begin ramping up in fiscal 2024. So with that as a backdrop of the segment performance, let me turn it over to Heath, he’ll get into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 8, where I will provide more details on the Q2 financials. Adjusted operating income was $664 million, with an adjusted operating margin of 16%. GAAP operating income was $537 million and included $62 million of restructuring charges, $57 million of other non-cash charges related to divestiture activities and $8 million of acquisition related charges. Year-to-date, we have taken $166 million of restructuring charges and would expect full year restructuring charges to now be approximately $250 million as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was a $1.65 and GAAP EPS was a $1.34 for the quarter and included restructuring acquisition and other charges of $0.31. The adjusted effective tax rate was approximately 20% in Q2. For the third quarter and for the full year, we now expect our adjusted effective tax rate to be approximately 20%. Importantly, as always, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. And let’s turn to Slide 9. Sales of nearly $4.2 billion were up 4% reported and up 8% on an organic basis year-over-year. Currency exchange rates negatively impacted sales by $155 million and adjusted EPS by $0.15 versus the prior year. We expect FX to have a modest negative impact for both sales and EPS again in our third quarter on a year-over-year basis. Adjusted operating margins were 16% in the second quarter, price and perspectives, we saw about 200 basis points of headwind to our adjusted operating margins year-over-year as a result of lower volumes in our Communications segment combined with the impacts from currency exchange rates. As we go forward, we remain confident about margin expansion in the second half and it’s important to note that we are not dependent on higher volumes to drive margin expansion. We have successfully implemented pricing actions to offset inflationary impacts in our Transportation segment and this will drive margin expansion at the company level as we move through the second half of our fiscal year. We also expect that industrial margins will modestly expand in the second half from Q2 levels. Communications should remain in the mid-teens at the expected volume levels that Terrence mentioned. It’s a good story here. In the quarter, we once again demonstrated our cash generation model of our business with cash from operations of $634 million. Free cash flow for the quarter was approximately $445 million. Through the first half of our fiscal year, free cash flow was $845 million, up 37% year-over-year was roughly $785 million [indiscernible] shareholders through share buybacks and dividends. As you may recall a few quarters ago, I indicated that we would look to drive our inventory levels lower as we see performance improving in our supply chain. And as Terrence mentioned earlier, we reduced inventory again this past quarter, which contributed to our free cash flow performance. We continue to remain disciplined in our use of capital and our long-term strategy remains consistent, which is to return two-thirds of our free cash flow to shareholders and use one-third for acquisitions over time. I want to stress that our capital structure remains very strong as evidenced by our robust credit profile, ample available liquidity and ease of access to the capital markets. We are maintaining a consistent financial policy and a strong balance sheet [Technical Difficulty] parts of our business model. Excuse me. Before I turn over to questions, let me provide a quick recap. The strategic positioning of our portfolio is enabling us to deliver strong results from secular growth trends despite cyclicality in certain end markets. From a market perspective, the Transportation and Industrial segments are consistent with our 90 days ago with ongoing cyclical weakness in our Communications segment as we expected. Our focus in the second half is to continue to generate strong free cash flow and expand our adjusted operating margins, driving to a higher margin rate as we enter fiscal 2024. We continue to demonstrate our strong cash generation model with a strong balance sheet that can support investments for growth. And we remain excited about the opportunities ahead of us to drive long-term growth, margin expansion and value creation for all of our stakeholders. With that, let’s open it up for questions. Sujal Shah: Thank you, Heath. Chris, can you please get the instructions for the Q&A session? Operator: Certainly. [Operator Instructions] The first question is from Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney: Yes. Good morning. Thanks for taking the question. Could you comment more detail on… Terrence Curtin: Hey, Mark. Mark Delaney: Good morning. Could you comment in more detail on your end market expectations for the balance of the year and how that’s being impacted by the various cyclical cross currents and content drivers? And then on the topic of content, maybe elaborate if you could please on China in particular and how TE’s content per vehicle and share compares between China domestic auto OEMs and then your content with the multinational OEMs. Terrence Curtin: All right. Yes, thanks, Mark. Let me start with the first part of that, which is what are we seeing in the various markets and some of this will be repetitive but I’ll add a little bit of color. Clearly, there is unevenness of what we’re seeing and I think with what we see in orders as well as the markets, it is – most of the industrial space continues to be very strong. You have stability in transportation and you have communication markets where you do have inventory correction, it’s market weakness. So I think you have to keep it in the framing of those big buckets. I think if you click down and I think about transportation, transportation is still – an automotive is still well below the 90 million plus or minus units have been back in 2019 and we’ve sort of been now for three years in a row around 80 million units. So we’re still off 11% or so on the production side. But one of the things that you can see comes through and it’s been built up over time is, our automotive business is up about $1.5 billion over the same period while production’s down. And it is the content trends we talk about every quarter. It is about [Technical Difficulty] and it’s also about the chunk of that. The vast majority comes out of electric vehicles. And I think it shows, where we position the business and also we do expect this year in excess of $2 billion of our automotive revenue will be from electric vehicles. And that’s something we’re proud of and it also proves the content. And even with production staying flat as we’ve said, we’re going to continue to see that content growth. Now the one thing we do have this year on our growth and content is the benefit from the pricing that we put into offset inflation. So that’s about 300 basis points more on the growth and we would normally have. But I do feel with leaving the guide we said where margin will be up next quarter implied in our guidance versus this quarter really reflects those dynamics. I think when you get into the industrial businesses, we have three markets that still remember – remain strong and like we talked about last quarter, our industrial equipment market showed some plateauing in some areas and we’ve seen a little bit more weakness in our orders in certain areas in the industrial equipment market. You’re going to continue to see strong growth in our energy business due to renewable applications. If you take this quarter, we grew high 20%, but over – since 2019, it’s high single digit growth on a CAGR basis and it’s really what we’ve done to position TE around renewable and turn energy into a growth business. Medical, it’s really nice that you see the record revenue. I also think that’s where we position ourselves in interventional procedures and I think that’s something that – as we get supply chain corrected and growth back there again can be higher single digits. And then com air, we’re still in the recovery mode. Our revenue is still below pre-COVID levels, [indiscernible] is not back. So I still think there’s upside there as that entire space recovers and the supply chains get better. And then in communications really what’s happening there is, well documented, cloud spending pause we have throughout everything corrections across the supply chain and inventory, whether it be the OEM, the ODMs, any of the contract manufacturers that are there as well as distributors. And we do think that’s going to be with us at least the next couple of quarters. But as I said on the call, feel very good that the design wins we’re getting on next generation artificial intelligence which comes on the back of cloud, where our teams are going to get there with the highest speed interconnects that are required really like where we’re positioned there. Once that does that inventory does get worked off and we move forward. So clearly some moving pieces, but I do think where we’ve talked to you about content is coming through and has come through during this cycle that we’ve been. Now let me turn to China, your second question. And I think the first thing we all have to remember is China just printed its GDP report and that was up 4.5%. Clearly, as it comes out of recovery, it’s been choppy. For TE what we see in China is the things in the Communications segment look very similar to the overall segment, not only in China but globally. So those markets are weak. A lot of supply chain correction. When you look at our Industrial segment, our bigger play in the Industrial segment in China is around our industrial equipment that remains weak and we’re looking to see if that does get some positive momentum. And then the automotive and transportation side, we grew last quarter, we expect to grow year-over-year this quarter. So we continue to see the growth from the momentum we have there. And I think what’s important is when you think about it, China is the grower of electric vehicles globally. You see that in our growth. We have even share when you look at whether it’s a multinational or a local or shares very even, it’s something our teams have worked very hard to make sure we get. And as EVs get adopted, whether it’s in China or elsewhere in the world, it’s going to be something that drives content growth and it’s part of our four to six. So we don’t see any change in our content momentum related to any OEM change. And what’s important for TE is we’re always agnostic to OEM. We’re trying to win and scale what we do for to make sure that the auto industry has further adoption of electric vehicles out to the consumer. Sujal Shah: Okay. Thank you, Mark. We have the next question, please. Operator: The next question is from Chris Snyder with UBS. Your line is open. Chris Snyder: Thank you. So the auto business was up 16% organically in the first half of the year. So about double-digit outgrowth versus production, 2x the targeted levels. How should we expect this trend into the back half of the year? The company in the prior response, you just called out about 300 basis points of price, I believe for auto this year. Is the back half stronger than the first half as the recent price increases are implemented or is that roughly flat throughout the year? Thank you. Terrence Curtin: No, thank thanks for the question. And what I’m probably going to say first is, please be careful looking at content in any quarter or short period of time, because you do get into supply chain elements as you get in there. I do think to your comment around price, I do think 300 basis points you’re going to – is going to be the benefit as we continue and as price rolls in. And that will continue to take for the year, drive us above the four to six range that we normally talk about. Price will be a part of that, when we look at this year. I think the other thing, and I know it’ll be a little bit probably redundant what I just said. We continue to expect that electric vehicle’s going to be 25% of global production. So I do think you’re going to continue to see that set up be very good. And I think overall content per vehicle and how it trends over time is the most important factor to look at. So we talked about this a lot on these calls a few years ago back in 2018, we were in the low-60s, we’re in the low-80s today, that just proves it’s due to electric vehicle content and as well as supply chains continue to improve and our service levels go up. You’re going to have some of these into quarter impacts at times, but net-net feel very good about where we’re positioned on content growth. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: The next question is from Wamsi Mohan with Bank of America. Your line is open. Wamsi Mohan: Yes, thank you. Good morning. I was hoping to get some incremental color on the margins in Q2, where you made progress in transport, but industrials turned a bit lower. Also the detrimental margins on a year-on-year basis was much higher than normal. What drove that and how should we think about the overall margin and conversion margin trajectory through the course of this year? Thank you. Heath Mitts: Hey Wamsi, this is Heath. I’ll take this one. Listen, I think the single biggest impact we look at the TE margins on a year-over-year basis is the pretty significant decline in the Communications segment. But you have to remember, if you go back a year ago, we kind of framed up the Communications segment margins as a bit overheated and it kind of showed how much volume leverage you could get at those types of volumes you were getting. And we have a business that goes from roughly a quarterly run rate of between $600 million and $650 million down to $450 million to $500 million, that deleveraging is steep. And you get brought back to reality pretty quickly. So we expected this, we were certainly didn’t expand our cost structure or anything when our revenue was higher, knowing that it would cycle down at some point. Net-net and then if you add in the impact of FX, those together are over 200 basis points of impact year-over-year to the company margins. And quite honestly, if you go back and look at our third quarter, which is our June quarter that we’re guiding to now, and you look at that from last year, we’re going to have similar kind of impact. And that impacts both, whether you want to say the year-over-year margins, that’s going to have that same impact. So that’s implied in our guidance as you can see. But if you take a broader picture and say, where does it look like going forward from here, right? We’re kind of running in this $4 billion range of revenue, plus or minus, I’m not guiding that’ll be beyond the quarter that we just gave, but let’s just assume we’re kind of in that range. So Transportation is kind of this $2.4 billion to $2.5 billion quarterly in our back half of our fiscal year, industrial running between $1.1 billion and $1.2 billion, right? And then you get into the communications business, which as Terrence said is going to be closer to $450 million quarterly run rate for the next few quarters. I think when you look at that and you say, okay, what’s that going to do for margins. Within transportation, the price that we’ve discussed so far in this call, and Terrence just walked through in a prior question that the price that we were – have been successful in implementing that was a long time coming and was negotiated contract by contract with OEM by OEM is largely in effect. And we’ll get the full benefit of that as we work our way through the second half of the year. And it gives us confidence in our margins in addition to all the outside growth versus market that we get from content. So we feeling more confident around the transportation margins as we look forward. Industrial side is a bit more challenged, right? We’ve got a business in here that the industrial equipment business, which is feeling the pressure on the order front and certainly as it translates into the revenue side of things. And that is our highest margin business within the segment. And you saw that as we move forward fiscal Q1 and our fiscal Q2 that, while industrial equipment grew albeit modestly at 3%, the rest of the segment far outgrew it. And if you look at how that impacted the mix within the industrial equipment – or I’m sorry, within the industrial segment, it did have an impact. And we’ll have an impact as we work our way through the rest of the year. Now the good news is as we’re seeing revenue increase for commercial transportation within aerospace and defense, Terrence also mentioned medical and then obviously our energy business, which we’ve highlighted on this call. Those, albeit, they have structurally lower margins than the industrial equipment business, volumes do help. And our commercial transportation – I’m sorry, our commercial air business is not back to pre-pandemic levels yet. And so we are still catching up on the margin front. So there’s some things trending in right directions. There’s also some things cycling down with our industrial equipment business that is putting pressure on those margins. But we do expect from a modeling perspective, Wamsi, if you wanted to assume a modest improvement as we move from our Q2 levels through the rest of the year within the segment. And then Communications is pretty straightforward. Listen, it’s roughly $450 million quarterly level, mid-teens is a good [Technical Difficulty] So I think we’ve discussed that already. So hopefully that answers your question. Happy to take anything else. Sujal Shah: Thank you, Wamsi. We have the next question, please. Operator: The next question is from Amit Daryanani with Evercore. Your line is open. Amit Daryanani: Perfect. Thanks. I guess, I was hoping if you folks could spend a better time just talking about from a supply chain perspective, what are you seeing from a component availability and then also the inflation side. And really on the inflation side, I’d love to understand if you think the price increases so far are adequately offsetting this or do you think more that needs to be done here? And then just secondly, if I could get the clarification, could you just remind me what are you estimating from an auto production perspective in the June quarter? I think IHS is that 21.5 million units. So I’d love to get a sense of what are you kind of taking into the guide to auto production side. Thank you. Terrence Curtin: Yes, sure. Let me do the last one first, all year, we’ve sort of said, we’re going to be around 20 million units on of auto production to 80 million in total. And it’s just going to be a flat environment and that hasn’t changed from the beginning of the year. So that’s pretty much how we think about it. And I know there’s some differences of heavy vehicles that are in the IHS number that we put in our commercial transportation, but we’ve viewed flat. On your [Technical Difficulty] about supply chain inflation and price, I want to give a little bit before I get into supply chain is service levels of how we’re servicing our customers. Because I do think whether it is supply chain, whether it is the orders that I talked about earlier is they’re all interrelated. And it’s why when we talk about some markets being stronger stable, it does come into how we’re servicing our customers. And what I would tell you at the overall TE level, our service levels are back to 2019 at the overall TE level. Some people are higher, some people were servicing better as supply chain has improved. There are markets like commercial air and medical, which were late in the recovery. I would tell you our service levels still need to improve. And the main reason the service levels need to improve is we’re still seeing supply chain impacts. But at the big picture, what I would tell you is the availability across the global supply chain has improved. Our customers are feeling it from us. And I think that’s a key element that also explained why we see some stabilization and backlog and I think our orders going up sequentially is a positive factor. Now from an inflationary impact, what I could tell you is places like freight and logistics, we have seen deflationary impacts. I would tell you elsewhere, it’s sort of just moving sideways. I wouldn’t say it’s getting worse. I wouldn’t say it’s getting better. And it’s why when we feel with the things that we’ve done on pricing, especially in transportation where we’re lagging, we do think we’re really in a mode of recovering the inflation that we’ve incurred over the past two years. And that’s why we feel good about the margin impact and we do expect that the pricing will stink. Sujal Shah: Okay. Thank you, Amit. Can we have the next question please? Operator: The next question is from Joe Giordano from Cowen. Your line is open. Joe Giordano: Hey guys, good morning. Terrence Curtin: Hey Joe. Joe Giordano: One just a quick clarification and then a question on an industrial and some of your other markets here. Just in China on EV, do you have a big spread between like, a high-end Tesla type vehicle and a low end kind of local manufacturer in terms of content. And then bigger picture, if I look at something like industrial equipment or IT obviously those are moderating here, but even with moderations, there’s still up a lot even adjusted for inflation or M&A from like a pre-COVID level. So like if those markets – like how much of a real reset should we think is reasonable in like an economic downturn for something like that, that’s moderating now but still up a lot over a like a fairly short period. Thanks. Terrence Curtin: Yes. Let me take both of those. So first off, when you think about content per vehicle, I think what you have to start with, especially, with China is anytime you move from an electric vehicle to from a combustion engine, that’s a content growth element for us, because we’re on both multinationals and locals. So I do think the bigger thing is to be thinking about not comparing content between, it’s really about it drives content growth, because we have a good position on them. And depending upon classic car, you’re always going to have, whether it’s a combustion or electric vehicle’s going to come into the features of what’s in the vehicle. So I think the real thing is as I think China’s over 20% of new car sold or electric vehicles, all that is good for us. And it’s really a key driver to our growth and we’ve always said Asia overall is the growth driver of electric vehicles. So the 25% of the 80 million units that we’ve always, that we say we think it’s going to be at this year, 70% of those units are going to be in Asia and certainly China, China is the largest. So it’s only positive for us. One industrial equipment, I think the element that you come into and let me add a little bit of color to your question is, industrial equipment’s a very broad space. There’s factory automation, there’s building automation things that go into construction, there’s process automation, there’s a number of different buckets and what I would tell you, in areas around factory automation that supports consumer electronics, that – there will be some element of where that will downdraft areas around building automation. Also, we’ve seen weakening there where you get into the commercial construction side. So I don’t expect it’ll be what we see in our Communications segment, but you will see it come down a little bit as some of those markets moderate. There’s also the element of our service levels have improved across that market as well, even though it’s up and we are seeing some of our OEM customers pull out some buffer stock. So we do think there can be some moderation, right now you can probably think about it, the growth and the other three businesses can offset some of that moderation. But we got to continue to watch it and make sure it stays contained in some of the submarkets in the industrial space. Sujal Shah: Hey, thank you, Joe. Can we have the next question, please? Operator: The next question is from Scott Davis with Melius Research. Your line is open. Scott Davis: Hey, good morning, guys. Terrence Curtin: Hi, Scott. Scott Davis: I want to switch gears a little bit. And you mentioned AI a couple times in the prepared remarks, but how material is this upgrade cycle? Is this kind of a nice to have or is this something that could be kind of a multi-year pretty powerful demand driver for you guys? Terrence Curtin: No, super, Scott. So yes, Scott, we talked about it and we talked about some of the design wins because it’s really just the next extension of what you get into high speed. So one of the things that’s nice is where we position ourselves in cloud that will be a multi-year cycle is you get into those higher speeds and also the importance of like I said the low latency you need. So those design wins we’re getting today will start in 2024 and I think it could be very similar to the cloud cycle that we saw over the past three years to four years. So I think as we work through the whole communications and the telecom and the cloud inventory work off, once that settles, I think you’re going to continue to see content growth that will be both from reinvigorated cloud investment plus the AI element that will really drive our D&D business as you get into 2024, 2025 and beyond. Sujal Shah: Okay. Thank you, Scott. Can we have the next question, please? Operator: The next question is from Christopher Glynn with Oppenheimer. Your line is open. Christopher Glynn: Yes, thanks. Good morning. Just wanted to dig into Transportation revenues a little bit more. Looks like it was well above your guidance production maybe in line with guidance, but there’s always some timing around supply chain and EV launches pull forward or more likely push out a little bit. So sounds like you expect consistent revenue in the back calf. So just curious what really changed there with the volumes that came through versus expectations. Terrence Curtin: Yes. So when you look at it, one of the things we saw is that a lot of our over performance in this past quarter was really out of Europe. And Europe was an area that coming into this year and I don’t think we were a typical of anybody else between what was going on from a utility perspective and energy cost as well as the war. And I would tell you in our Transportation business and our OEM customers, they’ve been building more aggressively than we would’ve thought when we came into it. China’s a little bit slower, which sort of gets you to the flattish and really not changing our view, but what’s really nice is, we were able to service them when they wanted it here. And on the back half, the back half isn’t that much different. When you go first half, second half, and when you think about we’re going to be down sequentially a little in Transportation that’s really just due to the choppiness I talked about in China. Sujal Shah: Okay. Thank you. Chris. Can we have the next question, please? Operator: The next question is from Matt Sheerin with Stifel. Your line is open. Matt Sheerin: Yes. Thanks, and good morning, everyone. Terrence Curtin: Hey Matt. Matt Sheerin: I had a question regarding your distribution channels Terrence, I know that you’ve got a big concentration of distribution within your industrial markets and I imagine you’re seeing some feedstocking at the industrial equipment market, but are you seeing that play out anywhere else or expectations that that the distributors are going to start to cut inventories, particularly as lead times continue to come in? Terrence Curtin: Sure. So couple of things Matt, just to frame everything, when you really look at where we play in the distribution channel, certainly in our Communication segment, a big chunk goes through to our channel partners and you’re exactly right, a big chunk goes through in our industrial business and our aerospace business. Now what I would tell you is in our aerospace business, as that continues to ramp, orders continue to grow, backlog builds and certainly we need to continue to increase our output to service the backlog and get service levels where they were before the pandemic. So what you see is you sort of see trends in the distribution channel that do mirror what we talk about in our different business verticals. So we’ve been seeing already, and it’s started a few quarters back with our distribution partners, those that were around our Communication segment units. Order levels have come down. They have been trying to manage their inventory, it’s probably at – it’s at the higher end of their range. And that’s something that when we talk about what we’re going to be at a $450 million in the next couple of quarters, that includes OEMs bringing down inventory, ODMs bringing down inventory, and certain our distribution partners getting to a better inventory level. I would tell you in the Industrial space, we have seen some impacts, but I would also say part of it comes to service levels. So during COVID, when we could not meet service levels due to supply chain, certainly our customers would go to our distribution partners to get product, which is part of the role they play. We have seen as our service levels improve, you’ve seen buffer stocks taken out and we have seen order levels weaken in certainly those industrial markets. It’s not even across all of them like we see in communications, it’s around the markets that we talked about that can be building automation and things like that. And we do see that the inventory levels are at the higher end of the range that our distribution partners would want to be at. So that’s why their inventory levels are a little bit down but not to the extent that we see in the Communication segment. Sujal Shah: Okay. Thank you. Matt. Can we have the next question, please? Operator: The next question is from Samik Chatterjee with J.P. Morgan. You line is open. Samik Chatterjee: Yes. Hi, thanks for taking my question. I guess thanks for all the color about the individual end markets. I was just trying to think of it in more aggregate terms when we take all your outlook for the different end markets auto activity here. Are we comfortable that in relation to cycling pass trough in relation to aggregate autos as you sort of match all those outlooks up by the end markets? And maybe if you can touch on autos there particularly, I know you mentioned choppiness in China, but I just also has a pretty material step up in production in China all through the year. Is that what you sort of are maintaining more caution around or are you seeing it in the orders yet? Thank you. Terrence Curtin: Yes, no, so a couple of things. As I said on our orders in Transportation, they were actually up 12%. And I think the other thing we have to realize, the China automotive market does a big build in our December quarter. So typically, you do have a step down in China and we sort of view China auto production for the rest of our fiscal year being pretty flat to where it was in the second quarter. So we don’t see an acceleration of build, but I do want to highlight that typically the December quarter Chinese auto producers do a big build to meet production targets. And as we look forward, it is choppy right now. We’re watching it. Certainly, the price activity that certain OEMs are doing in China, I think is creating a little bit of pause for consumers to say, hey, how does this settle out? The Chinese consumer is an intelligent consumer when it comes to price. So there are some things that are creating some near-term choppiness, but we view it’s going to be flat from here when we look at auto production in China for the rest of our fiscal year. Sujal Shah: Okay. Thank you, Samik. Can we have the next question, please? Operator: The next question is from Steven Fox with Fox Advisors. Your line is open. Steven Fox: Hi, good morning. I was just curious on the restructuring charges that you’ve taken year-to-date and plan to date for the full year. How those are flowing through the income statement? When are you getting to benefits? What kind of return on it? It looks like more is going into Transportation and other segments based on what I saw in the slides, any color there would be helpful. Thanks. Heath Mitts: Sure. Thanks, Steven. Yes. We did, as you recall, when we went out early part of the year back in our initial view into 2023, we said the restructuring would be somewhere around $150 million, which was flat from prior year. And then in the last call 90 days ago, I said we were reevaluating that and we did and in the discussions with our business and obviously with our Board, we’ve increased that by about $100 million to $250 million. Now you are right. There is chunks, it is just in Transportation, there is some incremental things we’re doing to adjust some cost structure, as you can imagine in this more accelerated downturn in both the Communications and in the Industrial equipment business that is driving some of that in addition to accelerating some of the rooftop consolidations and other parts of TE that had been planned that we want to go ahead and pull in and get done sooner that we’ve determined we have the capacity to handle. So that’s part of it. Now, a bigger chunk of this has been the trend over the past couple of years has been a little bit more in Europe based. And the payback, when you start getting into Europe based restructuring activity is a little bit longer than what you would think of in other parts of the world and it just has to do with the demographics that you’re dealing with and country constructs and statutory requirements. So if you’re looking at it, I would say nor and historically we’ve said that the payback on our restructuring has been just inside of two years. That’s been traditionally kind of how it’s blended together. It’s a little bit longer for that, especially for this incremental piece. It’s probably stretching out to 2.5 maybe not quite three years on the payback of this, but it does give us structural benefits in terms of fixed cost reductions and that’s what we’re really aiming for to lower the fixed cost side of the thing and give us more nimbleness to flex the business. Sujal Shah: Okay. Thank you, Steve. Can we have the next question, please? Operator: The next question is William Stein from Truist Securities. Your line is open. William Stein: Great. Thanks for taking my question. You all have done an excellent job of highlighting the content growth opportunity in EV and executing against it. At Tesla’s recent Analyst Day, they showed how in the Cybertruck and then also in the next-gen platform, their transitioning the lower voltage part of the vehicle to a 40 volt architecture. And this looks like it consumes significantly as content in terms of cabling and I suspect connectors as well. Can you talk about the degree to which this might have already become a trend at other OEMs or if it’s brand new and still on the com and what the impact if any you think this will have in your business? Thank you. Terrence Curtin: Thanks. Thanks, Will. So when you get into this, I think the first thing is even if you take a Model 3, which has a simplified harness versus the Model S, we have more content on it. So I appreciate harnesses being showed, but you really need to look at, when you look at a harness, not the wire, you need to look at the functionality. And in some cases what certainly they’re trying to achieve is how do they approve assembly, assembly quality as well as they do over the top updates. But when you’re bringing data power and signal together and it’s coming together and what may look like it’s a simplified harness. The interconnects on that harness are a lot more complicated, higher pin count and a higher pin count means an individual contact or connection point. So what you get into while the harness simplifies and yet if we made cable or we were a harness maker would probably be bad for us. What occurs is you move to a lot more complicated interconnect [ph], which typically have data power and signal running through them, which create a whole bunch of other demons in the architecture that engineers need to solve for. And what we get excited about that actually while it may lower the amount of interconnects themselves, the more complex interconnects in there are higher content, more highly engineered and really what you get rid of as some of the commodity interconnects that are out there. So – and the same goes through if you jump from not only a simplified harness, you get into zonal architecture, all of that plays into part of the content increase we talk about when we talk about electronification. So the trend for us, we like it. It does get into what we do and what we do well, and we’ve dealt with this for decades and it’s going to continue to evolve. And I think certainly when you get to an electric vehicle that allows you to look at the architecture with a clean sheet versus a nice vehicle, and that’s what we’d like to do. So net-net, it’s a positive for us. Appreciate you bringing up the question. Sujal Shah: Thank you, Will. Can we have the next question, please? Operator: The next question is from Luke Junk with Baird. Your line is open. Luke Junk: Good morning. Thanks for taking the question. Question for Heath this morning. Heath, as you saw the change in mix developed during the quarter in Industrial. I’m wondering how the margins within the sub segments performed or levered versus your excitation in the areas that are exciting right now, so differently, should we view adverse mixes being more mechanical or are there levers you can pull to get to that better volume leverage out of those higher growth areas that you’re envisioning in the back half? And maybe if you could put a finer point on what you think margins might look like in Industrial in the back half, that’d be great too. Thank you. Heath Mitts: Sure, Luke. Listen, I mean, the thing we’re coming off of is a pretty significant, what we’re worried about in terms of our worry beads as a mix of that of obviously less of the industrial equipment business, which it can run anywhere from 500, 800 basis points more profitable than the combination of the other businesses in that segment if you combine those all up. Now, the challenge then is obviously we’ve enjoyed a nice part of the cycle and the margins that that has helped drive for the segment overall is to minimize that impact on the way down and some of the restructuring undertaking that I just mentioned is going to help with that. The other side is getting more volume leverage out of the pieces as you mentioned that were growing through. And there’s a lot of moving parts in that that I won’t want to air in terms of how we’ve layered in acquisitions and the impact from those acquisitions is also some of the rooftop consolidations and things that don’t get captured restructuring, but drive near-term margin pressures. But I do feel confident, as I think about our aerospace defense business to continue, we’ve seen it, although we don’t share those margins at the business unit level externally. We have seen that business begin to improve as commercial air has come off of a pretty steep decline and is starting to work its way back, but still not back to pre-pandemic levels. Our medical business is not nearly as profitable, but as we’ve seen the volume get back to pre-pandemic levels we’ve started to see volume leverage there. And then the other piece is our energy business, which is more of a steady state margin business. So there is some challenge that we have as we look at it on the near-term as I look at it and look at where the growth is coming from and how that mix impact goes. I could see it if I was to frame it up the industrial equipment business could run another let’s say 50 to 100 basis points higher as we work our way through into the second half. But the ultimate goal here and if the team was here to show it, I mean the ultimate goal was still high margins within this segment. And we know that we do a lot of acquisitions in this segment. Sometimes they’re small for TE, but they’re more meaningful for the segment. That resets it down some, but the goal is still to get the operating footprint in the right place where it needs to be as well as getting the overall cost structure where it needs to be. So I feel good about where we’ll get to on this mix impact in the near-term is a bit of a pinch point for us. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: The next question is from Shreyas Patil with Wolfe Research. Your line is open. Shreyas Patil: Hey, thanks so much. In the past, you’ve talked about typical price downs that you pay customers. I think normally it’s in the 1% to 2% range, especially within your automotive business. You have been taking price over the last couple of years through recoveries. But with the supply chains broadly stabilizing, I’m wondering if you expect that you’ll have to start those price downs with customers again. And if so, are you able to extract productivity from your own supply base or drive restructuring savings to kind of help mitigate that? Terrence Curtin: So Shreyas, thanks for the question. I do think there’s an element there that and where does price really occur, like you sort of say, it’s typically in our automotive and our D&D business is where you really see those types of impacts, like you stated. I don’t think we’re close to that yet, and with where inflation’s at for TE and still we’re in a recovery mode that’s the discussions that we’re having with our customers. I think there – if there was things like deflation, real deflation and things like that, we may get back to those traditional patterns because it does come into how do we drive productivity that helps our customer if they hit the volumes in places like auto. But that’s not going to be something we’re seeing in the second half, but as cost comes down around the world, that is something we could get back into in outer years. Sujal Shah: Okay. Thank you, Shreyas. Before we wrap up, we have heard from some of you that we had patchiness of audio cutting in and out, so we are going to publish our earnings script on the Investor Relations portion of the website and that should be up shortly. Thank you everyone for joining us today. And if you have any questions, please contact Investor Relations at TE. Have a nice morning. Thank you Operator: Ladies and gentlemen, today’s conference call will be available for replay beginning at 11:30 AM Eastern Time today, April 26, 2023, on the Investor Relations portion of TE Connectivity’s website. That will conclude today’s conference for today.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the TE Connectivity First Quarter 2023 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning and thank you for joining our conference call to discuss TE Connectivity's first quarter 2023 results. With me today are Chief Executive Officer, Terrence Curtin and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, during the Q&A portion of today’s call we are asking everyone to limit themselves to one question and you may rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence R. Curtin: Thanks, Sujal and thank you everyone for joining us today to cover our results for our first fiscal quarter along with our outlook for our second quarter. Before Heath and I take you through the details on the slides, I do want to take a moment to discuss our performance within the backdrop of the current environment along with what we're seeing since our call 90 days ago. Clearly, we're all experiencing a lot of moving pieces in the global macro environment. While this volatility is creating cyclicality in specific end markets, we continue to benefit from secular trends leading to outperformance across many of the markets we serve. The strategic positioning of our portfolio and our team’s execution enabled us to deliver sales and adjusted earnings per share that exceeded our guidance and we also delivered strong free cash flow in the quarter. We generated high single-digit organic growth year-over-year with organic growth in all businesses, in our transportation and industrial solutions segments. The growth in these two segments offset incremental weakness in our communication segment. And while we can't control the macro environment or the headwinds from currency exchange effects, we are taking actions on the elements of our business model that we can control. Our industrial segment continues on its journey to expand margins towards its high teens margin target and we'll talk through that in the call. As well as we continue to implement price increases to offset inflation in our transportation segment. In addition, we continue to drive cost reduction and footprint consolidation efforts and are now implementing additional structural reductions in communications to ensure we stay in line with the target margins of that segment as we go forward. So let me provide some additional color on our markets and other updates since our call 90 days ago. Our view of the transportation end markets remain unchanged. Our growth will continue to be driven by content outperformance from our global leading position in electric vehicles and electronification trends even in an environment where auto production we expect to remain flat this year. Our view of the industrial end markets is also consistent with our prior view. We are seeing continued strong recovery in the commercial air and medical markets, as well as continued momentum and renewable applications in our energy business. In our communication segments, this is where we're seeing changes versus our prior review. Last fall, we highlighted that we were expecting moderation in cloud demand in our Data and Devices business and we're now seeing incremental weakness in enterprise and telecom applications along with inventory adjustments across the broader supply chain that serves the Data and Device market. And as typical our expectation is that the inventory [ph] adjustment will last a few quarters. Turning to orders from a company perspective our book-to-bill level remain below one as we expected due to the strong backlog coverage from our customers and increased stability in the broader supply chain. And I do want to highlight that our backlog remains near record levels and is almost 2X higher than we were in pre-COVID. Lastly, I do want to comment on the inflationary environment and just want to stress that we continue to be in an inflationary environment and we've negotiated additional price increases with our customers and transportation, which will take effect as we move through this year. These increases will partially offset these inflationary costs and we expect to have positive contributions to the transportation margins later in 2023 from the price cost dynamic. So with that as a quick overview, let me now get into the slides and discuss additional highlights and we'll start on Slide 3. Our first quarter sales were $3.8 billion and this was up 8% organically year-over-year. We saw market outperformance in transportation and continued growth and recovery in the industrial segment, which offset the sales decline in our Communications segment. Our sales were up 1% year-over-year on a reported basis and was impacted by approximately $300 million of currency exchange headwinds. Order of backlog trends continue to reflect a strong demand environment in both the transportation and industrial segments, and I'll get into more details about order trend dynamics by segment on the next slide. Adjusted earnings per share was ahead of our guidance at $1.53 and included $0.25 of currency exchange and tax headwinds versus our prior year. Adjusted operating margins came in as expected at 16.2%. Our free cash flow was strong at $400 million and we returned approximately $410 million to shareholders, and we'll continue to be aggressive with share buybacks, taking advantage of market dislocations and our share price. As we look forward, we are expecting second quarter sales to be approximately $3.9 billion and adjusted earnings per share to be around $1.57. Our guidance represents sequential growth in sales driven by the Transportation and Industrial Solutions segments and this will offset a sequential decline in our communication segment. Our teams remained focused on how we innovate with customers around the key secular trends that we position TE around, such as electric vehicles, renewable energy and data centers, just to name a few. Now I would like to move away from the financials just for a moment and I'm pleased that TE was named to the Dow Jones Sustainability Index for the 11th consecutive year. This recognizes our positive environmental, social, and governance policy and puts TE in the top 10% of the largest 2500 companies in the S&P Broad Market Index based upon long term ESG criteria. So let me get into the order trends in markets and I would appreciate if you could turn to Slide 4. For the first quarter, our orders were $3.6 billion and I think the key take away by segment is that we're seeing stability in transportation, strength in the industrial solutions segment, and we've seen incremental weakness in communications. I also want to highlight that as you look at this slide and you compare orders versus the prior year, there are some key moving pieces I want to highlight. First off is, while currency impact sales, they also do impact orders. And so to compare we're comparing different currency rates year-on-year. And the prior year also has higher than normal order levels due to the broad supply chain challenges we were all dealing with. I do also want to highlight, as I stressed earlier, that our backlog remains at near record levels. So let me get the orders by segment. Our transportation book-to-bill was 0.95, reflecting ongoing stable environment and strong backlog levels. On an organic basis, our transportation orders grew 9% year-over-year and it reinforces our ongoing strong content growth momentum in what is essentially a flat production environment. In our industrial segment, the book-to-bill of 1.02 reflects strong demand across most of them served end markets were in. We continue to see momentum around renewable applications and energy and are also continuing to see improving order trends in commercial air and medical as those markets continue to recover. Turning to communications, the orders reflect the incremental weakness in Data and Devices that I talked about. And the other thing I want to highlight on the orders is the appliance market is moderating as we expected and we've been talking to you about. As we continue to move through this year and continue to see supply chain improvements and a reduction of backlog levels, we expect book-to-bill levels to remain below 1, which is consistent with what we've been talking to you about. So with that as a brief overview of orders, let me now briefly discuss year-over-year segment results in the quarter that are laid out on Slide 5 through 7 and you can see the details on each of those slides. Starting with transportation, sales growth was strong. It was up 14% organically year-over-year, with organic growth across all businesses. Our auto business grew 20% organically versus auto production that was roughly flat versus the prior year. The outperformance was driven by our global leading position in electric vehicles. We're benefiting from electronification trends in the vehicle as well as some benefits from our pricing actions. While overall auto production is expected to be flat for this fiscal year, we expect production of hybrid and electric vehicles to grow approximately 25% of the total global auto production in 2023. And as you know, we generate 2X the content in EV platforms versus combustion engine vehicles. So we expect our content per vehicle to continue to expand as we move through the year. In the commercial transportation business, we saw a 3% organic growth, driven by growth in North America and Europe. And this growth was partially offset by declines driven by a continued China market that's weak. And in our centers business, we grew 3% organically and that was driven by our growth in automotive applications. At the Transportation segment level, adjusted operating margins were 15.8% as expected, reflecting the lag in the timing of price actions to offset inflation. Over the past three to four months, we took incremental cost actions and are implementing additional price increases to improve margin performance. We expect adjusted operating margins to improve sequentially into quarter two and get back to the high teens in the second-half of this year as we mentioned last quarter. Now let me turn to the industrial segment. In this segment, sales increased 7% organically year-over-year, with organic growth across all businesses. Our industrial equipment business was up 3% organically, driven by continued benefits from automation applications. Our AD&M business was up 14% organically with growth driven primarily by ongoing improvement in the commercial air market. In energy, we saw 8% organic growth with continued momentum in renewable applications. And our medical sales were up 5% organically and we're benefiting from the recovery and interventional procedures. As you can see on the slide, from a margin perspective, we expanded adjusted operating margins by almost 200 basis points and we continue to make progress towards our high teens margin target for this segment. Now let me turn to Communications. And in this segment, our sales were down 11% organic. The appliance market is down as we expected and as you would expect, with the benefit we got during COVID as it turns, we saw declines across all regions in this business. Our Data and Device business was down 6% organically, and this was driven by broad market weakness, which I already discussed. In the Communications segment, adjusted operating margins were 17%, driven by lower volume including declines in higher-margin distribution sales. We are taking additional cost actions to improve margin performance in this segment as we go forward. We will balance these actions with investments for growth as we continue to see strong design win momentum in next-generation platform serving the cloud data center market. So with that as a quick overview of our performance by segment, let me turn it over to Heath, and he'll get into more details on the financials as well as our expectations going forward. Heath Mitts: Thank you, Terrence and good morning, everyone. Please turn to Slide 8, where I will provide more details on the Q1 financials. Adjusted operating income was $622 million, with an adjusted operating margin of 16.2%. GAAP operating income was $502 million and included $111 million of restructuring and other charges and $9 million of acquisition-related charges. You'll note that we have taken nearly $200 million of restructuring charges over the last two quarters as we aggressively optimize our manufacturing footprint and improve the cost structure of the organization. We now expect full year restructuring charges to increase versus last year and as we mentioned last quarter, with the charges being more heavily weighted towards the first half of our fiscal year. We will provide further updates to the restructuring expectations as we move through the year. Adjusted EPS was $1.53, and GAAP EPS was $1.25 for the quarter and included restructuring, acquisition, and other charges of $0.28. The adjusted effective tax rate was approximately 20% in Q1. And for the second quarter and for the full year, we expect our adjusted effective tax rate to be approximately 21%. And as always, importantly, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. Now let's turn to Slide 9. Sales of $3.8 billion were up 1% reported and up 8% on an organic basis year-over-year. Currency exchange rates negatively impacted sales by approximately $300 million and adjusted EPS by $0.21 versus the prior year. In the second quarter, we expect currency exchange rates to be a headwind of approximately $165 million year-over-year. And last quarter, we indicated that foreign exchange would negatively impact full year sales by approximately $1 billion year-over-year. We now expect the full year impact to be roughly half of this number at the current exchange rates. Adjusted EPS was $1.53 and adjusted operating margins were 16.2% as we expected. Now turning to cash flow, in the quarter we once again demonstrated the cash generation model of our business with cash from operations of $581 million, free cash flow was approximately $400 million, and we returned over 100% of our free cash flow to shareholders through share buybacks and dividends. We continue to remain disciplined in our use of capital, and our long-term strategy remains consistent. And as you know, that is to return two thirds of our free cash flow to shareholders and use one third for acquisitions over time. Before I turn it over to questions, let me provide a quick recap. The strategic positioning of our portfolio enabled us to deliver Q1 sales and adjusted EPS that exceeded our guidance. From a market perspective, the Transportation and Industrial segments are consistent with our view 90 days ago. We continue to benefit from content growth in Transportation and continued market recovery and growth in the Industrial segment. However, some of this was offset with cyclical weakness in communication end markets and the inventory adjustments that come with that. We continue to execute on our margin journey and you can see that progression in the Industrial segment. We remain focused on the actions that we can control, implementing price increases to offset inflation and driving additional structural cost reductions to improve our margin performance as we go forward. We continue to demonstrate our strong cash generation model, with strong balance sheet that can support investments for growth. We will balance the short-term pressures with long-term opportunities, and I'm very excited about the opportunities we have to drive long-term growth, margin expansion, and value creation for our customers, employees and shareholders. Let's now open up for questions. Sujal Shah: Thank you, Heath. Abby, can you please give the instructions for the Q&A session. Operator: [Operator Instructions]. Your first question comes from the line of Mark Delaney from Goldman Sachs. Your line is open. Mark Delaney: Hey, good morning guys. Thank you very much for taking my questions. Could you please provide more detail on orders, specifically the linearity of how orders tracked over the course of the quarter and into January and any differences in order trends by end market? Terrence R. Curtin: Sure. Thanks, Mark. Thanks for the question. First off, how orders trended during the quarter and even into January had been pretty stable outside -- except for our Communications segment. So when you think about orders linearity or orders were stable, except for the one area that we highlighted. And what's interesting is, and you see it on the orders chart, our backlog in both TS and IS are up year-over-year. We have seen our backlog being worked down in TS, and it reflects the demand dynamics that we see. So from a demand, I think you got to look at both orders and the backlog together to really get a picture. If you break it apart by segment, as I said on the call, Transportation, if you remove currency effects, our orders were up 9% year-over-year. And production has been running around this 20 million units per quarter. So relatively, it's got more stable, and the supply chain has improved. And really, that growth really comes into the content that you see the strong outperformance and that we've, I think, proven to you about our content opportunity. In Industrial, we continue to benefit from some markets that are recovering. You see that Comm Air, while single aisle is back very -- back to pre-COVID levels, dual aisle aircraft, which are bigger content opportunities for us are starting to improve. So we still see recovery there. Also in medical, we see it. And in those two markets, we still see some broader supply chain challenges, but we see our orders continuing to accelerate there and renewables I talked about as well. The only place in Industrial, I would highlight, we had multiple years of very strong growth in our industrial equipment business. We probably see that plateauing. It would probably be how I would phrase it because that growth is just off a very high base, and we're going to have tough compares. And in Communications, where we really saw the weakness, I would say, we always highlighted to you that the appliance business that we had was going to benefit in cycle due to the COVID benefit it got. It's playing out as we expected where it got worse was in communications, where we were expecting moderation in cloud CAPEX spend. We solely got weaker both in enterprise and telecom type applications. And that supply chain is here, let's face it, whether it's distributors selling into EMS or lower-tier players or the ODMs and EMS. They all make the same, and what we are experiencing is we do see inventory burn happening there. So I think it's more of a cyclical element we're dealing with. And as you go through inventory burns, as I said on the call, that's going to be with us for at least a couple of quarters, that's going to have a cyclical pressure with us in communications. Sujal Shah: Okay, thank you Mark. Can we have the next question please. Operator: Your next question comes from the line of David Kelley from Jefferies. Your line is open. David Kelley: Hey, good morning and thanks for taking my question. I wanted to follow up on the Communications Solutions segment discussion. I was hoping you could provide a bit more color on the progression of comms demand throughout the quarter? And then can you give us a view or sense into how you're thinking about sequential 2Q sales and margin trajectory for the segment? Thank you. Terrence R. Curtin: Sure, David. Thanks for the question. And I'm not going to repeat what I said in the last question on the demand side. But as you think about our comm segment, last year, pretty much every quarter, it ran in excess of $600 million and really showed the momentum we have in those applications. In the first quarter, it's down to 520. When we look at where we see the demand levels, we think that we're probably going to be around $450 million to $500 million in revenue in the second quarter. So we do expect an incremental step down with what we're seeing in demand patterns and this inventory work off. And then right now, with the best we can tell, that's probably where we're going to stay for a couple of quarters. So that's how I think you should think about it. I do think what you'll see from a margin perspective is I think we've done a great job proving to you what we've done with the cost base of this segment when you saw the margin outperformance last year. But I do think you'll see this in the mid-teens as we work through this and working its way back up as the inventory works up into the higher teens as we work through the year. Sujal Shah: Okay, thank you David. Can we have the next question please. Operator: Your next question comes from the line of Wamsi Mohan from Bank of America. Your line is open. Wamsi Mohan: Yes, thank you. Good morning. Terence, can you just help us with some color around margins in your other segments as well, particularly, you stressed confidence in moving industrial back to high teens and also recovery in transport margins. How much of that is predicated on some of these restructuring actions versus the pricing initiatives that you've taken in transport and how contractual are those or is there a lot of cyclicality or uncertainty associated with accomplishing those initiatives? Heath Mitts: Wamsi, this is Heath, and I'll take the question. First of all, if you just take a step back for a second, our margin targets for each of the segments is unchanged. I mean we will react to different types of market conditions in terms of the demand environment, as you would expect us to. But in terms of how we focus some of the cost reduction and footprint consolidation efforts, those strategically are unchanged. Now we've accelerated some things, and you've seen that more recently in some of the charges that we've taken. And some of that is in response to a quicker decline in the communications business than what we had originally anticipated. But if you just break it down by the three segments, and they each have a little bit different story, the transportation margins we've talked to you about, there's been a lag from -- when we felt the inflationary pressures and continue to, and we feel those real-time versus when we can get the negotiated price increases in effect. And those are meaningful price increases, and we're confident that we are in the -- as we implement those real time, that those are going to have a nice benefit for us as we work our way through the year and would expect the Transportation segment margins to be in the high teens during the second half of fiscal 2023. The Industrial business, we're pleased with the performance. As you see in the quarter, not just year-over-year expansion, but as we continue to move forward, we've been committed to a high teens margin trajectory for the Industrial segment. That has been a balance of both restructuring and growth, and you'll continue to see us move our way through that and hopefully appreciate the progress that you see reflected in our Q1 results accordingly. And then Communications is a bit of the wildcard right now. Obviously, the prior couple of years, you saw the types of margins that can kick out at the types of volume levels that we were seeing. And as Terrence mentioned, if you go back and look over the last year plus, our communications business was running well north of $600 million a quarter in revenue. And as we go into a period here, as there's some inventory corrections and so forth where we see the revenue being somewhere in that $450 million to $500 million range for the Communications segment, as Terrence mentioned, there will be a deleveraging impact we will get after the cost structure, as you would expect. Our long-term margin for this business is still around 20%, but we're not going to be able to react in one quarter to be able to preserve that. So I think Terrence just mentioned it, and I'll mention it again, if you're modeling it, I'd say the Communications segment will be in the mid to high teens from a margin perspective this year as we deal with the decline. But importantly, all the areas that we are focused in and all the platforms that we have won relative to the areas that we're excited about have very good margin opportunities as we move forward. So we are confident in the overall margin projection there. Sujal Shah: Okay, thank you Wamsi. Can we have the next question please. Operator: Your next question comes from the line of Chris Snyder from UBS. Your line is open. Christopher Snyder: Thank you. I know the company is only guiding for the March quarter, but I wanted to ask a little bit about the outlook for the various end markets into the back half of the year. And then specifically for auto, I know the company said last quarter that there was agreed to price coming into effect in January. Is that not really having an impact until the back half or are you going to start to see that in Q2? Thank you. Terrence R. Curtin: Thanks, Chris. Let me talk on the first part before -- thanks Chris, sorry about that. Let me talk about the first part before I get to your price question. Like you said, I'll give you some insights that I think I said in the script around how we think markets could develop. We are only guiding for one quarter. And so in transportation, while I think there's a couple of key points as we think about these markets, I think we've said very clearly that we expect production to be flat. I also think it's important to highlight, we're still well below pre-pandemic levels in auto production. So while it might be around 80 million units a year and flat versus 2019, that's -- there were 88 million cars made in the planet. So we're still below pre-pandemic levels by about 10% on production. When you look at this year, it's all going to be about our penetration in our global leading position in electric vehicles. And what we get excited about is that position, I said on there, if electric vehicles and plug-in hybrids get up to about 25% of that 80 million units, our revenue -- or auto revenue this year, the amount around electric vehicles and plug-in hybrids, will be well in excess of $2 billion of our revenue in automotive. And I think we've proved the content story there. We continue to prove it, and you see it in the outperformance. Looking at outside of automotive and transportation, commercial transportation, last year was a negative market for that -- those submarkets. This year is probably going to be flattish with anything going on in North America and Europe being offset by China weakness, and we'll slightly outgrow that due to our content momentum. In Industrial, I already covered Comm Air, and medical are recovering markets so we expect that you're going to continue to see further growth in these markets because it's how we're catching up. And then there's also levers of further growth potential, especially when you get into Comm Air and dual aisle aircraft, which are only at 50% of pre-pandemic levels. And renewables, that momentum continues. So I really don't view that's going to slow, and that's up to 25% of our energy revenues related to renewables. And in Communications, I think we spent a lot of time on already about how you should think about that market from here as well as maybe where the revenue can be. On the second part of your question around pricing, in the first quarter we were with our customers. And our pricing in automotive, it does lag. When we get inflationary pressures, inflation doesn't stop. We have negotiation with our customers, and we did an additional round in the December quarter, which were negotiated, and now they are starting to come in. They do phase in into the early part of calendar year. And we will get margin improvement in transportation this quarter, in the second quarter from the first quarter, and then it will continue to increase as we go through the year. So those have been negotiated, and we're going to start seeing the benefits of those as they come in as we work through this year. Sujal Shah: Okay, thank you Chris. Can we have the next question please. Operator: Your next question comes from the line of Matt Sheerin from Stifel. Your line is open. Matthew Sheerin: Yes, thanks, and good morning. Heath, I wanted to just ask about your inventory levels. I know last quarter, you talked about some margin headwinds due to reduction in your own inventory within transportation. It looks like your actual inventory dollars were up quarter-on-quarter. So could you walk us through that inventory picture? Thanks. Heath Mitts: Yes. Sure, Matt. Thanks for the question. And honestly, it's fairly straightforward. And we normally grow inventory in our fiscal Q1 rather than what we're talking about today in anticipation of things specifically related to activities in China, in anticipation of the Chinese New Year. So if you think about the increase we had from sequentially within the quarter, about half of that was just the revaluation due to foreign exchange. And the other half was the planned inventory build that we anticipate. As you think about it for the year, I -- we'll continue to be aggressive. I do not anticipate -- and when you look at -- when we sit back and look at this at the end of the year, that we're going to have a material inventory inflation. Obviously, we'll do what we need to do on the communications side as we deal with everything Terence has talked about already. And then the other two segments are well on plan for that. So hopefully, that answers your question. Sujal Shah: Thank you Matt. Can we have the next question please. Operator: Your next question comes from the line of Jim Suva from Citi. Your line is open. James Suva: Thank you. Your transportation content story is very positive and compelling. So congratulations on that. One concern we get though is given a recession or a slowdown and the economy concern, is there any signs of auto unit you mentioned flat outlook, but a potential inventory correction there or a slowdown there as we progress through 2023? Terrence R. Curtin: No. Thanks Jim for the question. And what we continually monitor with our customers is really how's inventory to the consumer. And when we look at that inventory, Jim, North America is still in the mid-30 days, which is well below the 60 days, which is more traditional. Europe is pretty much in line and China is in line. So we continue to monitor that. What's also nice you continue to see the supply chain improving across the world that anything that would be out there in the supply chain is being worked off. So I'll be honest with you, we got to watch it. So certainly, we're in a slowing macro economy, but I do want to also stress again auto production is still 10% below pre-pandemic. So I don't think we've overshot, but I think we have to keep an eye on it. And I think flat is the way we're seeing it is a prudent way that we've been planning our business right now. Sujal Shah: Alright, thank you Jim. Can we have the next question please. Operator: Your next question comes from the line of Amit Daryanani from Evercore. Your line is open. Amit Daryanani: Thanks for taking my question. I guess, [indiscernible] kind of have you spent a bit more time on the price increases that you're expecting on the transportation side, how that flows into the model in 2023, can you just quantify what the size increases are that you expect this year? And then secondly, I think the fear I would have is, can you really raise prices on customers, the auto OEMs were actually lowering the price of their own car size by 15%, 20% at this point or do you end up with more sizable pushback, if not for this a likely for next year? So I'd love to just see your perspective on your confidence that these price increases will flow through and what sort of benefit are you embedding from that into your guide for 2023? Terrence R. Curtin: Yes. So a couple of things, Amit. You were breaking up a little bit, so I hope I get every element of your question. First off, being our pricing with our customers are contractual. So no different than you've seen us have a lag in transportation. I do want to make sure that is around transportation. These are negotiated elements that came in, and we have been, over the past three to four months doing another round, which does give us the confidence around the pricing and those global agreements aren't checked. Now certainly, each one is a little bit different, and they will be coming in. So we will see the benefit of them starting this quarter that we're in, and it will accelerate as we go through the year. And the other element is we're still dealing with inflation. So when you look at it, we are still in an inflationary environment, things that are oil-based, how utilities and conversion costs that come out of some of the materials we use. We're still in an inflationary period, even though it might be a lower rate than last year. And we're still dealing with that in transportation as these prices come in. So as I said on our prerecorded message, we do expect our margin to get up in the high teens in the flat environment later in the year, and that will benefit from the pricing that we put in -- and what we do with our customers, we are a commodity business. We are key to their EV launches. We aren't making commodity products here. And that's the contractual nature of what we do with them. So certainly, they may have some price pressure. Certainly, we've had price pressure, and that's what we had to go through the negotiations, and we do have confidence around them. Sujal Shah: Okay, thank you Amit. Can we have the next question please. Operator: Your next question comes from the line of Scott Davis from Melius. Your line is open. Scott Davis: Okay, good morning guys. Terrence R. Curtin: Hey Scott. Scott Davis: There's been a lot of talk already on kind of inventories and price and inflation. But can you disaggregate inflation a little bit for us and help us understand kind of -- are you seeing material moderation in things like labor inflation, I mean we can follow the materials ourselves, but labor is something that I think is a little bit harder to track? Terrence R. Curtin: Yes, Scott, I think it's important when you look through that in our world, material is the biggest part of our spend when you look through it. Labor is incrementally higher, but the bigger pressure that we have is really around the base materials we use. And during this period, you cover it well, you really have not only the base material, but then you also have where do utilities and conversion costs come in. And where I would say we're still seeing inflation metals have come off, I would say it's more neutral year-over-year. In resin-based things and chemicals, where you use a lot of energy to make those and let's face it, some of that those come out of Europe, continuing to see inflation there. Utilities around the world, certainly, the cost to run factories is inflationary. And the other area that I would say we talked about that actually has retreated is around how do you move things around the planet from a freight and logistics perspective. So last year, you would have had everything inflationary. You're seeing freight logistics come down. You're seeing metals be more neutral, but you're still seeing resins and oil-based things that are energy-intensive still have an inflation around it. Labor for us is incrementally inflationary, but I wouldn't say it's the biggest headwind we have, and that may be different for other companies. Sujal Shah: Okay, thank you Scott. Can we have the next question please. Operator: Your next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open. Christopher Glynn: Hey, thanks. Good morning. Just shifting gears a little bit. I was curious about the Industrial segment margins, incrementals were a few hundred percentage points. And you held margins on lower sales versus the second half of last year. So I'm curious if you're hitting more of a culmination of the cost structure program that you've been talking about for a while? Heath Mitts: Hey Chris, it's Heath. It's a good question. It feels like we're always on this journey with Industrial. I would say that, certainly, we're pleased with the results in the quarter. And as we look through the year and our internal viewpoint, certainly, there's progress being made. Now the other thing, and there's a lot of good reasons, but we do -- this is -- this does tend to be the segment that we are the most acquisitive in. And we have done enough acquisitions last -- in the last couple of years, where we feel, at least 100 basis points of margin pressure just from those acquisitions. But that's part of the value creation journey, right? We bring something in. We know it's lower margin. We get the cost structure right. We integrate as appropriate, and then we start to see the returns from overall. So absent that impact, I feel very good about where we are from the restructuring journey we've been on, which is really a flip top -- or I'm sorry, a rooftop consolidation journey that we've been talking pretty publicly about for the last five years. We have made a ton of progress on those rooftop consolidations. And then just the acquisitions are the things that are kind of the wildcard in here in terms of the pressure relative to the opportunity. Sometimes, we don't get into that as much, but it was pertinent to your question. I thought I'd highlight that, Chris. Sujal Shah: Okay, thank you Chris. Can we have the next question please. Operator: Your next question comes from the line of William Stein from Truist. Your line is open. William Stein: Great. Thanks for taking my question. You just answered a bit of this, but I'd like to dig a little bit more into the M&A opportunity. You highlighted that the company plans to spend over time about a third of its free cash flow on acquisitions. I think it's been significantly below that level for several years. So I'm hoping you can maybe refresh our memories as to both the strategic and tactical approach to M&A and whether we might expect that to accelerate in the next couple of years given the spend has been, I think, quite a bit below that third of free cash flow number? Thank you. Heath Mitts: I appreciate the question. And certainly, the two thirds, one third ratio that we talked about and have talked about for years is through a cycle, right. You're going to have periods of time when you do acquisitions and it's heavier or size of a deal tends to swing you in a particular direction. I would tell you that there's been times over the last couple of years where we have not spent that third. At the same time, that doesn't mean we're not active in the space. I think, so far this fiscal year, we've spent about $100 million on a transaction. So we're -- I don't know what that is in terms of our ratio, but you can't look at it in really quarter-by-quarter or even in a one-year off basis. We do have a pipeline of activity. And as you imagine, besides the stuff that we keep track of and we monitor and cultivate on our own, we obviously are involved in a lot of processes that are out there as well. However, our approach to this is unchanged. That means the deal has to be strategically important for us, number one. Number two, where do we add value as the owner of that company. And then number three, obviously, the financial profile of the acquisition and how it relates to what's good use of cash for our owners. So we're going to continue to be disciplined in that process. We're going to continue to make sure that we're making smart acquisitions and in spaces that we feel very good about. So there is some fragmentation out there, and it just depends on which of our business units. And we'll continue to be aggressive in those areas, and we'll see where it all adds up here as we track it over time. Sujal Shah: Alright, thank you Will. Can we have the next question please. Operator: Your next question comes from the line of Joe Giordano from Cowen. Your line is open. Unidentified Analyst: Good morning. This is Michael on for Joe. Earlier, you mentioned elevated restructuring costs in the first half of the year, which are more in line with 2020 levels. Can you disaggregate the drivers behind that, I know you had mentioned a little bit earlier, but any additional color would be super helpful? Heath Mitts: Yes. And Michael, I appreciate the question. As you think about it, when we went into the year, we said restructuring will be roughly flat or down from the prior year. And prior year FY 2021 number was around -- I'm sorry, FY 2022 number was around 150 million. Certainly, that was our plan going into the year, with the incremental downturn, particularly in the Communications segment. We have elected to accelerate some things in order to react more aggressively to that, which will push our FY 2023 number higher. I'm not at a point right now where I want to quantify exactly how much higher it is. We'll have a better view when we're back online here in April. But I would say that it's -- we took a charge in Q1 of north of $100 million that we've already spent a good chunk of that, and that was really to aggressively get after a few things here. Longer-term, certainly, after we react to that, we would anticipate bringing this number down. And our hope was to do some of that in 2023. But with the market conditions, that's not going to happen. Sujal Shah: Okay, thank you Michael. Can we have the next question please. Operator: Your next question comes from the line of Samik Chatterjee from J.P. Morgan. Your line is open. Samik Chatterjee: Hi, thanks for taking my question. I guess I wanted to see if I can dig into the industrial equipment sub segment a bit and get some more color there. You talked about the recovery that you're seeing in medical, Comm Air and also the strength in renewables. But when I look at the industrial equipment, the broader sort of industrial group there, how are you -- what are you seeing in terms of the impact of macro, what are the puts and takes there, and any sort of color on book-to-bill, what that sort of sub segment is tracking at? Terrence R. Curtin: Yes. So first off, when you look at it, I would tell you, I do think we have to keep in the context our industrial equipment business grew 25% each of the last two years. So very strong growth. And I think what we're seeing is we continue to see the backlog around CAPEX whether it's around what you see around automotive, electric vehicle, those types of things, that backlog is very strong. We are also seeing supply chain improving. So in that space, you're seeing supply chain improving. So that will impact order levels a little bit, but not to the extent we're seeing in Communications. The other thing that I think we're watching is, it's not lost on us, what's happening in consumer electronics. Consumer electronics is a big user of factory automation. And that certainly has been a weakened market. What happens around warehousing could be a weaker environment as well. So when we look at that, there are areas, but there are strength areas when you think about the infrastructure investment as well that our products go into. And you're also seeing strength in process automation. So I would tell you, it's not all in one direction. I think it's also -- we have tough compares that we're going to be going up against. And it feels like we've seen a peak and plateauing is how we would see it both from an orders as well as the supply chain improves. Sujal Shah: Okay, thank you Samik. Can we have the next question please. Operator: Your next question comes from the line of Steve Fox from Fox. Your line is open. Steven Fox: Hi, good morning. Just one broad question on China and there's been a lot of news flow out of there and questions around how companies manufacturing footprint should look for the long-term or even shorter term given all the changes in terms of government policies, et cetera. Can you just sort of sum up your current situation in China and then how you look at sort of your global footprint, especially as you do some restructuring down the road here? Thanks. Terrence R. Curtin: Sure. Thanks, Steve. And a couple of things, I mean you followed us for quite some time now, and we've always been on that how do we produce engineer where we make if we can? And our China footprint is very much for China. We are not a big exporter out of China, and anywhere we even do have that, we do continue to look at where do we have China plus one within region where we might be doing some things for Japanese or Korean customers in China, they may want an option. So I view it much more as a modification and an evolution than a wholesale change because we don't import a lot of things back to places like the United States. We're also -- when you think through our growth opportunity, we talk a lot about electric vehicles. China is the largest electric vehicle market. So we continue to look at how do we expand capacity in China to support those local OEMs as they continue to make up the lion's share of electric vehicles. So net-net, our strategy to move back again to the big picture we want to manufacture in region, it's the best for the supply chain. Certainly, we have to mirror what our customer supply chains are, and you're going to continue to see us modify so that we make within region. And even some of the things Heath talked about in restructuring is, in some cases, we're still exporting out of places like Europe into China. We want to make sure we're more localized in China. So we're continuing to invest in China around these key verticals that we expect to be there long term and drive our growth. Sujal Shah: Okay, thank you Steve. Can we have the next question please. Operator: Your next question comes from the line of Guy Hardwick from Credit Suisse. Your line is open. Guy Hardwick: Hi, good morning. Just want to understand, sorry if this has been covered already, but I want to understand that the transportation margins just a little bit better. So I think you guided to, at the last quarter, at least 100 basis points of impact on the Transportation margins for the inventory reduction. At the same time, you also benefited in this quarter from, I believe, very strong pricing as well as strong outgrowth driven by mix. And even if I take out that 100 basis points of inventory reduction impact, you're still like 100 to 140 basis points decline in the margin despite the pricing. So does the pricing get even stronger as the year progresses, is that kind of what you're communicating, can you help me understand that a little better? Heath Mitts: Sure. Guy, this is Heath. We covered some of this a little bit earlier, but our price increases largely are a little more calendar-focused, if you think about it and go into effect really as we sit here today. So January-ish time frame, they're obviously not all aligned on the same date, but more or less, we didn't see much help in our first quarter results in transportation or otherwise from pricing. So it pretty well laid out as you would have thought in terms of that. Now as we work our way through the year, both in the quarter as Terrence mentioned earlier, both in the quarter and the second quarter that we're sitting in today as well as our second half of our fiscal year, we do expect a significant help from those pricing increases. And you'll see those -- I'm confident you'll see those in both our second quarter results as well as the back half of the year. Sujal Shah: Okay, thank you Guy. Can we have the next question please. Operator: Your next question comes from the line of Luke Junk from Baird. Your line is open. Luke Junk: Good morning, thanks for taking my question. A modeling question for me. Heath, just wondering if you can help us understand the moving pieces around your updated FX guidance, specifically, how that translates from revenue to earnings, wondering what has changed versus 90 days ago in terms of how it works through the plumbing, if you will, especially thinking about the back half of the year and the earnings impact as the top line impact starts to moderate? Heath Mitts: Sure, Luke. And listen, it's been a moving piece for us as well over the past 90 days. The top line piece is really just we snap a line in the sand in terms of where things are relative to the dollar. And we did see the dollar weaken in the quarter, particularly towards the end of the quarter. And obviously, that's impacting most all companies who are global. That's the translation impact. The transactional impact is a little bit harder because that starts getting into where we denominate currency versus where we have costs and those types of things and where we move things across border, across currencies. And so that piece of it has more of an impact to the EPS element of it. Now we talked last quarter about $1 billion, and most of that first -- $1 billion year-over-year and most of that in the first half weighted. Now it's about half of that at today's rates, and that's still largely in the first half of the year. And you see the numbers we talked about, the $300 million year-over-year impact in the first quarter and $165 million that we just guided for the second quarter in terms of that, and I think we provided in the bridges, the EPS elements of that. Now at today's rates, if you work your way through the back half of the year, it balances itself out. You don't have much of an impact in the back half of the year. A little bit of a headwind I think in the third quarter, and it swings around a little bit of tailwind in the fourth quarter, but we're getting into much smaller numbers at that point. So the back half, again, at today's rates, we don't know what's going to go from there. That's kind of how it looks. Sujal Shah: Okay, thank you Luke. Can we have the next question please. Operator: Your next question comes from the line of Shreyas Patil from Wolfe Research. Your line is open. Shreyas Patil: Hey, thanks so much for taking my question. Just coming back to communications. So maybe thinking a little bit beyond this year. You've talked about the ability to sustain low 20% margins in that segment. Obviously, we're going to be dipping below that for the next few quarters, but I'm just trying to get a sense of the bridge to get back to that low 20s level, I mean how much of that is really dependent on the end markets versus some of the internal cost actions that you're talking about taking out? Heath Mitts: Sure. This is Heath. I'll take this. It's really -- I mean, listen, I think if you look at your models, first of all, it's our smallest segment, right? So there's a little bit of law of small numbers here on a relative basis for TE when you start getting to the margin rates. And we are always very careful about not jumping up and down to when we had the real high margins the last two years because we knew what the leverage was in those factories when you have that kind of output and when you see it flip around. So when you go from a 600 million to 650 million per quarter run rate at that segment down to sub 500 million here for the next few quarters, it does have a meaningful impact. And I think part of it also is the amount of inventory bleed off. And the margins that we know exist in that channel inventory that's just the reality of the cyclical nature of this. Now our confidence, in terms of being able to get back to closer to a 20% margin number for the segment, really resides in the fact that we don't -- we see this as more than a $2 billion segment annually, right. We do see this continuing to grow. We know the markets where they are. We know where our customers' capital needs are and the things and the platforms that we've been specked [ph] in on that are incremental growth to us going forward for the next several years. We feel good about that, and we know what the margin is going to look like, but we're going through a bit of an air pocket here for the rest of 2023 or for at least the next couple of quarters of 2023. Sujal Shah: Okay. Thank you. We'd like to thank everybody for joining our call this morning. And if you do have additional questions, please contact Investor Relations at TE. Thank you and have a nice day. Operator: Ladies and gentlemen, today's conference call will be available for replay beginning at 11:30 A.M. Eastern Time today, January 25th, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity Fourth Quarter 2022 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning and thank you for joining our conference call to discuss TE Connectivity's fourth quarter and full year 2022 results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. I also want to remind you that our Q4 results include an extra week and we'll be discussing some of our results on both the 14-week and 13-week basis during the call. Please see the appendix in the slide presentation for the impact of the extra week in our results as well as the accompanying reconciliations. Finally, during the Q&A portion of today’s call, we are asking everyone to limit themselves to one question and you may re-join the queue if you have a second question. Now, let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal and we appreciate everyone for joining us today. As I typically like to do at the beginning of these calls before we get into the slides, I'd like to spend some time discussing our performance, along with some of the developments that we're seeing since our call just 90 days ago. While there are a number of external data points showing crosscurrents from global economic uncertainty, we continue to perform well and you'll see this both in our fourth quarter and fiscal year 2022 results. Our performance came in ahead of our guidance and continues to demonstrate the benefits for how we strategically positioned our portfolio around secular growth trends as we continue to outperform our markets. We also were demonstrating operational performance in serving our customers and delivering strong financial results despite the broader macro challenges. Our backlog remains near all-time high levels and our overall order levels imply solid demand across the majority of the markets we serve. Within this backdrop, we have some markets that are growing, some that are still in recovery mode back to pre-pandemic levels, and others that are showing signs of moderation. At the same time, we're being negatively impacted by a stronger dollar, which will continue to be a significant headwind into 2023. I also want to highlight that our team continue to proactively implement price increases to keep up with ongoing inflationary pressure. I am confident in our ability to execute in the short-term as we navigate these challenges and I am excited about the long-term opportunities as we go forward. And Heath and I will go into more details on these moving pieces as we discuss our performance and outlook on the call. To summarize our financial performance, we delivered strong results again in the fourth quarter with double-digit organic growth and double-digit adjusted earnings per share growth year-over-year. For the full year, our adjusted sales and adjusted EPS were records with sales up 12% organically and adjusted earnings per share up 13% versus the prior year despite headwinds from foreign currency exchange and inflationary pressures. With this quick backdrop, let me give you some details on what we're experiencing. First, on the orders front. We're seeing some putting some tanks across the different end markets we serve and this is reflected in our orders in our backlog. With the higher backlog levels that we have and the stability we're starting to see in our supply chain for the first time since COVID, it is reasonable to see our book-to-bill below one in the quarter. Our backlog remains strong at $6 billion, which is almost two times higher than pre-COVID levels. If you click down on orders by segment, transportation and industrial are continuing to show positive order trends. In transportation, OEM auto production is still constrained by supply chain limitations, and end demand remains above current levels of production. So, we continue to have a favorable outlook for this market long-term on both production as well as the content growth. In the industrial segment, we continue to expect growth in com air and medical markets as reflected in our orders, along with the benefits from wind and solar applications in our energy business. Renewables now represent 20% of our energy sales and the com air market is still recovering to pre-COVID levels. And both of these will be growth areas within the industrial segment in 2023. In our communication segment, we are seeing orders decline in the appliance market. Based upon recent developments, we have seen orders to cloud customers moderate, reflecting lower capital spending, along with inventory adjustments in the data center supply chain. We also continue to experience inflationary pressures and this is particularly true for resins, that we use for molding as well as higher energy costs that impact our manufacturing operations globally. We are continuing to implement additional price increases to offset these inflationary costs and expect to have a positive contribution margin later in 2023 from the price/cost dynamic. And the last thing I want to highlight before we turn to the slides and I think we've consistently demonstrated, we will take actions to ensure our cost structure is in line with what we're seeing in the market environment and Heath will provide additional details on this in his section. So, now let's get into the slides and I'd asked you to turn to slide three and I'll cover some additional highlights for the fourth quarter in the full year as well as get into our first quarter outlook. As Sujal mentioned earlier, our fourth quarter included an extra week. Our fourth quarter sales were $4.4 billion, which are up 14% on a reported basis, our adjusted operating margins were 17.4%, and our adjusted earnings per share was $1.88, and this was up 11% year-over-year. If you include the extra week to get to a better apples-to-apples comparison, our fourth quarter sales were slightly over $4 billion and this was up 12% organically year-over-year, and adjusted earnings per share were $1.75. A key thing to highlight in the fourth quarter is that we delivered record free cash flow of $745 million in the quarter, which demonstrates our strong cash generation model and we returned over $500 million to shareholders. I do want to highlight and we discussed it with you previously, earlier in the year, we did increase inventory levels to deal with supply chain volatility and ensure we can meet the needs of our customers. As we began to see our supply chain improving, we decided to get our inventory more in line and reduce our inventory by approximately $350 million in the quarter and you'll see our days on hand were actually down year-on-year in the fourth quarter. We do believe this was prudent balance sheet management in the current environment and this action improved our free cash flow in the quarter, but does pressure our margin in the short-term. So, now let me touch upon a few additional highlights for full year results. Our fiscal 2022 results were record at $16.3 billion and this was up 9% year-over-year on a reported basis despite currency exchange headwinds of approximately $760 million. Sales were up 12% organically with industrial and communications of double-digits and transportation of high single-digits demonstrating the strategic positioning of our portfolio. Adjusted earnings per share was a record at $7.33, which was up 13% year-over-year and adjusted operating margins were 18.2% with expansion in the industrial and communication segments versus the prior year. For the full year, we returned $2.1 billion to shareholders between share buybacks and dividends, as our focus was on organic investment in the business, as well as return of capital to our owners. Now, with as a wrap-up of the financials for 2022, let me touch upon our first quarter guidance. And I want to frame this out by incorporating some of the moving pieces I already highlighted for you. I do want to make sure we have the right baseline together for guidance. So, when you look at this, the year-over-year comparison would be against $3.8 billion of sales in the first quarter of fiscal 2022 and the sequential comparison would be against the 13-week sales in quarter four of $4 billion. So, if we look at it going back to quarter one of 2022, -- I mean sorry, 2023, we do expect sales of approximately $3.75 billion and this sales in the first quarter of 2023, up 9% organically and down slightly on a reported basis year-over-year, despite approximately $400 million of FX headwinds. Adjusted earnings per share is expected to be approximately $1.50, which includes year-over-year headwinds of approximately $0.25 from currency exchange, and a higher tax rate of 21%, which will be up from a year ago. When you look at our guidance sequentially versus the 13-week $4 billion, we are declining by $300 million in sales and $0.25 in EPS. Roughly half of our topline sequential decline is from foreign currency, with the remaining bounce split between typical seasonality and the decline in the communications volume due to end market moderation. The EPS decline is driven by foreign exchange and volume declines I just mentioned, as well as a temporary impact from the proactive inventory reductions we drove in the fourth quarter. While we have some near-term pressures that are non-structural, we have been making progress on what we can control with our teams driving price increases this past year to partially offset the increasing inflationary pressures. As we've mentioned in the past, in transportation, there is a lag between inflation and our ability to recover through price. We have implemented to do additional price increases which again transportation margins back up into the high teen sometime in the second half of 2023. While we are working through the crosscurrents we're experiencing, one thing that has not changed is the benefit we continue to see from the secular trends in our markets and the outperformance we're generating from content growth. We're benefiting from our position in electric vehicles, smart factory applications, including automation, renewable energy and high speed cloud and artificial intelligence applications. We remain committed to our business model and long-term value creation through growth, margin expansion, as well as driving our strong cash generation model. So, with that, wrapping up the highlight slide, let's turn to slide four and I'll share some more details on orders. For the fourth quarter, orders were $4.3 billion and this reflects resiliency in both transportation and industrial and also demonstrates moderation in our communication segment. Our backlog of $6 billion is up 11% year-over-year and I want to emphasize that we're seeing very little impact from push outs or cancellation from our customers. In transportation, we had a book-to-bill of 1.03, along with a strong backlog position. This reflects favorable demand patterns. End demand for autos continues to be higher than what OEMs can currently produce, providing a favorable backdrop for production increases as our customer supply chain bottlenecks begin to resolve and dealer inventories get back to historical levels. Our content growth remains strong with content per vehicle expanding in fiscal 2022 to over $80 per vehicle from the $60 range of pre-COVID. We do expect further content expansion due to our global leadership position and increased adoption of electric vehicles globally. In our industrial segment, we had a book-to-bill 1.01. Year-over-year order growth was driven by both at AE&M [ph] and our medical businesses, as these businesses continue to recover from pre-pandemic levels. And in our communications segment, orders declined year-over-year and sequentially reflecting expected decline in appliances and moderation in data and devices as the data center supply chain adjust inventory levels for its cloud customers. Despite this market cyclicality, we expect to continue to outgrow the market in the data and devices business due to share gains and benefits from high speed and AI implementations in the data center and cloud. Now, let me provide a little color what we're seeing in orders geographically. On a 13-week organic basis by region, we saw year-over-year growth of 6% in China and Europe, while North America was essentially flat. On a sequential basis, we saw orders growth 18% in China, with single-digit declines in Europe as well as in North America. So, with that as a backdrop of orders and backlog, let me turn it over Heath and he'll get into segment highlights, as well as some information on the financials. Heath Mitts: Thank you, Terrance and good morning everyone. I will now briefly discuss year-over-year second results in the quarter on slides five through seven. You can see the details on the slides and I will talk about organic sales performance on a 13-week basis. Slide five, transportation sales were up 13% organically year-over-year, our auto business grew 16% organically with growth across all regions. We continue to increase our content per vehicle through our global leadership in EV. Electric vehicles now account for nearly 20% of auto production with further increases in production expected in 2023. To provide context EV and HEV production has grown 3x from 2019 with 14 million units produced in 2022. And importantly, for 2023, we expect our market outperformance to be well above our stated 4% to 6% range and automotive. In commercial transportation, we saw 13% organic growth, driven by North America and Europe with significant market outperformance in all regions driven by content growth and share gains this year. In sensors, we declined 3% organically with our focus growth areas offset by continued portfolio optimization activities. At the transportation segment level adjusted operating margins were 16.6% and the margins reflect the short-term impact of our planned inventory reduction along with the timing of price actions to offset inflationary pressures which Terrance mentioned earlier. Moving to the next slide, the industrial segment, sales increased 16% organically year-over-year. Industrial equipment was up 20% organically with double-digit growth in all regions and continued benefits from factory automation applications. Aerospace and defense was also up 20% organically with growth driven primarily by ongoing market improvement and com air. In energy, we saw 16% organic growth driven by increased penetration and renewable applications. And our medical sales were up 3% organically with increases in interventional procedures as the medical device market continues to work through supply chain challenges. Adjusted operating margins for the segment expanded year-over-year to 16.5%, driven by higher volume, price actions, and implementation of previous cost actions. The next slide communications. We had 3% organic growth year-over-year. In data and devices, we saw continued market outperformance driven by content growth and high speed cloud and share gains in artificial intelligence applications. Our appliances business declined 46% organically, reflecting the expected moderation in this end market that will continue into fiscal 2023. Communications adjusted operating margins were 21.7%, reflecting the lower sales in the appliance business. If you turn to slide eight, where I'll provide more details on the Q4 financials. As mentioned earlier, Q4 includes an extra week and we had provided tables in the appendix that bridge sales, margins, and EPS for that extra week. Sales of $4.4 billion were up 14% on a reported basis year-over-year and currency exchange rates negatively impacted sales by $348 million versus the prior year. Adjusted operating income was $757 million, with an adjusted operating margin of 17.4%. We are being impacted in the near-term by non-structural pressures of foreign exchange, inflation, and the previously mentioned inventory reduction. While we can't influence currency exchange rates, we are continuing to be proactive on recovering inflationary pressures through price increases. Additional upcoming price increases will go into effect and transportation helping to lift segment margins back to the high teens in the second half of fiscal 2023. And while our Q4 inventory reduction has a near-term impact on margins, we do expect margin expansion as we move through this year with the back half closer to run rate company margins and as you know, we were in the 18% range for most of fiscal 2022. GAAP operating income was $660 million and included $82 million of restructuring and other charges and $15 million of acquisition-related charges. For the full year, restructuring charges were approximately $150 million, which were in line with expectations. We did ramp up our restructuring charges in Q4 to proactively react to the market environment. While I expect restructuring charges in fiscal 2023 to be roughly consistent with fiscal 2022, the charges will be more heavily weighed into the first half of the fiscal year and we will continue to further evaluate cost actions as we move forward. Adjusted EPS was $1.88 and GAAP EPS was $2.21 for the quarter, and included a tax related benefit of $0.57 related to discreet tax benefits during the quarter. Additionally, we had restructuring acquisition and other charges of $0.25. The adjusted effective tax rate was approximately 19% in both Q4 and fiscal 2022 and for Q1 and fiscal 2023, we expect our adjusted effective tax rate to be roughly 21%. Importantly, we continue to expect our cash tax rate to stay well below our stated ETR for the full year. Turning into year-over-year comparisons on slide nine, fiscal 2022 sales of $16.3 billion were a record at up 9% on a reported basis and 12% organically year-over-year. Currency exchange rates negatively impacted sales by approximately $760 million versus the prior year. Due to the further strengthening of the U.S. dollar against other currencies, we expect currency exchange rate headwinds to be approximately $1 billion for fiscal 2023 with roughly 70% of this headwind to be felt in the first half of the fiscal year. This equates to approximately 600 basis points of headwinds to reported growth in fiscal 2023. Adjusted EPS expanded 13% year-over-year to $7.33 and adjusted operating margins were 18.2% with year-over-year expansion in our industrial and communications segments. Turning into cash flow, free cash flow for the year was approximately $1.8 billion, with over $2 billion returned to shareholders through share buybacks and dividends. We continue to remain disciplined in our use of capital and our long-term strategy remains consistent, which is to return approximately two-thirds of our free cash flow to shareholders and use one third for acquisitions. Near-term we have been aggressive in buying back our stock and taking advantage of investing in our own organic value creation opportunities. And before we get into questions, let me wrap-up. We delivered strong performance this past year. Our teams have continued to execute well in this volatile environment to effectively serve our customers. And while we have some near-term headwinds, I am excited about the opportunities we have ahead of us this fiscal year. Our positioning of the portfolio will drive content and performance. We also have a trajectory for further margin expansion and EPS growth through actions we can control, including price increases to fully offset inflation, cost reduction initiatives, and a strong balance sheet that can support investments for growth, while continuing to return capital to shareholders. So there's a lot to be excited about there. Now, let's open it up for questions. Sujal Shah: Angela, can you please give the directions for the Q&A session? Operator: [Operator Instructions] Your first question comes from the line of David Kelley with Jefferies. Your line is open. David Kelley: Hi, good morning team. And thanks for taking my question. Number of moving parts in the quarter, the extra weeks and inventory reduction shifting in demand. So, I was just hoping to dig into maybe the earnings trajectory into 2023. So, could you walk us through or give us a sense of exit rate 2022 sales and margin levels? Heath Mitts: Sure, David. This is Heath, I'll take it. We just laid out a lot of moving parts for you. And as I appreciate the opportunity to clarify anything that may come across this is as confusing. As we exited the year, certainly, we enjoyed good order volume and we saw that reflected in our sales. And you saw that and certainly we benefit from the flow through some of that. But we still are dealing with a lot of pressures. We have our inventory that we've elected to take down in the quarter, it was over 10% of our overall inventory balance, it was 350 million. And that does have a natural impact on margins in the flow through accordingly. But importantly, we did bring our days on hand of inventory metric, more back in line with where we would see a healthy ending balance script as volume level. So, we feel good about that. And obviously it has the benefit of the cash flow, which was a record in the quarter of nearly $750 million. So, we're going to keep our foot on that in terms of making sure that that stays in check as we move forward. But it does have a negative near-term impact on the P&L. The other piece is we still are seeing a lot of heightened price pressures, particularly in transportation around inflation, and where we buy resins and so forth that are oil-based driven cost structures is still hitting us. So, we do have planned increases that have already been agreed upon and will go into effect and more or less the January timeframe and other parts of Q2, that will have a nice uptick for us as we move from the first half to the second half of the year. And we are seeing our communication segment moderate as expected. We had expected appliances to moderate, we've been discussing that openly throughout the year and we have started to see that both in our orders and our sales. And that does have a little bit of a dilutive impact on the segment margins there for transportation -- for communications. So, there's a few things heading that direction. Now, on the on the flip side, as we think about EPS, FX, and the strengthening dollar is heightened. If you recall, back in July, when we snapped the line on what the currencies looked like, I had given an early preview that our FY 2023 exposure was going to be roughly $300 million and now we're calling that a $1 billion with about $700 million of it hitting us in the first half of the year. That does -- while that doesn't hit our margins quite as hard, that does have an impact on earnings per share and we're certainly feeling that in the first quarter. We can't control that, but we are working -- and that's just reality. We want to be transparent with the analysts and owners of the stock here. So, there's some moving parts there as we work our way through the year. At the same time, we're not sitting flat footed. We mentioned some restructuring activity that will continue. That is about right-sizing, some sort of things in an anticipated software macro environment. So, I appreciate the question and certainly if there's follow-on, let us know. Sujal Shah: Thank you, David. Can we have next question, please? Operator: Your next question comes from the line of Wamsi Mohan with Bank of America. Your line is open. Wamsi Mohan: Yes, thank you. Good morning. I was wondering if you can talk a little more about the order and backlog trends and comps, if you could share some color on that? And maybe the magnitude of the inventory adjustment, potentially the GRC being at these ODM suppliers to hyperscalers. And if I could, I was also wondering if you could comment on how TE's performance was an outgrowth versus production and in fiscal 2022 for transport and how much of that was inventory adjustments in 2022 as well? Thank you so much. Terrence Curtin: Sure, Wamsi, I'll take that and good morning. And let me talk about orders a little bit. Because I know you talked about comps, I want to talk about what we're seeing in orders again across and then I'll talk about content outperformance. First off, I just want to be honest that having a book-to-bill below one with where our bookings have been in building a backlog, that's not surprising to us. And as supply chains around the world improve and we would continue to expect to see book-to-bill dipped below one. So, I just really want to make sure as supply chains improve, including our own, we would expect our customers to work down our backlogs that we have -- that they have with us. So, I really want to make sure that people don't read into this, that demand is dropping off across our markets, because we're not seeing that. And as I said in the script, we aren't seeing cancellations or push outs in any meaningful way. I think if you look by segment, TS and IS, I think those backlogs are getting -- book-to-bills are getting more normalized. And I think it shows resiliency. In communications, I think what's important is we've had CapEx growth with our cloud customers that have been 20%, 30% cloud CapEx and we've outperformed that. Clearly, you can see it in the growth rates. But as you see the cloud CapEx moderating well off those levels, the ODM supply chain does have excess inventory in it that's been worked off. And I think that could impact us for a couple of quarters. But it's probably to that magnitude that you'll see it in our D&D business. And then the other areas in comps and we've always talked to you about is the appliance market was one that benefited from the trends during COVID. And we're seeing that moderation that we've already always expected. So, we're getting both of those in those order patterns. Now, let me turn to your second part of your question around content outperformance. I think what's very important is, as Sujal -- also and I said earlier, was we aren't -- from how much our revenue has been impacted anymore from supply chain disruptions, it's only about $50 million of revenue that we haven't built. That used to be about $100 million. And content outperformance was at the high end of our range, and we told you a 4% to 6%. When we look at the auto supply chain, I can't tell you what the impact of that growth is in there. We actually feel very good that it's at the high end of the range for 2022. And we expect for 2023 will be above the high end of the range. So, we don't see any major inventory impacts in the auto supply chain from what we're seeing. Certainly we've seen orders moderate and people getting more comfortable with were working off the backlog. Sujal Shah: Okay, thank you, Wamsi. Can we have the next question, please? Operator: Your next question comes from the line of Steven Fox with Fox Advisors. Your line is open. Steven Fox: Hi, good morning. I was just wondering since you're not providing a full fiscal year guidance for the new fiscal year, if you could maybe walk through what you're thinking about your end markets at this point in time? Thank you. Terrence Curtin: Yes, thanks, Steve and we got it for the first quarter, so there is volatility in the macro, I don't think that's a surprise. And the color I'm providing is on what we're seeing today and how we're planning the business and certainly there can be changes here, depending upon how the global macro moves. But let me do it by segment. First of all, transportation, the transportation environment has been a challenging environment for the past couple of years. Auto production has really been sort of stuck around 76 million, 77 million units, due it all the things that we talked about whether it's supply constraints, the war in Europe, certainly extended lockdowns in China around COVID. And I still think where you get -- and it's nice to see some of our customers talking about semi supply improving, it's going to be really about how can they ramp production to still keep up with demand that is greater than what they can produce. So, we still see end demand for auto being above the production environment. So, we still see that as a nice setup, as we go into next year. We do also expect, as I just said, to Wamsi's question that we're going to have outperformance versus market above the 4% to 6% this year. And this is really going to be driven by the global leadership position we have where we position ourselves in electric vehicles and certainly the penetration of electric vehicles continuing to increase as a percentage of total production. The other key market that's in transportation, which is commercial transportation, it's a market that decreased double-digits this year, really around China, and some of the emissions standards, that we're putting the fact that you're before. And we would expect that China could have an increased market situation there. And we've been driving out performance versus the market in commercial transportation as you seen all year through all the three regions. So, it's also something we've had a tough year, this this year, from a market perspective and commercial transportation could have some upside next year. In industrial, as you look at that and I still think it's a very strong setup. And you heard me when I talked about orders, both on backlog and orders. And we see com air and medical are markets that are still recovering. And we expect further growth in these markets in 2023. And when you look at com air, while single aisle aircraft are back to pre-pandemic levels from a build, double-aisle was still only at 50%. And what's nice is some of the air framers are talking about increasing production and increased demand on double aisle aircraft. The other thing that I mentioned, the script is wind and solar remain strong and our energy business, very strong double-digit growth this year and 20% of our sales are energy from renewable. So, we expect further growth in that this year. And the one market that's been really hot for us, which has been industrial equipment and we had extremely strong performance in past two years, we see good trends there, but we're going to have tough comps. And as we're focused on higher growth applications and robotics, and new programs around Ethernet connectivity, that will help make sure we outperform the market. But I just want to remind everybody will have tough com. And in communication, the appliance market is weakening as we expected and the step down in our sales in the fourth quarter. And you're going to continue to see that this coming year. And in data devices, as I just talked about with Wamsi question, we are -- do expect cloud CapEx to step down from where it was and moderate. And then we also have the ODM supply chain that's going to impact us in the first part of this year, as they adjust to the hyperscale company's demand. And I think it's reasonable to expect that our D&D business will be down this year based upon those two factors that we're dealing with. So, I know you asked a simple question and I gave you a lot, but it's sort of how we're thinking about the macro as we're entering 2023. Sujal Shah: All right. Thank you, Steve. Can we have the next question, please? Operator: Your next question comes from the line of Matt Sheerin with Stifel. Your line is open. Matt Sheerin: Yes, thanks. Good morning. I wanted to circle back to the gross margin and specifically, the impact of that inventory reduction, that $350 million. How much -- I mean it looks like in Q4, you were down with 220 basis points in gross margin year-over-year. And it looks like you're guiding roughly 200 basis points down in Q1. So, how much of that is related to that inventory reduction? And is that one quarter issue or does that carry through to Q2 of 2023? Thanks. Terrence Curtin: Hey Matt its Terrence. So, I'll take that. And you're right, I want to be clear, this was our inventory that we took out. So, I know we -- I talked a lot about D&D supply chain with cloud customers, this is our inventory. And as Heath sort of said, our inventories back in days on hand in the mid-80s, it was running in the 90s, as we were working through supply chain. And we made the proactive action to bring inventory down and as you have factories that have cost of x, you have less units running through it, you have higher costs inventory have to work off, we had a partial impact in our fourth quarter and you'll have a bigger impact on our first quarter, that'll be about 100 basis points in the first quarter. And it'll be a little bit in the second quarter as it works off, but then that'll be a temporary issue. The other thing is what why did we do it, I do think it's important. The why, it is something we made choices to carry more inventory during the year. But as our supply chain got better and we saw more normal flow coming in, it was something we said, hey, let's make sure we get our inventory more back in line. And we're serving our customers consistently. And it's just something we thought was prudent from a cash generation as well as the uncertainty in the macro. The only area we're seeing really supply chain impacts will be in some niche materials, as well as those markets that are really still in recovery mode back to pre-pandemic, medical, as well as commercial aerospace, which I don't think is a surprise to anybody. So, it is something that it was to get inventory back in line and TE and that always kind of a gross margin impact that will be with us here early in 2023. But that was a proactive action on our part. Sujal Shah: Okay. Thank you, Matt. Can we have the next question, please? Operator: Your next question comes from the line of Amit Daryanani with Evercore ISI. Your line is open. Amit Daryanani: Thanks a lot. Terrence, I think there's going to be a lot of focus on operating margin trajectory in fiscal 2023 beyond the mid-16% I think we're going to do in December. I was wondering if you could provide some clarity on how do you think margins stack up in 2023 qualitatively across segments? And really specifically on transport, reviewing the back half, recovery looks better versus the first half. And then CIS, do you think we end up dipping below 20 over there. Just any breakdown on margin trajectory going forward would be really helpful? Thank you. Heath Mitts: Thanks, Amit. This is Heath. I appreciate the question. No, listen, I think it's certainly on point. As we think about transportation margins and some of the things we've already discussed this morning, a couple of things that are pressuring transportation margins. One is we talked about the price cost differential and what we're looking forward to in terms of seeing higher prices go into effect that we've already got agreement on later in the first half of our fiscal year that will have a benefit as we move into the second half on transportation margins. The other thing that, Terrence just walked Matt through was on the inventory side. As you can imagine, we did take out $350 million of inventory as we burn through the accounting element of that and the pressure it puts on margins, there is a disproportionate amount of that that hits transportation. So again, as we just talked about, that will have a benefit as we think about our second half versus our first half. So, transportation margin is definitely a second half improvement based on a couple of things we talked about. Industrial is honestly performing very well. And we've been pretty vocal and transparent with you about our journey on transportation and the restructuring journey in terms of rooftop consolidations that we've taken on. The business has done that well and has absorbed some acquisitions in the middle of this journey that are going to be very good returns for the company and for the shareholders. So, we're looking forward to those. At any given time, there might be a quarter pressure here or there but we are making strong progress towards our journey towards high-teens margins even while absorbing some of the dilutive impact on acquisitions. So stay tuned on industrial, but we feel good about our trajectory there in 2023. And then the last part of your question, Amit, was around transfer and communications margins and being able to stay north of 20%. Listen, we've never advertised it as a high 20% business. We've enjoyed a couple of years and we basically have said as a reminder that at those volume levels, it just shows what kind of margins that we can generate at those volumes. Now that we're seeing volumes come back down, Terrence mentioned earlier on a question that we do expect Communications to be down modestly year-over-year on the top line, we would expect that the margins would moderate. I still think they'll be a little above 20% for the full year, but there's some pieces there that, in any given quarter that might dip below. But generally, I feel like we'll be above 20% for the year there, which still shows the resiliency of that even at lower volume. Sujal Shah: All right. Thank you, Amit. Can we have the next question, please? Operator: Your next question comes from the line of Chris Snyder with UBS. Chris Snyder: Thank you. So I wanted to talk about more the margin outlook for Transport Solutions, but maybe more so focusing on price cost. Prior commentary from the company has said that you're recovering about two-thirds of cost inflation and it translates to more than $200 million loss at the EBIT line based on my math. Presumably, the high majority of all of that is transport. So I guess, as we look into the back half of next year, and we see pricing going higher in cost maybe flat to down, at least with metal, how should we think about that 200-plus kind of EBIT loss? Could that get to neutral? Is there any scope for that getting beyond neutral? Any color there would be helpful. Thank you. Heath Mitts: Thanks, Chris. I'll take that. First of all, I think your math is pretty close, okay? So I'll give you the props for that, because certainly, that is not an easy way to back into, but your math is pretty close. Listen, our inflationary pressures really come from four main places. It's metals, right. It's resins, right, that we use for our molds. It's freight cost and its just overall utility costs that we've seen spike, particularly in Europe to run our factories. Some of those things, we have started to see moderation on in terms of being able to as capacity has come back online and so forth. We are still feeling inflationary pressure on resins and on utilities, which are both energy driven prices. So we are going to -- we anticipate that to continue even as we have certain buckets that will begin to moderate and potentially lower year-over-year in terms of any incremental pressure. Throughout the year, as you mentioned, we have recovered on the TE basis about two-thirds of that inflationary pressure through price. So that still leaves us, as you mentioned, a couple of hundred-million-dollar gap. When you break it into our segments, it's a little bit different. So while it maybe two-thirds for the company, it's -- we're covering much more in FY 2022 in both industrial and in communications. And the nuance there is that we do -- in both of those segments, we do more through our distribution channel partners. And it's simply easier to pass along price more efficiently and more timely when you're going through distribution partners because you can go out with more regular increases and they're less about reopening contractual negotiations. So, those have both been recovering more price. We permit more inflation through price as we work through both not just last year, but the prior year. Transportation is where it gets tougher because you've got more direct to OEM contracts and those contracts are tied to platforms and so forth. And so many times when you're recovering inflation, which everyone is trying to do, you are discussing things that won't go into effect for some times six or nine months out. And that's really what we're feeling in the transportation world now. Fortunately, we're coming up on those price increases later in the second half of this fiscal year. And I do feel that as we do that, we'll start to see that two-thirds of pricing coverage certainly will improve. Now as we get to the back half of our year, where we go above the inflationary pressures, I would say stay tuned. But we -- that ratio will improve as we work our way from the first half to the second half sure. And that gives us more confidence as we move into -- as we move and make our plans for the rest of the fiscal year. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: Your next question comes from the line of Joe Spak with RBC Capital Markets. Your line is open. Joe Spak: Thanks so much. Heath, you mentioned some higher restructuring. I was wondering if you could give a little bit more details on that stepped-up level in the fourth quarter. It looks like it was really in the transportation business. And I think on your guidance, it looks like restructuring is still going to be a healthier level in the first quarter. So maybe just a little bit more on those actions, what you're looking for in terms of a payback. And when can restructuring return to more normalized levels? Heath Mitts: Yeah. Joe, thanks for the question. Listen, as we noted in the prepared comments, we did do a little more than 80 -- of the $150 million and change that we took charges for in FY 2022, little over $80 million of that was in the fourth quarter. And a lot of it was geared towards transportation. Now we have been working our way through restructuring programs, which has been very focused on factory footprint consolidations. I think we've been pretty clear that we had some European footprint in Western Europe that we've been in the process of taking off line. Most of that is in transportation and, to a lesser extent, in our Industrial segment. Those are either finished, on track or certainly underway versus when those charges were taken and the payback for those continues to be in line with what you would expect for us and when you start talking about European footprint consolidations, you're somewhere in that two to three-year payback period. The charges that we took in the fourth quarter and that I anticipate taking in the first quarter, certainly are more geared towards a bit more of a somber view of the macroeconomic view, and we want to make sure that we are getting ahead of that. Now, we're not going to do anything to pinch capacity, to a point that we can't deal with a rebound in certain markets, and it won't be universally applied across TE, but it will be disproportionate in our Transportation segment, both in auto and then a couple of other selected places. So, this will be more focused on cost reduction, and we want those costs to come out. We want to come up with our structural cost, and I think importantly, lowering our fixed cost structure as we move forward here to maintain some nimbleness on the margin front. Sujal Shah : Okay. Thank you, Joe. Can we have the next question, please? Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney : Yes. Good morning. Thank you very much for taking the question. I want to understand what's making the company take the view that 2023 content growth will be higher than the 4% to 6% target? And do you think there will be any inventory reductions that your customers could be making and that perhaps could offset some of the underlying content growth this coming year? Thank you. Terrence Curtin : Hey, Mark, thanks for the question. And really, when you look at it, I think it just has to do with -- when we look at the setup of electric vehicle penetration and you see -- and I know Heath talked about where electric vehicles have grown from and to, and the broad global acceptance of them, which is exciting to us, it's very exciting to us that we still continue to see that being a big driver of our content growth. And with the mix that we would expect, we do expect that we would be above the high end of the 4% to 6% range. That also has a view when we make that comment and as I sort of said, production is stable. And we do view, we'll drive that off of stable production. We don't assume major supply chain excesses in the supply chain when we say that, and it's what we're seeing, especially as you look at our orders and where our book-to-bill has gotten to in auto, it's more back to more traditional levels. So net-net, we actually feel pretty good If production was to change meaningfully, maybe that could create a little bit of supply chain. But right now, we're not expecting that. Sujal Shah : Okay. Thank you, Mark. Can we have the next question, please? Operator: Your next question comes from the line of Samik Chatterjee with JPMorgan. Your line is open. Unidentified Analyst: Hi. This is Sumeet [ph] on for Samik Chatterjee. Thanks for taking my question. I just wanted to ask on transportation relative to the underlying market, like what are your expectations for auto production growth for 2023? Like IHS is currently forecasting a 4% growth, like amounting to nearly 85 million vehicles produced. What's your take on that? Thanks. Terrence Curtin : Thank you for the question. And I think what's important and I know at times, we don't include light vehicles, so it might be a little bit different on how we talk number and how you talk. We saw about 20 million units made in the fourth quarter of 2022. And we also expect 20 million units to be made in the first quarter and there will be seasonality in it. And we think production can be a little up. But net-net, we don't see it's going to be a rocket ship of production increases. We sort of view it will be up low single-digits, which I don't think is far off of what you say. So net-net, I think that's how we see production right now as the OEMs try to make sure they fulfill the demand that's in excess of production. Sujal Shah : Okay. Thank you, Sumeet. Can we have the next question, please? Operator: Your next question comes from the line of Jim Suva with Citigroup. Your line is open. Jim Suva : Thank you. Heath and Terrence, at this time of year, you typically give a little bit more on the 2023 or the next year outlook. I know I think I heard Terrence talk a little bit about the end markets. But then with the moving parts of inventory digestion, book-to-bill and all that, I was thinking and restructuring, I was thinking on the company totality level, any preliminary thoughts on either sales or margins or cost structure or cash flow for kind of the full years as we look out because there are a lot of moving parts? Heath Mitts : Hey, Jim, this is Heath. Well, certainly, we've got to be careful in terms of what we say, because we have not provided FY 2023 guidance other than a few buckets like where current -- foreign currency -- excuse me, currently stands as well as what we're anticipating for restructuring. Those were full year numbers. I think as we sum up a lot of things here, we've talked a little bit today about the first half versus second half. And hopefully, that provides a little bit of color for you and our expectation is that margins will improve and you can kind of cascade that way down through the P&L. From a cash flow perspective, listen, we finished very strong and had record free cash flow in the quarter and that was largely attributable to our inventory reduction. We do expect to have a strong cash year in FY 2023. We will fund all the organic opportunities that are in front of us, because we still are in a lot of markets and applications where we can outgrow our markets. That should give you some confidence that we feel pretty good about the revenue line. And in general, I feel good about that cash opportunity, not just return money back to shareholders, but to fund the CapEx and the investments we need and still deliver a very strong cash flow year above where we are in FY 2022. So I know that's probably more vague than you wanted, but that's about all I can give you at this point. Sujal Shah : All right. Thank you, Jim. Can we have the next question, please? Operator: Your next question comes from the line of Shreyas Patil with Wolfe Research. Your line is open. Shreyas Patil : Hey, thanks. I was just maybe on automotive. You talked about content outgrowth this year. It sounds like it was around six points. And I'm just curious what that would be if you stripped out some of the price recoveries just to kind of get a sense of the underlying content growth? And then I think as we look ahead, how are you thinking about the ability to sustain that six points of growth over market or potentially even do better than that? And as you look at your position amongst some of the big OEMs that are poised to be the largest players in EV, what gives you confidence that you're seeing content expansion, especially with those OEMs? Terrence Curtin : Yes, sure. So couple of things, and I missed it on my answer earlier, so I apologize to the earlier question. One of the things as we get into and being above the 6% this year is not only content, but we will have price benefit for the costs that we've talked about. So I missed that on the 2023 element as we get in there and those numbers were framed out earlier. When we look at the program wins and this year alone, our electric vehicle revenue of our Automotive and Transportation segment is $1 billion. So if you take what we have today in our revenue, it's $1 billion today. And when we look at the momentum that we have, which are by platform wins, guess what, that's how we build capacity, we know those wins. And really, the bigger wildcard is what cars get made, how the -- what consumers the cars -- the consumers -- the cars consumers want, sorry, I said the backwards. And really, that's the bigger variable. So net-net, when we look at the programs that we've won, we feel very good about the content momentum as well as where we're positioned globally. And let's face it, it's not only the OEMs we know here in the US, you take places like China, which is about a third of the global electric vehicle cars made in the world. So the 14 million that Heath talked about, 4 million to 5 million of them are made in China. And that position is very important as well as elsewhere with our European customers, our Japanese customers and our Korean customer. So, we feel very good about the content and it shows the demonstration of our global position as well as, I think, the $1 billion of revenue we have already in 2022 really shows how deep our penetration is already in EV, that's EV revenue. Sujal Shah : All right. Thank you, Shreyas. Can we have the next question, please? Operator: Your next question comes from the line of Luke Junk with Baird. Your line is open. Luke Junk : Great. Thanks for taking the question. Terrence, regarding the outlook for communications normalization, clearly, there's been a lot of data center capacity put into places since COVID hit in 2020, and that's, of course, benefited data in devices. What I'm wondering is, as you look forward, do you think there are opportunities to go back and strengthen the system after what at times has seen like a very frantic piece of investment in the past three years? Any near-term changes in channel inventory side, of course? Thanks. Terrence Curtin : Yes. So, hey, Luke, one of the things is, I think, there were elements that were certainly around COVID from an investment. But I also think it really supports their core business models. It could be around gaming elements and so forth where people want to have service, it's not just about COVID, but it's also about how the network that we've all used has had to get strengthened, and I also think there's a big element about refresh that you're always going to have around the energy efficiency of the cloud infrastructure and the data centers that go into it. So, when we look out, there will always be steps around how the technology improves to make them more efficient. Certainly, the speeds in the data center are always very important, and some of that will come in as chipsets come out for the data center. You will continue to see a refresh element of the cycle. I'm not sure you're going to have the 20%, 30% growth we've had from the past couple of years. So, when we talk about it, we really view it's a moderation off of two very strong CapEx years by the cloud customers. But I think when you think about efficiency, AI, how they continue to improve the compute, the move in the store element of everything that a data center and a cloud needs to do that all plays into content growth for us. So, we're very excited about that trend long term. Certainly, we think as we're starting 2023, we have a little bit of moderation on the CapEx side, as well as the supply chain getting in live, like you said, from a channel perspective. Sujal Shah : Okay. Thank you, Luke. Can we have the next question, please? Operator: Your next question comes from the line of Joe Giordano with Cowen. Your line is open. Unidentified Analyst : Hey, guys. Good morning. This is Tristan in for Joe. Thanks for squeezing me in here. Just wanted to double click on your industrial orders, which I believe was down sequentially despite that extra week? Like any reason for that, anything you can highlight? Terrence Curtin : No. As I said on the call a little bit, in industrial equipment, we have seen a moderation a little bit, but off a very high level. And I wouldn't use the word moderation, like we've been talking about in communications. Our Industrial Equipment business has had very strong growth. It does look like the orders are moving more a little bit sideways, and actually coming down, and that's what you're really reflecting in our orders. And also realized orders do also represent, they do have currency effects in them as well. So you'll also see that sequentially have an impact to what Heath and I talked about from a sales element also does affect our orders. Sujal Shah: Okay. Thank you, Tristan. And I'd like to thank everybody for joining us on the call this morning. If you have any more questions, please contact Investor Relations at TE. Thank you and have a nice morning. Operator: Ladies and gentlemen, today's conference will be available for replay beginning at 11:30 A.M. Eastern Time, today, November 2nd, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity’s Third Quarter 2022 Earnings Call. [Operator Instructions] I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning. And thank you for joining our conference call to discuss TE Connectivity's third quarter 2022 results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation can be found on the Investor Relations portion of our website at te.com. Due to the large number of participants on the Q&A portion of today’s call, we are asking everyone to limit themselves to one question. We are willing to take follow-up questions, but ask that you re-join the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal. And I also want to thank everyone for joining us today to cover our results for the third quarter along with our outlook for the fourth quarter of fiscal 2022. As I normally do and before Heath and I get into the details on the slide, I want to take a moment to discuss our performance within the backdrop of the current environment. We delivered strong performance again in the third quarter with record sales, and this represents 11% organic growth year-over-year. We had growth in each of our three segments and organic growth across all nine of our business units. Adjusted operating margins were in the mid-18% range and this is at level similar to where we've been running through the year, despite incremental headwinds that we've been experiencing. And we also delivered record adjusted earnings per share that was above our guidance. I feel our performance is a result of how we strategically positioned our portfolio around secular growth trends, as well as the execution of our teams, both from a manufacturing perspective and in our ability to effectively manage pricing in this inflationary environment. I'm also proud of our teams as they continue to overcome broader macro challenges to effectively serve our customers and deliver the strong financial results we're going to talk about today. Now let me provide some color on the supply environment, key end demand trends and the development since our call 90 days ago. When we provided our guidance last quarter, we told you about an anticipated impact from the sales – on our sales due to the COVID lockdown in China. And even during these lockdowns extended further into the third quarter than our original expectation, our teams were able to recover and the sales impact to the quarter was negligible. When you think about the global supply chain challenges and specifically around material availability, I would tell you they are about the same as they were 90 days ago and inflationary pressures continue to linger. One element that I want to highlight that has changed since the last time we spoke is the strengthening of the U.S. dollar. This strengthening has significantly increased the headwind we're facing from foreign currency exchange rates both year-over-year and sequentially and Heath will talk about that a little bit more, later. Returning to the markets, customer demand remains strong as evidence by our order levels and our strong backlog position. And just to highlight our backlog has grown over 20% versus the prior year. And we are seeing some consumer-facing markets like appliance, moderate, but we continue to see broad strength across our industrial segment and we still have a number of markets that we serve that are not yet back to pre-COVID levels. And this includes automotive, commercial air as well as medical devices. And we expect growth in these businesses as supply constraints are alleviated and those markets continue to recover. The other thing that I want to highlight we've consistently talked about, and it has not changed is the benefit we continue to see from the secular trends in our markets and the outperformance that we are generating from content growth and share gains. We are benefiting from our position as an industrial technology leader with growth from electric vehicles, smart factory applications, including automation, renewable energy and high speed cloud and artificial intelligence applications. The other thing that I want to highlight that we – as we continue to navigate through this noisy macro environment is that we remain committed to our business model and long-term value creation by driving further growth, margin expansion and strong cash generation. So with that, as a backdrop, let me get into the slides and discuss additional highlights that are on Slide 3. Our quarter three sales were record at $4.1 billion, and this was up 7% on a reported basis and up 11% organically. As I mentioned, we saw growth across each of our segments and organic growth across all of our businesses. Once again, demonstrating the strength and positioning of the portfolio. We generated double-digit organic growth in the Industrial and Communications segments and 8% organic growth in transportation, despite an auto production environment that was essentially flat year-over-year. Our orders were $4.2 billion in the quarter with a book-to-bill of 1.02. And this shows that the demand environment continues to be strong. And I'll get into more details about order trends by segment, when I get to the next slide. From an earnings perspective, our adjusted earnings per share was a record of $1.86 and that's up 4% year-over-year with adjusted operating margins of 18.6%. From a cash flow generation, our year-to-date free cash flow was approximately $1 billion with approximately $1.6 billion return to shareholders this year. And I will tell you, we've been aggressively shared buybacks as we're taking advantage of the recent market price dislocations with our stock. As we look forward, we are expecting quarter four sales to be approximately $4.2 billion and adjusted earnings per share to be around the $1.85. Our guidance reflects the benefits of an extra week that we have in the fourth quarter, but also factors in the impact of an increased headwind from currency exchange rates. And if you look at the slide, we've provided the details of each of these items and how they impact our fourth quarter. Before I get the orders. One thing I do want to do is move away from the financials for a moment and highlight that I'm pleased that we issue our 12th corporate responsibility report last quarter, which reinforces our One Connected World strategy. When you look at the report, it has many highlights, but one of the keys that I think is important was that we were successful in driving a 30% reduction in absolute greenhouse gas emissions in a single year in fiscal 2021. And this is a very large step towards our goal of achieving a 40% plus absolute reduction in our Scope 1 and Scope 2 greenhouse gas emissions by 2030. So with those being the highlights on Slide 3, let me turn to Slide 4 and I'll discuss order trends as well as what we're seeing in our markets. For the third quarter, our orders were $4.2 billion as we expected. And this reflects the continued strong demand environment from our customers, as well as we continue to see the impacts of ongoing supply chain volatility in the markets. Our backlog is up over 20%, and increased double-digits in each of our segments versus the prior year. It is also important to note that currency exchange headwinds are not only impacting our sales, but also when you look in the year and year compares negatively impacts the value of orders in the third quarter. And this impact when you look at the year and year compare, or orders would be $230 million higher this quarter, if it wasn't for the strengthening of the U.S. dollar. In Transportation, we have a book-to-bill of one in the third quarter, which is in line with where the segment has run historically. And keep in mind that we also have a strong backlog position. And demand for autos remains healthy and is significantly higher than what OEMs can currently produce, providing a potential setup for future auto production increases as supply chain bottlenecks begin to resolve and dealer inventories get back to more normal levels. In our Industrial segment, we saw another quarter of strong orders with a book-to-bill of 1.16 and growth across all businesses year-over-year. We continue to see a favorable backdrop in capital expenditures for factory automation, manufacturing capacity and renewable energy. And these trends benefit both our industrial equipment and our energy businesses. The other thing about our Industrial segment orders are we’re continuing to see improving order trends in the commercial aerospace, as well as medical markets, where we expect growth as those markets continue to recover. In our Communications segment orders reflect a double digit increase in our backlog versus the prior year, along with expected moderation in the appliance market that we’ve been talking about all year. And one thing, when you look at the communications order trends, it is important to note that our backlog in our Communication segment is approximately $1 billion. So with that as a backdrop on orders, let me get into the year-over-year segment results that you can see on Slide 7 through 7 and each one of those slides have the details for each segment. So starting with transportation. Our sales were up 8% organically year-over-year. Our auto business grew 9% organically versus auto production that was roughly flat versus the prior year. Global auto production was 18 million units and this was slightly lower than our expectations due to the lockdowns in China. And we do expect some sequential increase in auto production into the fourth quarter. The trends around our content remain robust as we continue to benefit from increased electronification, as well as higher production of electric vehicles. And we do expect electric vehicles to be up over 30% this year compared to a total auto production environment that is going to be flat. As we look forward, we do expect continued expansion in our content per vehicle and you’ll see that as we move from the first half to the second half of this year. In the commercial transportation market, we saw 10% organic growth driven by North America and Europe with significant market out performance in all regions driven by strong content growth, as well as share gains. In our sensors business, we grew 2% organically and what was nice of that growth was driven by the focus we have on factory automation applications. When you look at earnings for the segment, adjusted operating margins were 17.3% and this was impacted by the inflationary pressures. As you know, there’s a timeline from when we incur higher inflation until price increases become effective with our auto customers. So let’s move to the Industrial segment and in our Industrial segment sales increased 13% organically year-over-year. Industrial equipment was up 19% organically with double digit growth in all regions and continued benefits from increased capital spending and factory automation. In our energy business, we saw 17% organic growth driven by increased penetration in renewable applications. And in our aerospace defense and marine business, this is the first time we’ve seen year-over-year growth since the market was impacted by COVID. And we now expect continued growth as we go forward. Our medical sales in the segment were up 1% organically with a modest increase in interventional procedures, as well as medical device market is continuing to work through supply chain challenges. From a segment margin perspective, our adjusted operating margins expanded year-over-year by 100 basis points to 16.8% driven by higher volume and strong operational performance by our team. We have made significant progress in our margin progression over the past several years. And I’m pleased with how the team continues to drive towards its business model target of consistent high teens operating margin. So let’s turn to the Communication segment. And as you can just see, looking at the slide, our team continues to execute, while capitalizing on the growth trends in the markets they serve. Sales growth was 16% organically year-over-year for the segment with growth in both businesses as highlighted on the slide. In our data and device business, we saw market out performance driven by content growth in high speed cloud, as well as share gains in artificial intelligence applications. And as we highlighted last quarter, these artificial intelligence applications do improve energy efficient in the data center. And it’s just another example of how we enable lower carbon emissions with our customers through our engineering. In our appliance business, it didn’t perform ahead of our expectations, despite the expected declines in the China market. We saw growth both in North America and Europe in our appliance business, and that is driven by continued share gains enabled by our global manufacturing strategy. From a margin perspective, the communications team continues to deliver outstanding performance. The adjusted operating margins were 26.2%, and this was up 270 basis points versus a strong quarter in the prior year. And our teams continue to deliver strong performance, both on sales as well as proving margin resiliency. So with that as a backdrop of our segment results, let me turn it over to Heath who will get into more details on the financials as well as our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 8 where I will provide more details on the Q3 financials. Adjusted operating income was $761 million with an adjusted operating margin of 18.6%. GAAP operating income was $719 million and included $30 million of restructuring and other charges and $12 million of acquisition related charges. We continue to expect restructuring charges of approximately $150 million for the full year as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was $1.86 and GAAP EPS was $1.83 for the quarter and included a tax related benefit of $0.06, and additionally we had restructuring acquisition and other charges of approximately $0.09. The adjusted effective tax rate in Q3 was approximately 19%. For the fourth quarter we expect our adjusted effective tax rate to be roughly 20%. So we continue to expect an adjusted effective tax rate around 19% for the full year. Importantly, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. Now turn to Slide 9. Sales of $4.1 billion, a company record were up 17% reported and up 11% on an organic basis year-over-year. When you think about our organic growth, approximately one-third was driven by price increases and the remaining two-thirds was driven by volume as a result of the strength of our portfolio. In the third quarter currency exchange rates negatively impacted sales by $236 million, and $0.07 versus the prior year. As Terrence mentioned, FX impacts have worsened significantly over the past 90 days. In Q4, we expect currency exchange rates to be a sequential headwind of approximately $70 million and a year-over-year headwind of approximately $275 million. For the full year we now expect a negative impact from FX of roughly $700 million, which is significantly worse than our view 90 days ago. Adjusted EPS was a record at $1.86; adjusted operating margins were 18.6%, and I am pleased with the performance of our team given the incremental inflationary and supply chain pressures we are seeing. We continue to pull pricing levers across the business to help partially offset these pressures, and as we talked about last quarter, while we are not able to offset these costs dollar-for-dollar, we continue to recover approximately two-thirds through price and the remaining through productivity initiatives. We continued taking pricing actions to offset these inflationary pressures. Turning cash flow in the quarter; cash from operation from – excuse me, from operating activities was $579 million, free cash flow for the quarter was $423 million and as we mentioned in past calls, the year-over-year trend in free cash flow does reflect strategic inventory builds. However, we expect a work down inventory this quarter with Q4 expected to be the highest quarter of free cash flow for the fiscal year. Through the first three quarters of the year we have returned approximately 1.6 billion to shareholders with approximately 1.1 billion returned through share buybacks. We will continue to remain disciplined in our use of capital and near term. We have been aggressive in buying back our stock and taking advantage of investing in our own value creation opportunities. So we've made significant progress towards our business model over the past few years, and our teams are continuing to execute well in a volatile environment. The strategic positioning of the portfolio has enabled us to deliver sales growth, margin resiliency and EPS expansion despite the challenges we are facing. We will continue to focus on what we can control to effectively serve our customers and drive strong financial performance, including strong cash generation. So now let's open it up for questions. Sujal? Sujal Shah: Hey, thank you. Can you please give the instructions for the Q&A session? Operator: [Operator Instructions] Our first question comes from Chris Snyder with UBS. Your line is open. Chris Snyder: Thank you. I wanted to ask about expectations for global auto production over the next couple quarters. Obviously a big debate in the market, consumers are pressured but we've already had production year top levels for the last two years. So just what are you hearing from customers around expectations for production and, and intern connectors over the visible time horizon and would also be interested in any views on auto demand versus production debate? Thank you. Terrence Curtin: Sure Chris thanks for the question. And let's just frame it a little bit. Auto production I talked about it in my comments, we think in our fiscal year, the September year, there can be 76 million vehicles made this year and that's the same amount as it was made last year. And you look at demand; we would tell you we think demand is well above 80 million units. And also to give you another guide goes back in 2019 pre-COVID, there was 88 million cars made on the planet. So we still have a way to go to get back to pre-COVID production. And we can also see where inventory levels are in pretty much every region of the world still very low. So we do think there is potential for production increases, even if demand comes down a little bit there's still a big disconnect between demand levels versus what our customers can deliver. And a lot of that is well documented from the OEMs around semiconductor supply and things like that. I think the other thing that I just want to say is we did see 18 million units made this quarter. Going into the next quarter we do think, and I said in my prepared remarks, 19 million units and so there is I think upward momentum to production as we move into next year the supply chain continues to improve. I think to Heath's point though, the other thing is what we control. We control content. We don't control production. Certainly TE does not make semiconductors. But I think the other element I just want to stress is, and I think it's shown up through this period even in a tough production environment like we've been in the past couple years, how our content has expanded from what was in the 60s, consistently in the 80s you'll see an increase in the second half really shows where we position the portfolio bodes around as electric vehicles continue to be built, continue being a bigger pie, but also from the electronification. And as I told you, [indiscernible], you can look at that $20-plus delta per vehicle, about 60% of that's driven by electric vehicle growth. The other 40% is due to electronics on both combustion engines as well as on electric vehicle. So I do think while production has been frustrating, I do think we're still well below demand and if we do get some breaks on semiconducting other supply chain, there could be upside as we go next year, even with a cloudy macro environment. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: The next question comes from David Kelly with Jeffries. Your line is open. David Kelly: Hey, good morning, Terrence and Heath, and thanks for taking my question. Maybe to follow-up on the order summary page and specifically the transportation and communications orders which pulled back a bit here. Can you talk about demand trends and maybe transportation kind of outside of automotive and then also what you're seeing in communications and maybe also if you could give us a sense of how orders are tracking for both in markets Q4 to date, that would be great? Thank you. Terrence Curtin: Sure. So let me take the first, the last piece of your question first. So when you look at our orders in July from a TE level, they're running very similar to what they were running at last quarter. So our orders overall have been pretty steady here. What we saw last quarter as we go into this one month in, so from a July they remain healthy. The other thing that I think is important is we do have to keep them perspective, and we talked about this a lot over the past year, two years. A lot of customers were ordering ahead. Certainly we have an elevated backlog position. And even in some of the compares like our communication segment, last year in this quarter our orders were over $800 million. So it's very strong compares and tough compares. What we continue to look at in our orders is orders with backlog, and I mentioned on the call communications we have $1 billion of backlog and our communication customers did a good job of ordering out. I do think they did a better job than our transportation customers when they were trying to make sure they were securing supply and overall that's what you're seeing in the trends. So as we look forward and no different with our guide, we continue to see healthy demand trends, certainly the industrial markets continue to look like they're accelerating and we have two of our four markets in industrial. We're a little bit later to the recovery party with medical and commercial aerospace, industrial equipment stays strong, and the one market that we do see moderation in which isn't a surprise we talked about has been the appliance market. We would've thought there'd be moderation even before now. We sold it in China. Certainly that's tied to housing and property and we would expect that will continue to moderate. But when we say moderation, you're really talking about our orders sequential going from our March quarter to our June quarter being down like 12%. I don't want it to be either falling off a cliff, but they did moderate. And certainly the backlog also supports where we guide them. So hopefully that gives you a better color about how we think about and also confidence. Sujal Shah: Okay. Thank you, David. Can we have the next question, please? Operator: Our next question comes from Wamsi Mohan with Bank of America. Your line is open. Wamsi Mohan: Yes. Thank you. Terrence, can you talk about the various moving pieces and margins across the segments? Automotive was weaker and I know you experienced a lot of headwinds in the quarter, but comps and industrials were quite strong. How should we think about the trajectory from here? And also if you could address how the incremental margin should track because that that seemed to decelerate someone in the quarter? Thank you. Heath Mitts: Hey, Wamsi this is Heath, and I appreciate the question. Listen, I think if we just start with where we are TE in total, right, we're still tracking in that mid-18% level, which is really where we've been tracking most of the year. And there's no doubt some of the strength coming out of our communications segment. And then some of the improvement we're seeing in industrial has helped offset some of the pricing lag that we get in the automotive and overall transportation business. But we're pretty pleased with the diversity of the portfolio and the ability to be able to withstand these volatile environments. Part of the answer to your question, though is the timing on when price increase is the one to affect. Within transportation specifically, you're dealing with a lot of automotive customers and there's a lag between when we see the price increases go in relative to when we see the impact of inflation. And I think it's important for us to remember that where we operate in the world, inflation looks very different. And in some cases it has worsened including in Europe where energy prices have continued to be a pretty significant headwind. So we are offsetting about two-thirds of that inflationary pressure with price, which as you know, well, us moving into positive prices was a big move coming out of COVID here, but it does still be because we can only cover about two-thirds of it. It still does require us to make up the difference through either productivity initiatives, and then obviously what we've been undertaking with some of the longer term restructuring activities. Within the quarter, I think it'd be fair to say transportation also felt a little bit of the impact from China, just the inefficiencies of not shipping much for two months and then catching it all up in the final month of the quarter that did have an impact. And as we move forward, I think we'll continue to focus in on where we stand from our ability to be able to pass on price, but overall we're feeling good in where we stand. So with that hopefully that answers your questions. Thanks. Sujal Shah: Thank you, Wamsi. Can we have the next question, please? Operator: Our next question comes from Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney: Yes. Good morning and thank you for taking the question. So you would better understand the FX impacts and from a couple dimensions potentially. So first you spoke to some of the translational impacts, but are you seeing any change in actual business conditions and are any of the international companies potentially being more aggressive with quoting activity given some of the changes in currencies and then specifically to the P&L, I was hoping you could maybe speak a little bit more specific to the 4Q sequential EPS. Heath, I think you said its $70 million on revenue quarter-on-quarter; could you speak to the EPS impact? Thanks. Heath Mitts: Sure, Mark. As I said on the call it's – when we said here 90 days ago, I gave a number range for the full year FX impact. I think it should be between $400 million and $500 million, and that has stepped up by a couple, $250 million for our full year now to about $700 million. And about 75% of that has been in the second half of our fiscal year that we're in the middle of right now. So it does flow through when we give that's the translational impact, the overall EPS impact from all that's about $0.17 for the full year FY 2022. So it is meaningful to us. In the fourth quarter, we expect that number to be year-over-year about $275 million. So incrementally worse than what we saw the third quarter. And as we look into the first, we look into FY 2023, obviously we'll provide more guide here next quarter. But if we just snapped a line in the sand right now with where various currencies are, it would be about $300 million headwind in FY 2023 for us most of which would be in the first half of our fiscal year. So there's some numbers out at you just to try to frame up what we're seeing out there. Now, your question on the competitive landscape, we really haven't seen a whole lot difference in that yet we're keeping an eye on it, but for the most part, we haven't seen anything change considerably in terms of how competitors are treating each other along those lines. And listen, we're not economists, we're not going to predict where the dollar is going to go relative to these other currencies that we do transact in, but we feel pretty good about our balanced position globally. Sujal Shah: Okay. Thank you, Mark. Can we have the next question, please? Operator: Our next question comes from Joe Giordano with Cowen & Company. Your line is open. Robert Jamieson: Hey, good morning. This is Robert Jamieson in for Joe. Just wanted to pivot quickly and ask about the buyback activity. It looks like you guys are running about two experts you did last year this time. Just wondering if there is any changes to your capital allocation strategy. Heath Mitts: Well, this is Heath, I'll take this question. Listen, long-term, our strategy is unchanged, right? So you think about it over a cycle we still think about two thirds of our free cash flow being returned to shareholders in the form of buyback and dividends, and about one third being used for M&A. However, we've always qualified that with there will be times when we might deploy more into M&A, and there will be times when we might deploy more through buybacks and that kind of takes into consideration market dynamics where we're trading the value of acquisitions out there relative to our value and weighing everything through a strategic lens as well. So we have the good fortune that we have a very strong balance sheet and that has allowed us to play offense in the near term here. It's allowed us to play offense in the sense that we were able to make some strategic inventory builds and flex our working capital to make sure we are taking care of our customers. That's not letting ourselves off the hook. We will start working that back down. Now that we're seeing a little bit – in certain markets a little bit more visibility allows us to plan in our factories. But we've been able to flex with that. We've been able to flex obviously using our free cash flow for buybacks as well. But I would not consider this a permanent change, but more of an opportunity to create value for our shareholders. Sujal Shah: Okay. Thank you, Rob. Can we have the next question, please? Operator: Your next question comes from Amit Daryanani with Evercore. Your line is open. Amit Daryanani: Yes. Good morning, everyone. So I guess I have a question on a clarification. Terrence the questions for you as you think about beyond the September quarter, I think, there is a lot of concern around what 2023 could look like given all the macro worries that are out there. Can you perhaps just maybe talk about the cross curves that you see at TE as it relates to 2023 across the segments would be helpful? I think to just level set things like constant growth and how you see that stacking up next year. And then Heath if you could just clarify, I heard your discussion around margins, maybe I don't appreciate this enough yet. Why are margins going down in September quarter sequentially, when I think some of the headwinds you've talked about, should alleviate? So lead us what the margins puts and takes as well in September. Thank you. Terrence Curtin: Thanks Amit. And let me get into the first half of your question. As you know we've been guiding a quarter out, so anything we'll give you more about next year, but I'll give you some initial thoughts here and then we'll tighten them up in 90 days. The transportation back to an earlier question I had content was very good about, and you can all see the OEM programs that are coming out on electric vehicles, it isn't one or two OEMs in the world it's every OEM in the world that's coming out with electric vehicles that the content momentum that we've had we continue to see that. And probably being closer to the higher end of the range that we've talked about in the four to six. But that's not only in automotive. That's also in commercial transportation and our commercial transportation team has been driving a lot of content. So I think you can have a good content there. And let's face it this year in commercial transportation in 2022, China was rough. China drove the entire global market to contract this year, but our team grew. And I do think, as you think about some of the stimulus, China is doing around infrastructure, as well as what they are doing around auto stimulus as they are coming out of COVID, I do think there is upside opportunity versus the production environment in both of those markets that I said earlier. And certainly that China stimulus is important, because it's one of the most, the bigger market in the U.S., as well as Europe. In industrial, I would tell you, feel good about the CapEx trends feel very good about the renewable positioning we've done in energy and solar 17% growth here. This quarter in energy, I think, you are going to continue to see that momentum because they were tied to good trends and then com air and medical I know I spoke about they are growing again, but in com air, we're still only at two thirds of what we were pre-COVID. And while single-aisle has improved, there is double-aisle opportunity that's even more content for us than a single-aisle aircraft. So the content is true there and it's really about, how the large air framers continue to ramp production as it gets in there? When you look at our Communication segment, I think, it's going to be probably a tale of two cities. The appliance market we've talked about we expect that to moderate next year, but offsetting that will be Cloud CapEx. And the question where does Cloud CapEx go after? It was up 20% this year we do expect Cloud CapEx growth next year. We just have to see where our customers really put it at. I'm not sure it will be a 20%, but I still believe it will be growth. So there is a bunch of moving pieces out there, but I would tell you, when we look at the order trends, we also look at the content growth that you've seen in our results plus the backdrop of where we play. It still feels very constructive as we go into 2023. And as I said, when we get on our next quarter call, we'll add more color versus what we're saying. So, Heath, why don't you take the second piece of Amit’s question? Heath Mitts: Sure Amit, your question was relative to implied margins for Q4. As you know, we did not guide the margin number. So if you are backing into a margin number relative to the sales and the EPS, I think, one taking consideration of the tax, rate is going to be a point higher as we guided in the fourth quarter. So, we're not seeing a dramatic fall off in margins. But if you are on the fringes, if you will, keep in mind a couple of things as we signaled we do expect our Communications segment to be a little bit lower revenue levels in the fourth quarter, just because of some of the appliance pieces the Terrence just talked about that has a little bit of a mix impact. There is no change in our assumptions around this inflation and price. Go get when we're only covering two thirds. And then again on the fringes, we are going to be working down some inventory in the quarter and that's going to have a little bit of impact as we work through that. But it's not something that we see falling materially at all if any. Sujal Shah: Okay, thank you, Amit. Can we have the next question, please? Operator: Your next question comes from William Stein with Truist Securities. Your line is open. William Stein: Great. Thanks for taking my question. Terrence if we zoom out and don't really focus on any particular end marketer segment, just look at the overall revenue performance and overall bookings, this sort of feels like the elusive soft landing. We're still seeing good revenue growth, but the orders are backing off these very elevated levels that we've experienced in recent quarters. Is that the way you all see it? And if that's the right characterization, how many more quarters of this sort of performance do you anticipate? Do you think that this is going to continue to play out and we'll continue see perhaps moderation of orders, but sort of a burning of the backlog and revenue growth still sort of at good levels? Terrence Curtin: Well, thanks for the question. And I guess, I know we spoke to many about it. When we think about our business and the lead time for our product, let's put things into perspective about our lead times, for an average product, you might be six to twelve weeks. So I do want to frame, when you look at TE and you think about an average lead time, you are six to twelve weeks, it's not some of lead times you hear from other product categories that you have. So there is an element here of when we were talking about book-to-bills of 1.20, we always said there will come a time that as markets become more normalized, we would expect our book-to-bill, to reflect more normal patterns than a 1.2 book-to-bill. So when I look at it and I think about transportation, getting closer to a one, we are expected to get to. Certainly as we work off backlog, like you saw in communications, we got a lot of backlog. We have over a $1 billion in backlog in communications. Customers they feel good with that backlog, they are not going to place more orders. They're going to want to work that off. And we looked for pushes and cancellations. Are people pushing out orders, are they canceling orders? We are not seeing any major trends in pushes and cancellations. So with the indicators that we're looking at show that hey, while we have some markets in transition like appliance, that we've been highlighting to you we also still have markets that are still trying to catch up like commercial aerospace. So I do think it's an environment where not everything is going up and growing. And we just have to realize if a customer is concerned about the macro, they are probably going to get a little bit more conservative and say, hey, let me work off a little bit of backlog. So I think you are going to continue to see book-to-bills getting more normalized in an environment like we have. But certainly we have some markets where customers are concerned about supply chain volatility. And like we talked about in the Industrial segment, we're still at a 1.16 book-to-bill, which is a very strong book-to-bill. And that means we're still building backlog. Sujal Shah: Okay. Thank you. Will, can we have the next question, please? Operator: Your next question comes from Samik Chatterjee with J.P. Morgan. Your line is open. Unidentified Analyst: Hi, this is MP on for Samik Chatterjee from J.P. Morgan. Thank you for taking my question. So I just wanted to ask regarding the order trends in industry like you are seeing some of your peers downgrading their expectations for the growth in this particular sector. Additionally, the global PMIs are also down relatively compared to the starting of the year. What exactly is driving like strong order growth for you in this particular sector? And as you said that as you see them accelerating as well. Terrence Curtin: Yes. When I look at our – thank you for the question. When we look at our industrial business unit, it also comes into the backlog of our customers. If you look at our customers that are all the robot manufacturers of the world, certainly the factory automation, and you even go back to semi capacity, be put in electric vehicle battery capacity, being put in, other automation program being put in, they're the drivers of it. So you have to look at the capital spending and the backlog of the projects continues to be very strong. And that's creating backlog for our customers of the world, whether they're in Asia, whether they're in Europe, whether they're here. And what's nice is we're very globally deployed in that business unit. And orders continue to be very strong is people are trying to make sure they can fulfill their backlog. And we've really positioned well in that space. And you've seen that outperformance consistently over the past year and a half. Sujal Shah: Okay. Thank you. Can we have the next question, please? Operator: Your next question comes from Matt Sheerin with Stifel. Your line is open. Matt Sheerin: Yes. Good morning, everyone. Terrence Curtin: Hey, Matt. Matt Sheerin: Terry, I was hoping to get your take on inventory picture at your customers. Obviously with longer lead times, there is ordering and perhaps double ordering even of your products, which we don't typically see with interconnects. But are you getting a sense of any build particularly in the industrial markets where you have a lot of distribution exposure. We're seeing lots of inventory at EMS and the OEMs, and at some point, that's all going to give and we're going to see a correction and I'm just wondering, are you seeing that, are you expecting that at some point? Terrence Curtin: Well, I think the thing is first off being, people have been trying to make sure you're not going to want to hold up manufacturing of an end product for a connector. If you're waiting for a semiconductor, people will want to make sure they have the interconnects with certainly the semiconductor being the brain. And we're a little bit more like the arms and the legs. But when you look at it and you take distribution to what you've said. Distribution inventory is still not back to where we would expect it to be. It's still probably 15 days light on a term perspective of where it was pre-COVID. So we continue to monitor that inventory position. And that's an important thing to watch to make sure that the distribution channel does not get heavy from a day's perspective. So feel good that they're still in a good spot, when you get into where our product goes everywhere in the world, we're not going to know every little pocket inventory. But it's something that if lead times continue to get better and I wouldn't tell you, they have gotten better yet, they're stable, but they're not better. You would expect, there might be a little bit of an air pocket, but we're not at that point yet. Sujal Shah: Okay. Thank you, Matt. Can we have the next question, please? Operator: Your next question comes from Christopher Glynn with Oppenheimer. Your line is open. Christopher Glynn: Thanks. Good morning, Terrence, Heath, Sujal. Terrence Curtin: Hey, good morning. Christopher Glynn: Hey, had a question about how you're viewing market share in the electric vehicle space. Curious if you're able to kind of cite or see share gain there or if the market's still too formative? Terrence Curtin: When you look at that and I think you have to start with, we have a very strong position already. And as we say, we're in essentially every car in the planet already. So I think our market share, our strong position we already have that has been in combustion engine as we bring the technology. And I know we've shared content elements of, hey, you look at an electric vehicle, it's about 2x, what we have. But then you also carry over what we do on a low voltage architecture that when you add the high voltage motors in it, basically is additive. So when you look at it from a market share, I feel very good about the programs we're winning. What's in great is it's as global as our current position. We want to sit there and make sure we're globally positioned. And it's pretty similar to what we have and what we had in our historical market share. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: Your next question comes from Shreyas Patil with Wolfe Research. Your line is open. Shreyas Patil: Hey, thanks so much. Just wanted to quickly understand, how do you think about the interplay between order activity and backlog? So, for example, if you're seeing some segments like transportation now in a more normal book-to-bill, but you also mentioned that the backlog is still growing in those segments is the right way to think about that, potentially the order activity would moderate as those customers try to work down that backlog. I'm just trying to understand, how we should be interpreting those going forward. Terrence Curtin: When you look at it, book-to-bill of one basically means you're not building backlog. So I think the one thing, when we look at book-to-bills, please remember there's two numbers in a book-to-bill equation. The order number, and then obviously the revenue number and you have to realize, we have brought up our output by the growth that we talked about. So the bill has also gone up. But when you look at it, similar to what we talked about in communications, if the backlog is so strong, you can have a book-to-bill below one because the customers feel they are scheduled out over a couple quarters, could be up to three quarters in our case where they say, hey, guess what, I feel good, where I'm primed in the system and you could run below one a little bit. So they're just key factors of how it works. And I think you have to keep in the mindset. I'll go back to what I said today. When we have an average lead time of six to 12 weeks, let's say, we aren't somebody that has backlog that goes out years. That is not our business, our backlog typically is within the next nine months. Sujal Shah: Okay. Thank you, Shreyas. Can we have the next question, please? Operator: Your next question comes from Jim Suva with Citigroup. Your line is open. Jim Suva: Thank you. I know it's just kind of an accounting thing with the extra week, but I know that there's also year-end thing, whether it be stock vesting, merit increases, but also in your fiscal Q4, a lot of the OEMs do production change over years and kind of close for annual vacation and switch over model years and such. So I know you gave some commentary in your slides on the Q4 impact. But I'm just wondering, is it more complicated than just adding one extra week of sales and EPS due to some of the things I mentioned. And importantly, though, for setting up expectations for Q1, I know it's early, but do we just remove that exact same amount in Q1 or is it kind of non-linear and I expect that it's a lot more complicated than what people just may initially think, but I think it's important. So people level set and don't get ahead of themselves for extrapolating that going forward. So any additional clarity around that on revenues and EPS would be great for the extra week. Terrence Curtin: Thanks, Jim, and good to hear from you. I'll let Heath handle that. Heath Mitts: Thanks, Terence. Jim, I'm sure you remember that we went through this in the fall of 2016 as well, right, which was the last time we had the extra week. And so this is a convention that does happen every five to six years based on when the true up of our fiscal calendar where we end up with an extra week. So if you think about it, from a fiscal year perspective, operationally, nothing changes, right. So nothing changes relative to a cut over into our October which will be the first month of FY2023, nothing changes with employee schedules and everything else. It really is basically a mechanism that trues up the calendar every five to six years. It does provide, as we did here, we gave our best guesstimate of what that extra week will provide, which is about $250 million in revenue and about $0.10 of EPS, what will happen. And when we get our fourth quarter results in our Q1 guide here in about 90 days, we will tighten up that estimate. So we'll give you what we can calculate it more appropriately or more accurately at that time. And then obviously as we move into the first quarter, first quarter, we'll be back to having 13 weeks and we'll move forward with that way. So from a Q4 to Q1 compare, there is an extra week in Q4 versus Q1. We're estimating that to be about $250 million and about $0.10 of EPS. But we'll tighten all that up and be very transparent. As we close the books here in about 90 days. So I hope that it answers your question, but it's some fun stuff. We work through every five to six years with this fiscal calendar. Sujal Shah: All right. Thank you, Jim. Can we have the next question, please? Operator: Your next question comes from Steven Fox with Fox Advisors. Your line is open. Steven Fox: Thanks. Good morning. I heard all the comments on margins this morning. I was just wondering if you could dig a little deeper into the communications margins. I think you keep telling us not to expect these mid 20 margins to repeat themselves, but they keep repeating. So there must be something going on in terms of products or pricing or execution since you’ve put up 26% and you’re talking about pressure on appliance markets. So any color there would be helpful. Thanks. Heath Mitts: Thanks, Steve. This is Heath. Listen, I know we – the question – in our stated business model, right, we’ve said this segment should be in the high teens operating margins, and I’m acutely aware that we’ve been running significantly higher than that, particularly for the past couple of years. I think what’s important here is, is to step back a little bit and say, this was a journey in this segment to get it to where it is today, right? There was a lot of – if you go back several years, there was about $1 billion of consumer related product that we walked away from. And then there was a tremendous amount of restructuring to get this business where it is today. And what that shows is when you get that operating footprint, right, and then you get these levels of volume that we’re seen out of both appliances as well as data and devices. We can kick out these kinds of margins. So there’s nothing artificial in these margins. We have been aggressive on price as you would expect. And in some cases we are able to pass through price in both industrial and in communications a bit more efficiently because a bigger chunk of those businesses go through channel partners. And those price increases can go on a little bit more rapidly and take effect more quickly versus transportation. That is a renegotiation OEM by OEM. So there is some price piece. There’s no doubt about that. And we’ll continue to keep our foot pressed down on those elements to help cover. We’re not – we’re just trying to cover where we stand from an inflationary pressure environment. But when we do see appliance, moderate, right? We’ve been running about $1 billion annual run rate on appliances. And if that moderates down some element – some amount, we do expect that to have a little bit of pressure on the margin front. That doesn’t mean we see it collapsing, and we’ll give more color as we’re more comfortable with that here this fall. But right now at these volume levels, this would be the margin you would expect. Sujal Shah: Okay. Thank you, Steve. Can we have the next question, please? Operator: The next question comes from Joseph Spak with RBC Capital Markets. Your line is open. Joseph Spak: Thanks so much. Can you give us some color on what your customers are thinking in Europe, in light of the energy issues there? Like ironically, one of the things we’ve heard is in transportation industrial, some of those players may try to produce as much as possible this quarter to get ahead of what they think might be potential larger issues later in the winter, I guess as long as the supply chain allows them to do so. Are you seeing any evidence of that? And then related, I do think you have some facilities in Germany. So how directly impacted would you be by gas shortages? Terrence Curtin: Yes. Good question. And I would say this is real time and we’re staying close with our customers. So I would not say there is one size fits all as I deal with it. So the key element for us is we got to stay close to our customers on it. We do have a team that’s working at real time, and this is a real time issue to say, hey, if output of our customers were impacted and we do have some factories in Europe, primarily supporting the automotive industry, we would have impacts as well. So it’s a real time situation. But I would not assume it’s one size fits all across Europe. Sujal Shah: Thank you, Joe. Can we have the next question, please? Operator: Your next session comes from Luke Junk with Baird. Your line is open. Luke Junk: Good morning. Heath just hoping you can help us unpack the margin in industrial this quarter. It’s a new high water mark. If we look bigger picture and there was a nice step up sequentially as well. Last time we saw this kind of step up was in the third quarter last year and that margin upside proved to be pretty sticky on a go forward basis. So just hoping you could expand on what’s going on under this surface and that business this quarter, especially as it pertains to the path of industrial margins from here. Thank you. Heath Mitts: Sure. Thanks, Luke. Listen, we’ve been very public going back almost five years now on this march in towards margin improvement in this segment, right? And it involved a lot of restructuring activity. We talked about at the time this is going back when we started this journey of taking over 20 facilities offline and consolidating those into lower cost locations, where we already had capabilities and capacity. And I would say we’re two-thirds the way through that at this point. Certainly, we did not anticipate COVID and some of the other in the bounce back and so forth that that we’ve had to adjust the playbook a little bit on timing. But the overall strategy is unchanged and a lot of it is around rooftop consolidations and so forth. And we’ve been more aggressive in this segment with acquisitions, which also give opportunity to us to for the right size and realize synergies by integrating those into existing facilities that we already have. So in most recently the ERNI acquisition came in and we see a real margin opportunity there within that business, which is in our industrial equipment portion of the overall segment. Having said all that, there’s still pieces of the segment that are underperforming from a margin perspective and maybe – and largely that’s due to volume, right? Terrence talked about medical and our commercial aero business, which is inside our aerospace and defense business unit. Those are far from getting back to normalized volume levels and both of those opportunities avail – opportunities for us to continue to see margin expansion in addition to some of the restructuring activities. So, hey, we’re pleased with the results this quarter. In any one quarter there can be noise, that swings your margins a point or so either direction, but we’re pleased with the results. We’re pleased with the trajectory of where the cost structure is in this business. Obviously, as I mentioned in the previous question, we’re able to get more pricing in this segment than we have in transportation. So there’s a lot of good things going here. And with the recovery of medical and commercial air, we feel like there’s still legs to go. Sujal Shah: Okay. Thank you, Luke. Can we have the next question, please? Operator: Your next question comes from Nikolay Todorov with Longbow Research. Your line is open. Nikolay Todorov: Yes. Thanks and good morning. Two clarification questions for me. One is in auto, you posted 9% outgrowth versus production. But I just wonder, was there any inventory build in the June quarter last year that would suggest that your outgrowth was even stronger? And then the second question clarification, I think it was asked, but what is the FX EPS impact sequentially? I think revenue impact $70 million to $75 million sequentially, but what is the FX, the EPS impact sequentially? Thank you. Terrence Curtin: So one – I’m going to let Heath take the second part and I’ll talk about the first part. Heath Mitts: Yes. Nikolay, I apologize if we didn’t provide that. The sequential impact we are on FX, we are estimating to be it’s around $70 million revenue and about $0.05 of EPS sequentially. Terrence Curtin: And then on the outperformance, quarter on quarter I’m always going to caution you, be careful on trying to come up with inventory bills in a quarter, especially with the volatility we have. So when you look at it, I don’t think there was a meaningful impact that you should take that out performance and add or subtract to it. Sujal Shah: Okay. Thank you, Nik. Can we have the next question, please? Operator: Your next question comes from William Stein with Truist Securities. Your line is open. William Stein: Great. Thanks for getting me back in. I apologize if this might have already been asked. But specifically in the transportation end market, you have a target of 20% EBIT margins. And I understand that right now we’re going through this well documented and well discussed on this call inflationary FX that there’s a timing effect of passing that on. Do you all have an expectation as to when you might approach that 20% level again? Is that like something we should think of in the next year or two? Or is that now feeling longer out in time? Heath Mitts: Thanks for the question. I’m not going to go back through, like you said, we’ve discussed a lot of things on the call here relative to the current situation with our ability to get price relative to inflationary pressures and the pressures that that’s putting on the business. So, as that equation morphs over the next year or so, we’ll see how that plays out. The other thing was, if you recall, a couple of years ago we did start, particularly in our Western European footprint for transportation of taking of restructuring a couple of locations and that’s well underway in some cases, we’ll see support coming out of those actions here as we get into next year. But the other thing to remember is, we’ve talked about in our business model, right? That 20% target for transportation, that never contemplated auto production being down in the 76 million, 77 million units. So, if you start to – we start to see some support there where we’re getting closer to 21 plus million units a quarter. I think that is a better opportunity for us to capitalize on not just our content growth, but also absolute volume production that we’re set up to support. So I think that would have the bigger impact versus most of the other variables. Sujal Shah: Okay. Thank you, Will. I want to thank everybody for joining our call today. If you have further questions, please contact Investor Relations at TE. Thank you and have a nice day. Operator: Ladies and gentlemen, today’s conference call will be available for replay beginning at 11:30 AM Eastern Time today, July 27th on the Investor Relations portion of TE Connectivity’s website. That will conclude the conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity Second Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning, and thank you for joining our conference call to discuss TE Connectivity's second quarter 2022 results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information. We ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Due to the large number of participants on the Q&A portion of today's call, we're asking everyone to limit themselves to one question. We are willing to take follow-up questions but ask that you rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal. And also, I appreciate every joining us today. to cover our second quarter results as well as our outlook for the third quarter of fiscal '22. Before Heath and I take you through the slides and details, I want to take a moment to discuss the current environment and frame our performance relative to some of the developments that we've been seeing. Since our last earnings call 3 months ago, we've seen some elements of the macro environment become more volatile. And specifically, we've seen the invasion of Ukraine as well as COVID lockdowns in certain parts of China. While we've seen volatility increase, we continue to see strong end demand trends across the markets that we serve. And I'm very pleased that despite the incremental pressures, our teams were able to deliver results in quarter 2 that were ahead of our expectations. Our continued strong performance is a result of how we strategically positioned our portfolio around secular growth trends. Also, the resilience of our global manufacturing strategy, where we have invested to produce in region, and the commitment of the hard work of our employees across the world. I'm very proud of our teams as they continue to overcome broader challenges to effectively serve our customers to both manage the present while also ensuring we're winning programs that will drive future growth for TE. I'd like to put our performance into perspective a little bit. We've made significant progress towards our business model over the past couple of years. We've been driving top line growth despite market headwinds, executing successfully on cost reduction and footprint consolidation plans, and driving margin and earnings per share growth despite the supply chain and inflationary pressures that we faced. And if you look at TE versus a pre-COVID time frame of fiscal 2019, our auto sales have increased nearly 20%, against auto production declines of approximately 10 million units or 15%, and this really illustrates our global strengths in the automotive space as well as the content gains we've been talking to you about. Our industrial equipment and data and device businesses have both grown approximately 50% over the same time frame, and this is significantly above the markets that we serve, showing the benefit of where we strategically position these businesses as well as the strong execution of our teams. I do think it's important to separate signal from noise as you look at TE from an investment perspective. While we are in a very noisy environment near term, the longer-term growth signals across our portfolio remain positive. These signals are secular in nature, giving us confidence that we will continue to perform in line with our business model through cycle as an industrial technology leader. We have all 3 segments contributing to our performance. For example, in our Transportation segment, we are the established global leader for EV connectivity solutions. Over the past year, the value of our design win pipeline grew by over 50%, and we are designed into every major electric vehicle and hybrid platform with customers around the world. This positioning has been driving and will continue to fuel our content growth and enable consistent above-market performance in our Transportation segment. If you turn to our Industrial segment, we are in the heart of the industrial automation trend and have grown our sales at double the rate of capital expenditures as the markets recovered from COVID. We've been working with industry-leading customers to develop engineered solutions targeting higher-growth robotic and safety applications, and this is resulting in the robust growth pipeline that you're seeing. And in our Communications segment, we are expanding content in high-speed cloud applications and gaining share in artificial intelligence deployments as customers implement workload architectures to make data centers more efficient. And these are just a few of the secular trends that we have positioned the portfolio around, which will drive future growth, and we remain excited about the long-term growth and margin expansion opportunities we still have in front of us. So now let me highlight a couple of few additional takeaways from today's call. Our second quarter results were a record in quarterly sales and adjusted earnings per share with strong results in each segment. On a year-over-year basis in the second quarter, we delivered organic sales growth of 8% and adjusted earnings per share growth of 15%, along with adjusted operating margins of 18.4%. The Margins expanded in each segment year-over-year as our teams are effectively managing pricing and cost in an inflationary environment to drive the margin performance across our businesses. The other key highlight is that the demand environment continues to be strong, and we'll talk about it, and it's evidenced in our orders, which were $4.5 billion in the quarter. Our book-to-bill was well above 1 for each segment, and it reflects the continued strength across our markets. The other highlight about our organic performance is that in the second quarter, it shows to strengthen the positioning of the portfolio with our Industrial and Communications segment growing over 10% and 20%, respectively, and our Transportation segment growing 5% despite auto production declines in the quarter. We continue to benefit from the ramp of new electric vehicle platforms, which will continue to drive content outperformance for our Transportation segment. And the last highlight is that we are expecting our quarter 3 sales to be around $3.9 billion, and this does reflect continued strong performance. We have a strong demand environment. But coupled with the broader volatility, I do want to stress our ability to produce will remain a key factor in our near-term sales performance. So let me turn now, and I'll provide some additional color on some key end demand trends as well as talk about the supply environment. We are continuing to see broad strength in global capital expenditures that relate to factory automation, cloud and data center efficiency as well as renewable energy sources. End demand for autos remain healthy and is significantly higher than what the OEMs can produce, and this provides a set for future auto production increases as supply chain bottlenecks begin to resolve. While we see a demand environment that remains positive, the invasion of Ukraine and COVID lockdowns in China are new developments versus 90 days ago. And let's face it, the supply chain challenges and inflationary pressures continue to linger. On the supply chain, the challenges around material availability and flow, I would tell you are about the same as 90 days ago, but we have seen an uptick in inflationary pressures. I am pleased with how our teams are continuing to manage the supply constraints to meet our obligations to customers, and they are also working additional price increases to partially offset higher costs so that we can maintain margin performance in each segment. We believe that we are differentiated with our global manufacturing strategy and ability to produce in region, and this is helping us to enable the growth in share gains across our business during these volatile times. Now with this as an overview, let me get into the slides and discuss a few additional highlights that are on Slide 3. Our quarter 2 sales of $4 billion were up 7% on a reported basis and 8% on an organic basis, and adjusted earnings per share was $1.81, which is up 15% year-over-year, with both being records, as I mentioned. From a free cash flow perspective, we generated approximately $615 million in the first half. and we returned approximately $670 million to shareholders in the second quarter, and we did increase the pace of our buybacks during the quarter. If I turn from financials for a minute, I'm also impressed that we continue to be recognized for our ESG initiatives with TE being named among the World’s Most Ethical Companies by Ethisphere for the eighth consecutive year. I am pleased with our commitment and continued progress along our ESG initiatives and also our employees are really leaning in and being engaged on these important initiatives across TE. So let me again touch upon our guidance for the third quarter. We do expect sales of approximately $3.9 billion and this will be up 1% on a reported basis and 3% on an organic basis versus the prior year. This guidance does include approximately 300 basis points of year-over-year headwinds from the expected COVID-related shutdowns in China that we expect in the quarter. And we do expect adjusted EPS to be approximately $1.75 in the third quarter. So if you could, I'd like you to turn to Slide 4, and I'll get into the order trends and markets a little bit further. At an overall level, our second quarter orders were $4.5 billion, with a book-to-bill of 1.13, and it highlights the strong demand that I mentioned already. While TE is not typically a backlog business, we are in an environment where you need to look at both bookings and backlog to get a full picture of demand. Our backlog is up 40% year-over-year and is up significantly in every segment. Importantly, we continue to see stability in our backlog in each segment, and our customers continue to provide order visibility beyond the current quarter to ensure supply certainty in these ongoing volatile markets. In our Transportation segment, we saw order levels increase sequentially, influenced by concerns around the recent developments in Ukraine and China. Global auto production was in line with our expectations in the second quarter at approximately 19 million units, and we expect auto production to decline slightly in the third quarter on a sequential basis. The trends around our content remained robust as we continue to benefit from increased electronification and higher production of electric vehicles, and we expect electric vehicles to be up approximately 30% this year in production. Given the volatility we're seeing in global auto production and the comparisons that can result as we move through the second half, it is important we look at content per vehicle as an additional long-term metric. Our content per vehicle has expanded from the low $60s range in and pre-COVID times to roughly $80 in fiscal 2021. As we look forward, we expect continued expansion in our content per vehicle from the first half to the second half of this year. When you look beyond the near-term noise in the auto supply chain, we continue to see a favorable setup for our longer-term auto production growth with healthy end demand and dealer inventories that remain extremely low. Looking at our Industrial segment orders. We saw another quarter of strong orders with a book-to-bill of 1.22. We continue to see an improving backdrop with increased capital expenditures for factory automation, manufacturing capacity and renewable energy. And these trends benefit both our industrial equipment and energy businesses. We're also continuing to see improving order trends in the comm air as well as favorable conditions in our medical business, and we expect to see favorable year-over-year revenue comparisons in those businesses later in this fiscal year. And lastly, in Communications, orders continue to reflect strong demand as well. We had a book-to-bill of 1.07. In data and devices, we're seeing a robust outlook for cloud capital expenditures, and we continue to gain share. As we mentioned last quarter, we continue to expect softening in our appliance business from the first half to the second half of this year. And just to add some color on what we're seeing geographically, and I'll do this on an organic basis sequentially. In North America, our orders were up 12%. In Europe, they were up 16%. And in China, our orders were down 4%. So with that overview about orders and markets and what we're seeing, let me get into the segment results that you can see on Slides 5 through 7, and I'll hit on some of the highlights in each of the segments. In our Transportation segment, our sales were up 5% organically year-over-year. Our auto business grew 5% organically versus auto production declines in the mid-single digits. This continues to show the separation of our sales performance versus the market, which is being driven by our leading position in electric vehicles and their increased adoption. In commercial transportation, we saw 5% organic growth driven by North America and Europe, even though the market in China is still going to be down this year, we continue to see significant outperformance in all regions, driven by content growth and share gains. And in our sensors business, we were roughly flat organically, and we continue to see strong design win momentum in transportation applications. If you look at earnings in the segment, adjusted operating margins were 18.2% as our teams continue to execute well and implement price increases to partially offset the inflationary pressures. So let me turn to the Industrial segment, where our sales increased 11% organically year-over-year. In the industrial equipment business, our sales were up 27% organically with double-digit growth in all regions and continued benefits from increased capital spending and factory automation. In energy, we saw 5% organic growth driven by increased penetration in renewable applications. And in our AD&M and medical business, our sales were both roughly flat. And as I said earlier, we expect improvement in both markets and more favorable comparisons as we go forward. At the segment level, adjusted operating margins expanded year-over-year by 280 basis points to 15.3%, driven by higher volume, price actions and strong operational performance. So let me move to the Communications segment. As you'll see on the slide, our teams continue to execute well while capitalizing on the growth trends in the markets that we serve. Sales grew 23% organically year-over-year for this segment, with growth in each business, as you can see on the slide. In our data and devices business, we saw a market outperformance driven by content growth in high-speed cloud and share gains in artificial intelligence applications, which are aimed at improving energy efficiency in data centers. This continues to illustrate how we are enabling a positive impact in carbon emissions across our portfolio through our products and our technologies. In our appliance business, we performed ahead of our expectations, and this is despite the expected declines we saw in the China market. We saw growth in North America and in Europe with continued share gains enabled by our manufacturing strategy to produce close to our customers. This resiliency has proven to be a differentiator as customers navigate the challenges in the macro environment. And from an earnings perspective, our communications team continues to deliver outstanding performance with adjusted operating margins of 24%, up 330 basis points versus a strong quarter in the prior year. Because of the heavy lifting we've done in the segment around cost reduction and footprint consolidation, we expect segment adjusted operating margins to remain above 20% through the second half even as the appliance market moderates. So with that as an overview of the segments and the markets, let me turn it over to Heath to go into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning, everyone. Please turn to Slide 8, where I will provide more details on the Q2 financials. Adjusted operating income was $736 million with an adjusted operating margin of 18.4%. GAAP operating income was $705 million and included $21 million of restructuring and other charges and $10 million of acquisition-related charges. We continue to expect restructuring charges of approximately $150 million for the full year as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was $1.81, and GAAP EPS was $1.71 for the quarter and included tax-related items of $0.02. Additionally, we had restructuring, acquisition and other charges of approximately $0.08. The adjusted effective tax rate in Q2 was approximately 19%. For the third quarter, we expect our adjusted effective tax rate to be roughly 20%, and we continue to expect an adjusted effective tax rate around 20% for the full year. Importantly, we expect our cash tax rate to stay well above our adjusted ETR for the full year. So let's turn to Slide 9. Our results that you see on this slide reflect the strong execution of our teams and how we have strategically positioned our portfolio. As Terrence mentioned, we delivered strong results in each segment. Sales of $4 billion, a company record, were up 7% reported and 8% on an organic basis year-over-year. And just to provide some color on our organic growth. Approximately 1/3 of our organic growth was driven by the price increases. Also, currency exchange rates negatively impacted sales by $116 million versus the prior year. As we look forward into Q3, we expect currency exchange rates to be a sequential headwind of approximately $50 million and a year-over-year headwind of approximately $150 million due to the strength in U.S. dollar. As you may recall, last quarter, we discussed the impacts of currency exchange rates for our fiscal year, and we now expect fiscal '22 impact between $400 million and $500 million headwind from FX. This is about $100 million worse than we were 90 days ago with the majority of that additional impact occurring in our second half of our fiscal year. Adjusted EPS of $1.81 was up 15% year-over-year and represents a company record as mentioned earlier. Adjusted operating margins were 18.4%, and I'm pleased with the performance of our team given the incremental inflationary pressures we are seeing. We are pulling price levers across the business to help partially offset these pressures. While we are not able to offset these cost dollar for dollar, we are able to recover approximately 2/3 through price and the remainder through productivity initiatives. As you would assume, we will continue to respond with pricing levers to mitigate the impacts in this environment. Turning to cash flow in the quarter. Cash from operating activities was $413 million. Free cash for the quarter was $242 million. As we mentioned last quarter for the year-over-year trend in free cash flow reflects strategic inventory builds. We expect free cash flow to increase significantly in the second half of the year versus the first half and expect inventory levels to stabilize as we move through the year. We increased the pace of our share buyback in the quarter and returned approximately $670 million to shareholders through share repurchases and dividends. Through the first half, we have returned over $1 billion to shareholders. We remain committed to our disciplined use of capital. And over time, we still expect 2/3 of our free cash flow to be returned to shareholders and 1/3 to be used for bolt-on acquisitions. So before we go to questions, I want to reiterate some of the key points that we covered today. We are continuing to execute well in a volatile environment, demonstrate sales growth, margin resiliency and EPS expansion. We remain in a strong demand environment as evidenced by our orders and backlog and the ability to produce will be a key factor of our near-term revenue performance. We have strategically positioned TE around well-recognized secular growth trends, and we continue to generate performance ahead of the markets we serve. Our teams continue to prove their ability to execute in this volatile environment, effectively serving our customers while managing price and cost dynamics, and we continue to demonstrate resilience through our global manufacturing strategy. So with that, let's now turn it up for questions. Audrey, can you please give the instructions for the Q&A session? Operator: [Operator Instructions] We'll take our first question from Chris Snyder at UBS. Christopher Snyder: So my question is on order trends. When we see transportation orders up 18% sequentially, how should we think about the drivers here? Between improving demand, but also, likely longer duration ordering as supply chain fears are picking back up. And then from a higher level, the company talked a lot in the prepared remarks about the secular transformation of the business. So when we look at the $4.5 billion of orders, are there any metrics or color you could provide around how much of this is coming from the secular growth business lines, whether it be EVs, medical, automation or data centers, just to help get more comfortable around the ability to drive continued growth in the macro slowdown? Terrence Curtin: No, sure. Thanks, Chris. And there's 2 questions there. And so let's start with the first one. As I said on the comments right now, the demand environment remains strong. And you can look across all 3 segments, certainly, you saw Transportation pick back up. I do think some of that was a reflection of people trying to make sure they had supply chain certainty with what was going on in Eastern Europe and Ukraine which a number of our customers have operations in the Ukraine and Tier 1 customers. And people really working hard to make sure we get continuity of supply. The other thing that you certainly add was also with some of the China lockdowns. And the China lockdowns, we've been dealing with since -- even in the second quarter, certainly in Southern China, but what we're experiencing in Shanghai is obviously more widespread than what we've been dealing with today. And I think the other key thing when you look at these orders, in addition to what I said is I want to go back to a point which I think is very important. The amount we can produce will be the driver of our revenue. And even when we look at our performance in the second quarter, it was more about our teams executing well to be able to get more out and I would say it was more incremental demand, and we're still in a supply chain constrained environment. The other thing about your question on -- that I mentioned in the pre remarks, I do think it's important to also look at backlog. And I know that's not something we like to talk about a lot, but it is something as we continue to see customers try to get more certainty also knowing what's going on around the world, we do see customers placing orders out to make sure they are securing supply certainty. And let's face it over what we do, you don't want to be shutting down the line over what our content is in any application. So we continue to see customers place orders out. It is across all our businesses, and the other element that we always look for is are we seeing pushouts or cancellations in the backlog. And we are not seeing meaningful pushouts or cancellations anywhere. So it really is an indicator that the demand is strong, and we feel good that you see things are, like the industrial businesses, continue to improve from the industrial recovery we've been talking about. Places like appliance, we do see moderating and started in China. We expect that to moderate through the remainder of the year. But net-net, it is a constructive demand environment. As you get down to your second part of your question about orders and those secular trends, I think you see that in how we talk about our guidance and some of the things I'd mentioned. So the orders that we're seeing do reflect those secular trends. I don't have numbers here in front of me to tell you the order by each one of them. But when we talk about our guide and our content outperformance let me tell you, with the program wins as well as the orders as they're coming in, as these are typically newer custom programs, it is things that are coming in and driving the orders as well. Operator: And next, we'll go to David Kelley with Jefferies. David Kelley: I was hoping to dig into the auto content per vehicle drivers. And I believe you've referenced an expected uptick from first half to second half. I think we have content tracking in the low 80s trailing 12 months versus, you referenced, that low 60s numbers in 2020. So can you walk us through the EV impact to content over the last 2 years and how we should think about EV momentum and contribution into the second half? And then any color on the expectations of broader mix and inventory dynamics, first half to second half, would be helpful as well? Terrence Curtin: Okay. Thanks for the question, David. And let me get into -- I want to reiterate what I said in my prepared remarks. And when we talk about automotive content and what EV has done, one of the things that I always think is important in TE is we have content increase due to electronification, which has happened on both combustion and electric vehicles. And then we also get the kicker as EV adoption occurs. And I think it comes through when you think about our auto went to being up 20% versus 2019, while auto production of 10 million units. And really, it really shows where we positioned our portfolio and the investments we've been making for a quarter of a decade. And the $60 I referenced on the comments, that's 2019. So in 2019, our content was around $60, low $60s. And in 2021, we were at $80, and we're running above that as we continue to grow content. And if you look over this period, certainly, the number of ICE vehicles made on the planet went down, the number of EV vehicles are up significantly. And if you look at content going from $60 to $80, about 60% of that content increase is due to electric vehicles, their increased adoption as well as our content, both of those items. But the other 40% is content growth on electronification across vehicles, and that includes ICE cars. So we have content increase on both types of platforms over this period. Certainly, you get the kicker that we've always talked to you about around that EVs grow faster, our content is bigger on it. And you're going to continue to see that because, let's face it, EV adoption is up to about 12 million units this year from $9 million last year, and that's why we get so excited. The other thing I do want to highlight is our products are really differentiated. And we were in a business review and right now, we're up to about 1,000 patents that we generated around the EV technology globally. And we don't typically talk patents a lot, but when you think about the innovation we bring, I talked about the number of programs and dollar-value programs in the prepared comments, this is happening, whether it's a charger inlet, a connectivity that happens close to the motor, what's happening on the cells, the connectivity you need there as well as some of the power conversion that you need to incur between the battery and the motor. And there are things that we benefit from all of that and then where we get sensor elements around current sensing also creates a kicker. So I really think you're going to continue to see as EVs continue to get adopted, that is the content and our teams are scaling. And that's something that we also have to do not only how do we innovate, how do we can get the manufacturing done. And I think you're going to continue to see that content per vehicle grow. And I also believe there's a good setup as production gets better, that auto production to get into a growth mode again at some point in time, which will be an additional kicker. Operator: Next, we'll go to Mark Delaney with Goldman Sachs. Mark Delaney: Question which is on margins. You mentioned cost is going up. You spoke about being able to recover about 2/3 with pricing and the remainder with productivity. Could you give more details in terms of the timing to fully execute on those mitigation measures? And is there going to be some period of time where margins are going to be temporarily depressed? And if so, by how much as you work through some of those offsets to the cost pressure? Heath Mitts: Mark, this is Heath. I'll take the question on margins. Well, certainly, listen, we're holding our head in this environment. As you mentioned, this is a very heavy inflationary environment for us that impacts metals and resins and freight and utility energy prices. So we feel pretty good about our ability to hold our head in the mid-18s range of operating margins. I would tell you, as you mentioned, we recovered about 2/3 of that through price, and that will be the story as we work our way -- continue to work our way through the fiscal year as well. And you have to remember, and I know, Mark, you know us well, in a normal environment, our business model contemplates more of a negative price environment based on volume commitments. And so it was not uncommon for us kind of before we get outside of this inflation environment to be down 1 point, 1.5 points of price a year. We've moved that up into positive territory. And as I mentioned on the call, it represented about 1/3 of our overall organic growth. So you can kind of frame up a little bit what that looks like from a price. And yet, that's still only covered about 2/3 of the inflationary pressures, which are significant. So our business model contemplates certain things. And in this environment, we're happy we're able to pass on the amount of price that we can. Our footprint, we've done a lot of work on that over the last few years, as you know, and especially, you see that come through on the communications footprint where we have optimized that. And at these volume levels, we continue to print margins in the mid-20s in terms of operating margins. And we've been going through a similar type of activity, as you know, within transportation and industrial over the last few years. In some cases, we're getting close to where we need to be and that regional footprint is important to be close to the supply chains of our customers, and I feel good about that impact that that's happening for us to be able to hold our head here. In terms of going forward, I'd say we're kind of in the same range. And I don't anticipate calling out a temporary depressed margin relative to the timing and as part of your question, we'll continue to pound through this and take advantage of the opportunities where we have and continue to optimize the cost structure. Operator: We'll go next to Wamsi Mohan at Bank of America. Wamsi Mohan: Terrence, can you share some more color on the China lockdowns. I know you quantified the impact at about $100 million. But how much of that is supply versus demand? What is happening with the demand trajectory in China? And how much impact do you expect through the rest of the year? And then on pricing, I know Heath said that there was about 1/3 of the growth that is benefiting from pricing. I was wondering if you could put a lens on what percent of your portfolio you've been able to change pricing on and as it pertains to auto, is there more to come? Terrence Curtin: Sure, Wamsi. Thanks for the question. So let me start with the China element first. And just to base everybody, China is an important market for us. It's about 20% of our sales. And we do not see what's going on in China as a demand issue. Our orders in China have been above $900 million for 5 to 6 quarters now, and even in the last quarter, our book-to-bill was 1.07. So from a demand perspective, we don't see there being a demand problem. But when you think about the lockdowns, and like I said earlier, we've been dealing with lockdowns because not all our factories are in the Shanghai area. We have factories in the north, up in Qingdao. We have factories down in Southern China around Shenzhen, Guangzhou and Shantou. And really, what we're seeing here is you got to break it into pieces. Where the customer is located? We have customers that are in shutdown. Where are some of our suppliers? And then also how we move things around China because our China business is really to serve the China manufacturing market, it's not an export business to the world. And really, what we're dealing with is we have factories that are running. They aren't running full till we have customers that are trying to get back up and running. And the number that we laid out here today is really what we know from a bottoms up. If the lockdown would end, I would hope we would be able to recover up. The amount that we're missing here in quarter 3 but it is more of a logistics and a supply getting to the customer than it is actually our ability or demand destruction in any way. So demand is strong, but certainly a very fluid situation, and a very important market for us. On pricing, your second part of your question. When you look at pricing, we're getting pricing across all businesses and all segments. So when you talk about what element of the portfolio are we getting pricing on, it's all of that. It is different degrees. It depends upon the customer. Certainly, in areas like distribution, we'll be putting another price increase into effect here in July. With the increased inflation, certainly in those with direct customers, we're having direct contractual discussions, they started last year and they're continuing. And I think it's proven, between the pricing and the productivity that we've been able to drive. It shows up in the margin. That shows the breadth of it. So certainly, we have to get it because of the breadth of the inflation that we've seen and we continue to experience. Operator: Next, we'll go to Amit Daryanani at Evercore. Amit Daryanani: I realize TE doesn't provide a formal full year guide, but Terrence, you spoke about the signal versus noise, and there really is a lot of noise out there. I'm hoping to just get your perspective on what are you seeing in the back half of the year, there are multiple crosscurrents in terms of how things will play out. I'd love to just get a sense on what are the puts and takes if you can tell from a revenue and cost perspective for the back half of the year that you're contemplating? Terrence Curtin: Yes. And then you're right. So I'll give you some tidbits here, Amit. But certainly, you're right. We're only guiding for the third quarter. It is due to the volatility. But I think you have to start with, demand is strong. And while we have a little bit of an impact here due to China, our second half revenue is going to be driven by what we can get out of our factories. We still believe that -- and it's how do we get material, how do we get to produce? How do we get a ship because we do want to continue to make sure we help our customers with the supply situation. If you look at it by business, we're going to continue to probably say you're going to see industrial improve. I've talked about comm air and medical improving, certainly industrial staying strong in energy. We will see our CS segment to moderate due to appliances and that's not new. That has nothing to do with the recent market. That's really what we've expected and we've talked to you about. And I think transportation is probably going to be moving sideways more due to auto production demand and content. We do -- we would have thought probably 90 days ago, auto production would improve in the second half. with some of the things that are going on, we sort of expect it will probably be running around 19 million units a quarter. We do have, as Heath talked about, currency, I would ask you all to make sure you're picking up the currency impact. That's an incremental headwind, about $100 million in our second half. And some of the -- the wildcard would be around China. If the lockdowns are able to get done, it will be how do we recover, the customers recover, that if demand stays where it's at, could that be some recovery in the second half of this 300 basis points that we estimate today. But overall, it remains constructive, and we're going to continue to do the productivity and pricing actions that Heath and I've talked about. So net-net, I think you could see us getting back more to the quarter 2 level plus as we get to later in the year. Operator: We'll go next to Samik Chatterjee at JPMorgan. Samik Chatterjee: I guess I just wanted to ask you on data and devices. We get often asked this by investors about how long can this sort of trend that you're seeing in data and devices continue? And maybe if you can flesh out, I know you spoke about sort of the higher-speed cloud applications, but if you can flesh out the content growth story there between more number of connectors going into some of these applications over time versus where are you seeing sort of more appetite to supply higher feature or higher content connectors over time? How much of the content growth is purely more volume versus higher feature or higher specification connectors? Terrence Curtin: Yes. Samik, thanks for the question. And I think when you look at our D&D business, the important metric you should be looking at is really what's happening in cloud CapEx. Cloud CapEx is the important driver because as our cloud customers look at it, they're really trying to solve a couple of problems, certainly, not only the consumer need and enterprise need for cloud infrastructure, but also, they're trying to solve operating efficiency because one of the biggest drivers that they have is not only the need for speed and compute, but also how do they reduce their economic footprint. And cloud CapEx continues to be strong. It actually increased a little bit and we continue to see that be strong. The other thing that's benefiting our content is not only just cloud CapEx and you see us growing ahead of cloud CapEx, we are also winning not only on the speed side, but how do we help our customers solve some of the energy efficiency operating cost issues they're trying to tackle because data centers use so much energy. And I know Aaron has shared some things around our thermal bridge product, but also as they move to -- they're really trying to say, how do they increase computational power with some of their workload architectures, and that benefits us from a content perspective. And while we do have share gain happening that content element is just as important across all facets of the compute and the store and move elements of cloud. So I think you're going to continue to see it based upon the cloud CapEx trends, and that's the key driver to look out and then we can draw it out performance versus that cloud CapEx due to really how our engineers are really tucked into our cloud customers. Operator: We'll go next to Matt Sheerin at Stifel. Matthew Sheerin: Terrence, I wanted to get your take on the inventory environment. Your inventory was up like your peers, but we're also seeing inventory climb within EMS, OEMs and even the auto guys. So what is your sense of customer inventories? And did you see any pull in your March quarter due to anticipation of lockdowns, et cetera? Terrence Curtin: I wouldn't say we saw a pull in that because in many cases, we aren't -- what we can produce people are taking. So it comes back to the -- what I've been saying throughout the call about, hey, what we can produce our customers want. The one area where we always have the most visibility is in our distribution partners. And one of the things that we've been seeing with them is they're still light on a day's perspective versus pre-COVID and what they would normally target. So across our partner network, which is about 20% of our sales, they typically target about 180 days of inventory. They're still running in the 150, 160 overall. So that's something we look at because they can be a pretty concentrated proxy to say is inventory getting too flush out there. But I would tell you, we did see orders increase due to some of the certainty people were trying to get with some of the increased volatility. We did not see pull-ins and really how we produce will be the dictator of revenue. Operator: Next, we'll go to Joe Giordano at Cowen. Joseph Giordano: There was a comment that I believe GM made, and not to get like specific about one customer or anything, but just more of like an overarching theme. But on ICE vehicles, they're going to use 1/3 of -- 1/3 less of like unique parts. I have no idea if they're talking about like where in the car that's going. But I'm just curious if that's like a risk going forward to legacy platforms where like maybe products where you can have more pricing power and leverage because their custom engineered, become less and less prevalent? Terrence Curtin: Joe, could you repeat what GM said, I've missed you with what you said there on the 1/3 of what? Joseph Giordano: So they said that they're going to use 1/3 less unique parts in like ICE platforms going forward? Terrence Curtin: Okay. If you look at that, certainly, you see the innovation around ICE platforms. There has been less innovation put into it. You look at -- engine development has scaled back. So what you really are getting on the ICE vehicles, you really have the auto companies very much focusing their effort on obviously, EV first. You also get into data and autonomy type trends. And really on the ICE vehicle, it has become a little bit more of a maintain. That being said, you do need to think about what TE does, and what we do, we also play into features, safety features, and that really drives, whether it's safety features, infotainment features, emission features, those types of things really are where we get scale and even getting more standardized, we have many parts that are standardized in a car that create tremendous scale for us. So going less unique in a ICE vehicle is not bad for us. It actually provides us the scale. And in some cases, we're seeing them look to us to be that partner to help get that standardization. And I would go back to what I said on the call. Our content growth in an ICE vehicle is still strong, even though you have the innovation turning towards the next-generation electric vehicles. So we do not see cannibalization when we to move to EV. And we also continue to see that electronification trend. Now we just ask you to think about your cores of what you feel from a feature, how features change. And each time you're doing that, you're typically getting into more data in the car, things that are going to want more processing to get to more fuel efficiency in an ICE vehicle, could be safety features and all of those create content for TE because you're into the electrical architecture of a vehicle, whether it's low voltage in an ICE engine or your high voltage in an electric vehicle. Operator: We'll go next to William Stein at Truist Securities. William Stein: I'd like to ask a question about capital allocation. Heath you reminded us, I think about 1/3 of cash flow would be targeted towards bolt-on acquisitions. I'm hoping you might just remind us about the end market focus that we should expect to see such transactions? And your propensity today, given somewhat lower valuations, the stock market is going back. I wonder if that's influencing in any way the likely pace or ability to execute a deal. Heath Mitts: Well, thanks, William. I'll take the question. Longer term, which is kind of how we think about the 2/3 back to shareholders via share repurchase and dividends and then 1/3 back via M&A, that is a long-term view over a cycle, right? So you're going to have periods of time, including the ones we're in right now, where we see dislocations in our stock price, where we see ourselves as a better opportunity to buy, and we are spending accordingly on that. And we haven't been seeing as many deals get done in the spaces that we're focusing in on. But there's still a fair amount of fragmentation out there for bolt-on activities across, I'd say, about 2/3 of our end markets. And there is a focus on the spaces that you've seen us do deals and whether that's in industrial or certain things within medical and our high-speed data and some of the activities that we've undertaken more recently there. It is pretty broad, the net that we cast to look at transactions. And I think given time, you can imagine we're looking at half a dozen or so, and most of which don't get to the finish line for a variety of reasons, but we're very active in that front. I would say the pullback in the stock price, we have not seen a meaningful impact of that and impacts on valuations here in the near term. What that does over the long term, we'll see. Most of the things we do look at are not public companies. So there tends to still be a fairly decent appetite out there to deploy capital from us as well as others. So that has continued to inflate the multiple some. So we have to be selective. We've got to be smart with what we do with our owners' money and make sure we're getting good financial returns and things that make strategic sense for us, but we're active out there. Operator: We'll go next to Shreyas Patil at Wolfe Research. Shreyas Patil: I just had 2 clarifications. So it looks like auto outgrowth this year is going to be better than the 6 points, I mean, you're already doing about 10 in the first half. Is that mainly related to favorable pricing? And should we be thinking about the underlying content growth still in that 6 points level? And then the second one was on the Q3 guidance, Slide 12. It looks like the contribution margin on the $209 million of year-over-year operational performance was pretty low. It's only about $0.02 of the EPS. So that's maybe like a 5% EBIT contribution margin. And I'm just curious how much of that is being driven by COVID lockdowns and the cost impact of those? Terrence Curtin: Yes. Let me take the first half, and I'll ask Heath to touch upon your guidance question. On the first half, we are running well ahead. A lot of that relates to EV production is very strong this year. So you will have points where depending upon where EV production is versus ICE production can drive that outperformance. And like I said, we would anticipate, if you look at a content per vehicle, we'll continue to move up in the second half versus the first half. Heath, do you want to take the second part of this question? Heath Mitts: Yes, so look, the Q3 contribution margin, I would steer you to really look at how we've been trending sequentially in the mid-18s, 18-ish plus for operating margins. If you recall, a year ago, we were pretty upfront that we were -- our fiscal Q3 a year ago, which was over 19%, and why it was trending fairly hot. There were some timing issues between the second and third quarter of last year. If you go back and look at those margin swings. So you kind of have to look at those together to get a fair view versus this year's Q2 and Q3, which is a little bit more consistent. But I would tell you that there's no doubt relative to the lockdowns, I mean there is some pressure that's put on obviously. We quantified the top line of about 300 basis points to the total company relative to those China lockdowns. And that does come in a region where we make very good margins. And so it's something that does have a mix impact as we think about the roll up to a degree. So -- but we're hammering through it, and I don't feel like it's something that's permanent. So -- and I think as you get through and you look at our full year, the full year contribution margin, even including absorbing the earning acquisition still should be with a 3 handle in front of a 30, 30 and change, maybe a tad better than that as we work our way through the full year. Operator: And next, we'll go to Jim Suva, Citigroup. Jim Suva: Can you just help us bridge the orders and the pricing? And what I mean by that is, if everyone knows pricing is going up, is it not logical that everybody puts in a lot of orders to meet those increased pricing? Or do you put in some type of escalators or variables? And just if you can kind of talk about those dynamics and how they're kind of at play? Terrence Curtin: Well, Jim, it's a little bit -- I don't want to be elusive to your question, but it is a little bit different. With our distribution partners, we've also been repricing backlog. So even if they put orders in, we have been repricing backlog due to the broad escalations that we have. When you come into our large customers, that's part of a contract negotiation. We have not been doing surcharges and matters like that. It's been more around price increases. And that's -- like we've said here today, it's about cost recovery. So we're going to continue that, certainly, with the uptick that we've seen. We have more discussions we need to have on pricing, and there are going to be further pricing increases into the channel here come in July. Operator: We'll go now to Chris Glynn at Oppenheimer. Christopher Glynn: I wanted to ask about factory automation and industrial, sort of similar to the question about measuring the longevity of the potential data devices cycle. There are capital cycles, of course, but you're talking about robotics, electrification and safety and I think people contemplate maybe some longer-term labor constraints. So how would you view the sort of cyclical versus durable kind of secular components of what you're seeing in industrial growth these days? Terrence Curtin: A couple of things. Clearly, you got to start with where is the capital cycle at. And we will, similar to the D&D comments I made around cloud CapEx I do think there will be an element that we will follow this industrial CapEx with especially where we continue to position our industrial equipment business. And I think there's an element when I talk about that business, while I talk about some applications we focused on, it's also where we've done acquisitions to get deeper into. It's -- we did the INTERCONTEC acquisition a number of years ago, we did ERNI, we did ENTRELEC and these were things that were really about how do we get deeper into the trend because when you deal with factory automation, as well as the labor element, what are you trying to do? You're trying to get data off a machine. You're trying to get the machine to have more intelligence that actually can do things that humans can do in machine learning as well as preventative things. And that all starts with how are you getting data off the machine. And that's what we do, whether it's from a sensing or a connectivity perspective. So I do think the capital spending element is a positive construct. And I think that you're going to continue to see similar to what we've seen with our data and device business, as you're going to see content outperformance above that capital CapEx trend, and you've seen it already. So certainly, it's a more fragmented world than what we have when we talk cloud but it is something we like where we position ourselves. And I think you're going to continue to see us deploy capital to the bolt-ons that Heath talked about in those spaces to really make sure we strengthen our position. Operator: We'll move next to Joseph Spak at RBC. Joseph Spak: Maybe just one quick clarification on your inventories, which have been higher as planned as you've indicated. But is that the new normal? Or do you think they go back down and so. And then just with some of the disruptions in the industry, you've seen some of the auto capacity shift to other parts of the world, specifically out of Ukraine and others. Does that create any strain for TE? Terrence Curtin: Well, Joe, first of all, thanks for the question. No, our inventory levels are a bit more inflated now than I would say that not a new norm, okay? So our days on hand are higher than we would normally run. So even at these volume levels we're carried a bit more than we would normally. This was intentional, and we've talked pretty openly about that as we work our way through the year. In this volatile environment, where we've seen pretty aggressive swings, largely higher in terms of demand, the ability to be able to respond quickly to our customers and make sure that the customers' needs are met outweighed the pain of carrying more inventory. So we did do that now as certain parts of our business have -- we've been able to get a little bit better insight into a few things and order patterns and so forth. We will begin to start working down modestly from this level through the rest of the fiscal year. And you'll see that corresponding impact on our cash flows, but this is not the new norm. And we'll continue to talk about where we should settle in particularly from a days on hand perspective from that side of it. In terms of the shift of production, I assume you're talking about we don't do any production in the Ukraine, but certainly some of our customers do, particularly on the automotive side. And as some of those customers have had to shift some of their capacity to other places, and we're really talking about the harness makers within automotive that has shifted around. It hasn't really impacted our inventory so much because it's already been sold to them. But as they shifted around, it's generally being shifted around within regions. So in that -- in this case within EMEA to other parts of either Eastern Europe or Morocco or otherwise. So we're able to respond to those new locations. And doesn't -- that doesn't specifically have a major working capital headwind towards us. So I hope I answered that question. Operator: We'll go next to Luke Junk from Baird. Luke Junk: I wanted to ask a bigger picture question as we get deep in the call here. Specifically, hoping to get a feel, Terrence, for the ascent of your data and devices franchise over the past couple of years, it was roughly a $1 billion business in fiscal '19 pre-COVID that's now pushing $1.5 billion on TM basis. Obviously, underlying market is growing here, but what really the heart of my question is, to what extent has the overall positioning of the company changed competitively over that time frame, especially as it relates to the impact on future growth and profitability? Terrence Curtin: On it, it is something that I would tell you, it goes back to some of the hard work we had to do in the D&D business that we've talked about and it was around -- we wanted to be focused on ultimate high speed. Certainly, we bring the innovation to it. We have pretty even share across all the cloud providers. And on top of it, one thing that the cloud providers look for is also not only around technology is speed to ramp. And I think our teams have done an exceptional job on how they keep up with the pace that a cloud customer wants. And that's also created share opportunities on top of the innovation. So let's face it, part time, we had calls about D&D where we would talk about the problems we had in D&D. And I really think the D&D story is one where we got focused. We repositioned the cost structure. We refocused the team and the team has really executed very strongly on what has been a really good growth trend. We've gained share, and we're also being a partner that you continue to see our confidence on these calls about the content is growing. And I think there's still a lot of opportunity, especially while you get very customizable solutions that the cloud providers are getting around how do they get their operating costs down. It's not just a CapEx decision. It is an operating cost decision. And the innovation that we get to work with the cloud providers was to make that happen is just as unique as when we deal with the EV and the auto OEMs. So it's a position we really what we built there. We continue to be focused on it. and it's going to continue to drive growth and cloud growth is projected to continue. So I appreciate the discussion. Operator: We'll go to Nick Todorov at Longbow Research. Nikolay Todorov: Another question on cloud and data center. Terrence, I think this is the first time you kind of highlight the AI architecture impact on teas? And can you please talk about the content uplift there in AI architecture versus more traditional server architecture that TE benefits from? Terrence Curtin: Well, what you have is you obviously have much more complicated compute as you get through there. So you get speed. You also get increased thermal dimensions, and that comes into things that our team that really works well with and they have to help our customers solve all that. And some of the orders we saw in the first quarter were some new AI platforms that came in and are going to continue to benefit growth. On each application, the content does vary. It's not cookie cutter because the solutions that our cloud providers have, are very customized around their chipsets. So it is something we'll try to get you a little bit more as we do some of our Investor Day to give you a little bit more framing, but it is very different by the cloud architecture that we go after. Sujal Shah: Okay. Thank you, Nick. I want to thank everyone for joining us this morning. If you have further questions, please contact Investor Relations at TE. Thank you, and have a nice morning. Operator: Ladies and gentlemen, today's conference call will be available for replay beginning at 11:30 a.m. Eastern Time today, April 27, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity First Quarter 2022 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to your host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning. And thank you for joining our conference call to discuss TE Connectivity's first quarter 2022 results. With me today are Chief Executive Officer, Terrence Curtin, and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Due to the large number of participants on the Q&A portion of today's call, we're asking everyone to limit themselves to one question. We are willing to take follow-up questions, but ask that you rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Yeah. Thank you, Sujal, And also, thank you everyone for joining us today to cover our results for our first quarter, along with our outlook for the second quarter of our fiscal 2022. As I normally do, and before Heath and I take us through the slides, I want to provide some key takeaways that frame our performance relative to the broader environments that we continue to operate in. As Our results represent a strong start to our fiscal year in a world that continues to have challenges. Our first quarter builds upon the strong momentum that we demonstrated throughout our fiscal 2021, and things are playing out as we expected, including the outlook for our markets. We also continue to be excited about the growth opportunities where we have positioned TE around, as well as the strong operational performance of our teams to expand margins and drive earnings and cash flow growth as we go forward. In our first quarter, we delivered strong results in each segment. On a year-over-year , in quarter one, we delivered sales growth of 8% and adjusted earnings per share growth of 20% along with operating margins of 18.6%, which are up 90 basis points over last year. On an EPS perspective, our adjusted earnings per share of $1.76 was a record for our first quarter. The demand environment also continues to be strong as evidenced by the orders that we'll talk about. And our orders remained above $4 billion in the quarter. And what you'll see is this reflects strength across many of our end markets and provides a positive indicator of ongoing future growth. What we like about our performance in the first quarter is that it continues to demonstrate the strength and diversity of our portfolio. Our Industrial and Communication segments grew over 20% and 40% respectively, more than offsetting expected impact from the mid-teen auto production declines that impacted our Transportation segment. Transportation Also, you continue to see in our results the benefits of where we strategically positioned our engineering investments around certain secular trends. This is generating market outperformance in each of our segments as a result of this positioning. The content story growth is real, and we continue to benefit from our leading position in electric vehicles, factory automation, as well as cloud applications. 20% of our auto sales are now driven by hybrid and electric vehicles, and we continue to see ongoing content growth in auto around electronification across both electric and combustion engine platforms. We're also generating content outperformance from automation and an Internet of Things in manufacturing and higher speeds and greater efficiency in the data center. And also, throughout today's presentation, I think it's going to show our teams continued to execute well in a challenging supply chain environment, and it's clearly reflected on our first quarter results as well as our second quarter guidance. We are also pleased that we continue to generate performance that is in line with our long-term business model goals. And our first quarter results, when you look with our second quarter guidance, imply a first half growth of 5% growth in sales and 13% growth in adjusted EPS versus the first half of last year, along with continued margin expansion. This strong performance is within a backdrop of global GDP growth environment and higher-end demand across most end markets where we've strategically positioned TE. We are seeing broad strength in capital expenditures that relate to factory automation, expansion in manufacturing capacity, cloud and data center investment, as well as investment in renewable energy sources. If you look on the consumer side of the economy, demand for autos remains healthy, with auto production improving sequentially in our first quarter and we continue to see content growth to drive market outperformance in both our commercial transportation and auto businesses. We continue to see expansion in our content per vehicle, driven by our leading position on electric vehicles, as well as ongoing expansion of electronification in both internal combustion and EV platforms. And we clearly expect that this trend is going to continue as we move forward. Certainly, while this demand environment is positive, we are still in a world that deals with COVID as well as supply chain challenges. The supply chain challenges and inflationary pressures that we've been discussing since the onset of COVID are slightly worse than 90 days ago, but I do want to highlight how I am pleased with how we are managing through this and making continued progress towards our business model goals despite these ongoing factors. With the healthy demand and the current state of the global supply chains, our ability to produce will be a key factor of our near-term revenue performance. We continue to benefit from our global manufacturing strategy to produce in region and our teams continue to drive price actions and productivity initiatives across all three of our segments. So, with that as a backdrop, let me now turn to the slides and discuss some additional highlights, and I'll start on slide 3. Our quarter one sales at $3.8 billion were up 8% on both a reported and organic basis and adjusted earnings per share was $1.76, which is up 20% year-over-year and a record for first quarter, as I mentioned earlier. Adjusted operating margins were 18.6%, up 90 basis points year-over-year, driven by the growth in strong operational performance in our Industrial and Communication segments. We do continue to see a strong demand environment, which is reflected in orders of $4.3 billion. And I'll get into more details on the orders on the next slide. Looking at free cash flow. We generated approximately $370 million of free cash flow in the quarter, and we returned approximately $410 million to shareholders through buybacks and dividends during the quarter. And moving away from financials for a minute, I do want to highlight that we continue to be recognized for our ESG initiatives. And we were named to the Dow Jones Sustainability Index for the 10th consecutive year, along with our recent ranking in the top 20 of Investor Business Daily's 100 Best ESG companies. I think importantly, we remain committed to our goal of decreasing Scope 1 and Scope 2 greenhouse gas emissions by over 40% on an absolute basis by 2030, which is above and beyond the 27% reduction that we've already made over the past decade. And while I've talked about our team's performance about their execution – let's face it – to make these sustainability investments, it's also how our employees engage in that as well. And I'm very pleased with the progress of how our employees are engaging as we drive sustainability initiatives across TE. So, let me turn to guidance for the second quarter. And we expect that the strong performance of our portfolio to continue in our second quarter with approximately $3.8 billion in sales, and this will be up 2% on a reported basis and 3% organically versus the prior year despite the year-over-year decline in auto production. We expect double-digit growth in both Industrial and Communication segments to drive our second quarter growth, once again reinforcing the diversity of our portfolio. We do expect adjusted EPS to be approximately $1.70 in the second quarter, and this will be up 8% year-over-year. So, now let me get into the order trends and markets. And if you could, please turn to slide 4 where you see order progression by our segments. For the first quarter, our orders were $4.3 billion and our book-to-bill was 1.13. And we saw a year-over-year and sequential growth in our Industrial and Communication segments. In our largest segment, Transportation, order levels came in as we expected and our book-to-bill was 1.0, which aligns closely to auto production trends. Global auto production came in slightly better than we expected in the first quarter at approximately 19 million units. And we expect that auto production will remain at a similar level in the second quarter, reflecting roughly 5% reduction year-over-year in auto production. We continue to anticipate that auto production will improve in the second half compared to the first half, and we'll return to year-over-year growth as we move through 2022. In addition to production, the trends around content remains strong. And we continue to expect outperformance to be at the high end of our 4% to 6% range in 2022 as we continue to benefit from increased electrification and higher production of electric vehicles, which we expect will be up over 30% globally this year. When you think about transportation, there's certainly ongoing challenges with semiconductors and the broader supply chain that continue to be a governor for our auto customers' ability to produce. When you look beyond the near term noise in the auto supply chain, we continue to see a favorable setup for longer-term auto production growth, with healthy consumer demand and dealer inventories that remain extremely low. So, let me turn to the Industrial segment orders. And what's nice is, for the first time since the onset of COVID, sequential order strengthened across all businesses in the segment. We see an improving backdrop with increased capital expenditures for factory automation, manufacturing capacity related to electric vehicle infrastructure and semiconductors, as well as investments in renewable energy. And this increased capital investment benefits our industrial equipment and energy businesses in the segment. On top of that strength, we've seen improved order trends in our com air and medical businesses. And we expect to begin to see favorable year-over-year revenue comparisons in those businesses later this fiscal year. If you look at our Communications segment, our order growth in the first quarter was driven entirely by our data and devices business and reflects an increased outlook for cloud capital expenditures, as well as our ongoing share momentum. We also see, with our D&D customers, they're placing orders out for delivery beyond the current quarter due to the broader supply chain uncertainty. While we continue to see favorable end market trends in D&D, we are seeing a moderation of the appliance market as we expect it, particularly in China. And we would expect softening in the appliance market from the first half to second half of our fiscal year. With that overview of orders and markets by the segments, let me add some color what we're seeing organically from a geographic perspective. And I'll start on a sequential basis. In Asia Pacific, and I'll exclude China here, those orders were up 18%, while in China orders were up 4% sequentially. And outside of Asia, our orders were essentially flat sequentially. On a year-over-year basis, organically again, Asia Pacific excluding China orders were up 18%, North America and China orders were up 17% and 2% respectively, and we saw a slight decline in Europe of approximately 4%. So, with that backdrop around orders and markets, let me get into briefly just cover year-over-year segment results, and that's laid out on slides five through seven. And as I added a lot of color, I'll just hit the high points here. In Transportation, our sales were down 2% organically year-over-year, with declines in auto, partially offset by growth in commercial transportation and sensors. Our auto business declined 6% organically versus auto production declines that were in the mid-teens. Once again, you see the separation of our sales performance versus the market due to the content growth. TE's technology and products are enabling high voltage architectures and applications with every leading customer, and 20% of our sales are now driven by hybrid and electric vehicle platforms. In commercial transportation, we saw 11% organic growth with outperformance versus the market due to content growth drivers that are very similar to our auto business. And in sensors, we saw 5% organic growth, driven by industrial applications, as well as new ramps and transportation applications. For a margin perspective in the segment, adjusted operating margins came in as we expected at 18.2%. Now, moving to Industrial segment results. Our sales increased 18% organically year-over-year. In the industrial equipment area, we were up 40% organically, with strong growth in all regions, and we're benefiting from the increased capital investment and spending across the globe. In our energy business, we saw 17% organic growth that's driven by our increased penetration of renewable applications that we've talked about with you. And in our medical business, it grew 8% organically as we're starting to benefit from the recovery in interventional procedures. And in our aerospace and defense business, our sales declined 3%, which is organically driven by the market dynamics in that space, but certainly orders show a more positive outlook as we move forward. From a margin perspective in the Industrial segment, our adjusted operating margins expanded year-over-year by 130 basis points to 14.8%, driven by higher volume, as well as the strong operational performance by our teams. So, let me turn to the Communication segment, and I just want to start at – you look at the performance of both businesses as well as the margin performance, it just shows that our teams continue to execute while capitalizing on growth trends in the markets we serve. Sales grew 40% organically year-over-year for the segment, with strong growth in each of our businesses, as you can see on the slide. In data and devices, we saw strong growth across all regions, driven by content growth and share gains in high speed cloud applications as our customer moved towards 400 gig and next generation chip platforms, as well as growth in server and artificial intelligence applications. In appliances, we saw growth in all regions with continued share gains, as we continue to differentiate with our customers around our global manufacturing network. And from a margin perspective, the performance was outstanding, with another record in adjusted operating margins of 27%, which was up 950 basis points year-over-year, which was strong performance in the prior year as well. If you just take a step back and you looked across the segments, our teams continue to capitalize on the growth trends in their end markets, demonstrating the diversity of our portfolio and delivering operational execution with both pricing actions within the challenging supply chain environment. So, with that as an overview, let me give it to Heath and he'll get into more details on the financials and our expectations going forward. Heath Mitts : Thank you, Terrence. And good morning, everyone. Please turn to slide 8, where I will provide more details on the Q1 financials. Adjusted operating income was $712 million, with an adjusted operating margin of 18.6%. GAAP operating income was $672 million, and included $24 million of restructuring and other charges and $16 million of acquisition-related charges. We continue to expect restructuring charges of approximately $150 million for the full year as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was $1.76 and GAAP EPS was $1.72 for the quarter, and included a tax planning related benefit of $0.05. Additionally, we had restructuring, acquisition and other charges of $0.09. The adjusted effective tax rate in Q1 was approximately 18%. And for the second quarter, we expect our tax rate to be very similar to Q1. We expect the adjusted effective tax rate for the full year to be around 19%. Importantly, we expect our cash tax rate to stay well below our adjusted ETR for the full year. Turning to slide 9. Our results you see on the slide reflect the strong execution of our teams and the diversity of our portfolio. As Terrence mentioned, each segment contributed to the strong start to our fiscal year. Sales of $3.8 billion were up 8% on both a reported and organic basis year-over-year, and currency exchange rates negatively impacted sales by $45 million versus the prior year and were worse than expected. We expect currency exchange rates to be a sequential headwind from Q1 to Q2 and the year-over-year headwind of approximately $110 million in the second quarter. And if the dollar remains at current levels relative to other currencies, FX could be a headwind of approximately $300 million to 400 million for our full fiscal year. Adjusted EPS of $1.76 was up 20% year-over-year, and represents a record for the first quarter, as mentioned earlier. Adjusted operating margins were 18.6% and expanded 90 basis points versus the prior year. And the incremental flowthrough on the adjusted margins and revenue growth were approximately 30% in Q1 on a year-over-year basis. I'm pleased with our performance, given the inflationary pressures we are seeing and the challenges in the broader supply chain. And as Terence mentioned, we are pulling pricing levers across the businesses to help offset those inflationary pressures. Turning to cash flow. In the quarter, cash from operating activities was $532 million. Free cash flow for the quarter was $373 million. The year-over-year trend in free cash flow reflects the strategic inventory builds to meet anticipated customer demand as we mentioned last quarter. In Q1, we returned approximately $410 million to shareholders through share repurchases and dividends. As noted in our recent proxy filing, we proposed a 12% increase to our dividend that we expect to be approved by shareholders in March. We remain committed to our disciplined use of capital, and over time, we still expect two-thirds of our free cash flow to be returned to shareholders and one-third to be used for bolt-on acquisitions. So, before we go to questions, I want to reiterate that we are executing well, despite the challenges we discussed in the broader supply chain. Our results for the quarter demonstrate the strength and diversity of our portfolio with strong operational performance from each of our three segments. The demand environment continues to be strong as evidenced by our orders, which reflect strength across many of our markets and provides a positive indicator of future growth. You're continuing to see market outperformance in each of our three segments as a result of our strategic positioning around secular trends, and we e continue to benefit from our leading position in electric vehicles, factory automation and cloud applications. We continue to generate performance that is in line with our business model goals, and we are excited about the growth and margin expansion opportunities as we go forward. So now, let's open it up for questions. Sujal Shah : Rob, can you please give the instructions for the Q&A session? Operator: [Operator Instructions]. And your first question comes from the line of David Kelly from Jefferies. David Kelly: Maybe starting with the orders, and appreciate all the color there. Industrials, Communications clearly accelerated and Transportation softened. And can you just talk about how you're thinking about the order implications for revenues go forward, and maybe how we should think about some of the supply chain dynamics, impacts on those orders as well. Terrence Curtin: I think first off, you're exactly right. Orders accelerated. And I said in my comments, we expected orders in automotive to step down. And even last quarter when we talked to you, we had extreme content outperformance in the fourth quarter that we knew that the supply chain was going to be a little bit ahead and some inventory was out there. So, the orders coming as we expected, we really like in Transportation. And to your point, where we saw the reacceleration was very much the broad acceleration in Industrial and the D&D acceleration that I mentioned. So, when you take that, we see the reacceleration and time to trends like we all see around capital spending in industrial as well as com air and medical accelerating for the first time really during COVID, it sort of gets into the broad industrial cycle spending that we see. And in Communications, I think what it portends to, we sort of have a tale of two cities there. We have D&D that stays very strong. Cloud CapEx actually has moved up a little bit, but I would also say our teams are winning bigger share programs around some of the applications I talked about. I think you can expect that D&D is going to be strong. And we do expect our clients businesses to step down in the second half of the year versus the first half of the year that I think we telegraphed just as that gets to a more normal cycle. So, feel like the order reduction in automotive is very natural. The book-to-bill being closer to 1 is more natural. And I would also say, as we look at some of the more predictability of what we're seeing out of our customers, it does set up to – it feels like – around this 19 million units can be a baseline to grow off of. So, it was nice to see automotive production go from 16 million units in our fourth quarter up to 19 million units in our first quarter, and it feels like as the supply chain gets a little better, it has potential to move up as we move through the year and return to production growth. So, net-net, I actually think it plays out very well for how we think about how the year can continue to improve and the demand environment stays strong very broadly. And also, it's very global, as I said in my comments by region. Operator: Our next question comes from the line of Amit Daryanani from Evercore. Amit Daryanani: The question really is on the EPS performance. And there's a fair bit of moving parts here, but I was wondering maybe if you could perhaps put some context around the EPS performance we're seeing. Specifically, if you could talk about what really drove the beat in December quarter, so your perspective would be helpful. And then as I think about March quarter, you're talking about EPS being flat, so maybe just talk about what are the puts and takes there as well. Heath Mitts: This is Heath. I'll take that. We were pleased with our results. And if you recall what our guide was for the quarter, going into the December quarter, we end up beating on the top line by a bit more than $100 million. And that was largely driven by the higher auto production numbers that Terrence just referred to relative to our guide. So we were pleased with that. And we're pleased to see the follow through on the incremental revenue. In terms of the Q2, listen, largely, the top line is going to be flat sequentially, as we anticipated. We expect auto production to stay roughly flat at roughly the 19 million units. There is some things in terms of the strengthening dollar that work against us in terms of the sequential headwind with foreign exchange. And then, if you look at the segments, we think Industrial will improve modestly, but we do see Communications coming down a tad sequentially, mainly due to appliances, as Terrence referenced in his prepared remarks. So, from an EPS perspective, we don't expect our communications business to stay at 27%. We've talked in the past that that's a bit overheated, particularly given the amount of appliance that's in there. But as we move forward, we expect that to normalize some. And then, there's some non-operational impacts, foreign exchange and tax rate are headwinds sequentially. So, I think when we look at, it looks like a very similar quarter, minus those operational things with some puts and takes on the top line. Operator: Your next question comes from the line of Joe Giordano from Cowen. Joseph Giordano: Terrence, you mentioned that the supply chain internally for you guys was worse than it was 90 days ago. Can you maybe try to scale what [Technical Difficulty] revenue was in terms of getting stuff out the door and how that compares to the last couple quarters and what's embedded in the guide for 2Q? Heath Mitts: This is Heath. Listen, we talked last quarter that that number was around $50 million of sales we would like to have shipped if we had the material. That did worsen in the quarter. And it's just north of $100 million that, again, we would have liked to have shipped had we had the raw material availability to do it. So, it did get mostly worse in the quarter and certainly something as we reflect and look forward into our second quarter we anticipate this similar kind of level. Operator: Our next question comes from the line of Chris Snyder from UBS. Chris Snyder: My question is on pricing in the quarter and forward expectations for price cost, and then particularly for the transport segment where I know auto pricing can come through maybe a bit slower than the other segments. And then, also, are there any other puts and takes on Transport margins through the rest of the year we should be thinking about as ice volumes rebound and maybe any restructuring benefits. Terrence Curtin: When you look at it, pricing in TE was positive across the company in the first quarter. And we do expect it will be positive this year for the year and certainly, as your point, in places like Transportation, that is very much contractual negotiations. And those discussions do lag a little bit. So, that will benefit our margin as we get through later in the year as well as the volume to help offset some of the headwinds that we've talked about being a little bit worse. I think the one key I just want to remind everybody when we talk about prices, our normal business model, because we do play in the technology space, when we win programs, is how when we ramp them, we're going to get productivity back to our customers and that really varies by our segments. But we typically run in the 1% to 2% price erosion model. And right now, we're running in the low-single digit plus price. And I think that demonstrates – you see it in the margin. It also demonstrates how our teams are executing, and it's across all our segments. So, in some markets, we can get more than others. But I do expect we're going to be positive for the year. And we continue, as we see these inflationary effects, continue to implement more price actions. And I would say price isn't completely offsetting all of the inflation and supply chain challenges, but it's also the other elements of our business model are also driving the result. So, I do think it's a combination. And to the second part of your question on automotive, I think the one thing that we're going to continue to see is, as volume moves up, you're going to continue to see that benefit. Certainly, we continue to have some of the restructuring elements that Heath talked about. And then, you're also going to have some of those price elements coming in, with the headwind really being the inflationary things that I think everybody's dealing with. And I don't think we're any different. So, hopefully, that frames those couple questions for you. Operator: Your next question comes from the line of Wamsi Mohan from Bank of America. Wamsi Mohan: Terrence, as you look at the order trajectory in autos normalizing with book-to-bill closer to 1, how are you thinking of that progression in June and September quarters? And more broadly, can you maybe just give some qualitative color on the rest of fiscal 2022 and highlight any important headwinds and tailwinds that we should be thinking about? Terrence Curtin: I have to start with, we aren't given guidance for the year. Certainly, the environment that we've been in. But I think some of the color I gave on the slides and the orders is we do expect, with the order trends we've seen, we've seen some markets accelerate that haven't accelerated in a long time, like com air and medical. We also see auto turning the corner in production. And certainly, we have to see that come to fruition later in the year, but it feels better than where we were six months ago. And we continue to see places like D&D and industrial equipment, the orders remain strong. And in some cases, the confidence of people placing orders out, I also give a positive indicator that they're planning out more, knowing that we all think that supply chain challenges around semis and other components are going to be with us. I do think you can expect, as we move through the year, that it wouldn't be reasonable to expect a step up due to Transportation, due to Industrial in the second half of the year, with Communications coming down a little bit due to the appliance comments that Heath and I made. I think when you think about beyond the businesses, I think the one headwind that Heath talked about was the dollar strengthening is a headwind for us year-over-year. It actually accelerated. So, sequentially, we're feeling it. But on a year-over-year basis, to our growth, that's going to be about $300 million to $400 million headwind on currency exchange on a full year basis that I do think, as your model, you want to keep in front of yourself. Operator: Your next question comes from the line of William Stein from Truist Securities. William Stein: I'm hoping you can help us better understand the dynamics, maybe one level deeper in the automotive end market. I think a legitimate fear that investors might have is that, in the last year, as there have been shortages, we've seen the OEMs sort of shift their mix to the most – let's say the highest profit margin models, which are the higher end models and the higher end trims within the models. I'm wondering if you have visibility into what that trend might be this year as supply availability comes on? Is it going to be enough to cause mix to shift back towards more economical models? And then, similarly, the mix between EVs and internal combustion engines, do you expect that to continue sort of this similar mix favoring EVs during this year as well, similar to what we saw last year? Terrence Curtin: Let's talk about content overall, I think, and then I'll try to click into some of your sub questions. I think the first thing we have to keep in perspective is where is auto production versus where's our revenue back to pre-COVID. Auto production still off 10% globally, and our revenue is up well above 10%. So when it comes to content, we feel very good about our content, and I think you've seen that content outperformance. Now, over this period, you mentioned some, but there's also been the supply chain dynamic. And every quarter, I know everybody wants us to be right on top of our range, and sometimes we're above and beyond. But we feel good about the 6 points of over performance here, including supply chain normalization that we were very transparent with you last year. We probably got some extra revenue last year as supply chains were trying to get back to normalization, people secure inventory. And I think even you look at our first quarter, where production went from 16 million to 19 million units, our revenue was flat. And it really was some of that supply chain excess got sucked up. And we think you're going to see that as we get back to normalization. So, that'd be a little bit of a headwind. But when you think about what OEMs are building, they are prioritizing. First, I would say it's not mix and trim, it's electric vehicles. There's demand for the electric vehicles. They're trying to keep up on that growth. And in certain parts of the world, there's regulatory conditions that they get penalized if they don't get these electric vehicles out. So, I think one of the things, first off, is I've talked about the growth of electric vehicles. It's clear our content is growth, it's 2x an electric vehicle. That has not changed. And we're benefiting from that. And as electric vehicles continue to accelerate, we'll continue to get the benefit of that. We have also seen, and as I talked about last quarter, we do benefit from features, as well as increased electronics on a combustion engine, too. So, our content continues to increase on combustion engines, not just electric vehicle. Now, let's face it, one of the bigger drivers is the electronics that help a combustion engine be more efficient. That isn't a trim package. That is, guess what, for those that continue to make combustion engines and people have demand form, how do you make those more fuel efficient drive electronics, and that's some of the electronification. We're also seeing increased communication and infotainment. That is things that benefit us around the data side. And certainly, if automotive can – OEMs can add features that customers pay for, we always get those trim plus or minus, but that's not new. They're doing what they can. So, I would tell you, when we think about content, how we step up, I think it's clear where our content position is. I also just want to say our globalness is unique. And I know I say this every call. But when you look at it, we benefit from electric vehicle everywhere, not in one region, not in one customer. And I think that's a pretty special position that's differentiated. And we feel very good about the 6 points of outperformance we're going to get this year. But in a certain quarter, you can get elements of supply chain. So I would just ask everybody when you see overperformance or underperformance, please don't overreact to it because supply chain has been very dynamic as auto production is trying to get to a more normal level. And let's face it, hopefully get up as the supply chain crisis and get much higher than where we are here. Operator: Your next question comes from the line of Mark Delaney from Goldman Sachs. Mark Delaney: I was hoping to also ask on the Transportation segment, and specifically around the bookings. You commented the lower production was a factor in that bookings reduction as well as a degree of inventory. Could you comment if you think you can hold this level of absolute bookings in Transportation and maybe even build off of it from here? Or is there the potential for bookings to need to step down sequentially, given some of that inventory that may still be out there? Terrence Curtin: It's a great question. I actually think you're going to see a booking level that's moving much more with production. So I think you're going to continue to see booking levels stay closer to probably around that 1 book-to-bill than where we were at certain points of the recovery. And I think that's a sign of stabilization. And I think you also see it in the levels of how OEMs need to bring production down. It has become a little bit more stable, even though the supply chain still is not flowing as freely as we would have liked. But I do think you're going to continue to see pretty solid order performance, and we've even seen it as we've started our second quarter, orders staying pretty strong and solid across all three regions of the world. Operator: Your next question comes from the line of Jim Suva from Citi Group. Jim Suva: Can we talk about average selling prices? I know in your prepared comments and the Q&A, you mentioned that you're up low-single digits compared to normally down a couple percent. Is that specifically towards Transportation or across your entire portfolio? So, I'm curious about, is there a difference in Transportation, say, versus Industrial and other end markets? And those ASPs, are they changed contracts that are now your long term and you have visibility with it? Or is it more just some added adders for supply chain efficiencies or higher copper costs? If you could talk some more about ASPs? Terrence Curtin: First off, when you think about the pricing, and you've captured it right, we are a low single digits on the pricing side. And in CS and IS, about half of that goes through distribution. So we've been raising prices since last January. And that'll continue certainly [indiscernible] smaller customers. When you get into the larger customers, whether it's CS, IS or TS, they are more contractual agreements. So in places of like auto, they will be later. But I would tell you, pricing is across all three segments. It is connected to the headwinds and inflation we feel in the different products across the segments. And in different segments, in some cases, it's full recovery. In other cases, it's partial. And it is elements of do we have some adders, but also, in those that are contractual, it's probably more pure price. So, it reflects the diversity of the markets we serve. I'm pleased with the progress we have to date. And in some cases where they're contractual, they'll come in a little bit later in the year than where we have in places like the channel that are pretty much within three months and more transactional. Operator: Your next question comes from the line of Scott Davis from Melius Research. Scott Davis: Terrence, I don't want to beat a dead horse, and this has been asked in a couple of different ways, but the integrity of orders, most people focus kind of on auto, what about the non-auto end markets? Are there notable inventory builds that you see? If you had to put some customers on kind of allocation, thinking kind of medical where guys are scrambling around trying to get components and stuff in particular, but I'm sure there's other end markets too where there's perhaps customers that aren't used to not being able to get what they want when they want, if you know what I mean? So maybe a little bit of color around that would be helpful. Terrence Curtin: I'm going to focus around IS and CS, to your question. The one element that we've seen when you look at these orders is, I think, first off, being we don't see inventory building up. And let's take, in those two segments, a big part of our business goes through distribution. Our distributors are probably where they typically run 180 days at any time. They're only at 150 days. And certainly, they would like to get to 180 days, and we have not been able to get them up to 180 days. So their inventory levels are still below from a turn and a velocity, below pre-COVID. And certainly, they're trying to fill a role that they normally play. When you look at the larger customers, what we see is a scheduling out. I think a recognition that the supply chain is going to remain tight. And for those places where we typically would have had businesses where more orders would come in the current quarter and go out, we see our customers scheduling out and out quarters. And we see that in data and devices. I think that's an element of – as well as industrial equipment, those that we've seen extreme strength. You see our customers planning way out beyond the current quarter, beyond two quarters. And I think, in some cases, they're looking at certain other components like semiconductors that, in some cases, you have lead times that are 50 weeks, that used to be 26 weeks, and they're making sure and doing better planning to plan out around the long tent and the pole. So, you see that in the orders and industrial equipment, you see that in data and devices. And then, in those markets that are just recovering, like medical, like com air, I would tell you, they're just starting to move forward after there's been inventory work-off in both of those markets. Those markets got hit hard. Certainly, there was excess inventory in the supply chain. For those that follow com air, Boeing and Airbus builds have been known, but what we like to see is that our orders are finally showing some of the elements to make sure we can pick up. So, I still think there's a couple markets that I think we could see further acceleration of orders as we move through the year and they don't feel elevated at all yet, but they show initial signs of strengthening. So, I hope, Scott, that gives you some color across the different industries we play, especially in IS and CS since I did talk a lot about TS already in the transportation space. Operator: Your next question comes from the line of Samik Chatterjee from J.P. Morgan. Manmohanpreet Singh: This is Manmohanpreet Singh on for Samik Chatterjee. I just wanted to ask, you said that orders were down in Europe. Can you please help us understand what exactly is driving this trend in Europe particularly? Terrence Curtin: In the Europe orders, that decline that we talked about was very concentrated around automotive. So, when you look at automotive, that drove the decline. In the industrial space, as well as in our communications markets, which are smaller there, we had very strong growth. But European automotive is an important position for us. It's certainly our leading business in Europe, and those orders were soft in the quarter, and that drove the decline. Operator: Your next question comes from the line of Joseph Spak from RBC Capital. Joseph Spak: I wanted to ask about your strategic inventory build. Is that something you'd expect to work off over these coming quarters? Or do you still need to do more there? Or just given the general sort of supply chain uncertainty, do you expect your inventory levels to remain at higher levels than prior, at least until we have a little bit of easing in those supply chains? Heath Mitts: This is Heath. Most of our strategic inventory build has come in the transportation space around automotive and commercial transportation, where, as you recall, we built up quite an order base last fiscal year. And even as things normalized back to our book-to-bill, there's still a very healthy backlog to work down. And so, some of that is how our customers are scheduling the activity, and our ability to get ahead of that, so that when they see – when we see their ramps that we're going to be and not going to have caused them any parts shortages. In terms of timing, some of that is going to be tied to auto production recovery. I could see this starting to moderate in terms of the inventory levels as we work our way through and get into the second half of our fiscal year. And that's something that – stay tuned. But it really builds on the confidence of what we have, what our customers are telling us and how they're scheduling things out. And it depends on which part of the world that we're in. Given some of our production challenges in terms of raw material availability, it's just made sense to build up where we can and be ready for those customers. The other thing to keep in mind is, we've been talking about ongoing restructuring, there are a couple plants that come offline later in our fiscal year. And there are buffer builds associated with those. And again, those are largely in our transportation business. So that's all kind of part of the timing of this activity. Operator: Your next question comes from line of Luke Junk from Baird. Luke Junk: This could be a question maybe for Terrence or Heath. Wanted to ask about your gross margin performance in the first quarter. Of course, been a lot of discussion today about supply chain and inflation relative to sales and pricing for the company, but I was hoping you could put a finer point on the company's gross margin performance in the quarter. Heath Mitts: Listen, our gross margins for the quarter, on a GAAP basis, probably what you're seeing, shows a low 32s, but the reality of this, inside of that, there's some non-cash charges that were associated with the restructuring activity of a plant closure. So, that rolled through that line. So, we're actually running closer to our 33%. Just under that on an adjusted basis, which is consistent with what I think you would expect. and as we move a little bit higher, it's through the year, we would be a tad high word. We're absorbing the ERNI acquisition, though. And that that has a bit of a headwind on gross margins and the team is actively integrating that and working through getting those numbers up. So, there's a little bit of noise relative to what you're going to see on a GAAP versus how we view it. But that really is a one-time charge that was taken. Operator: Your next question comes from the line of Nik Todorov from Longbow. Nikolay Todorov: The question I wanted to double click and maybe clarify, the 6% content outgrowth you're expecting for fiscal year 2022 in auto, does that include the impact of FX because you clearly are seeing a bigger impact than you anticipated a quarter ago? Heath Mitts: No, that would not include FX. So, that comment is organic. That would include anything we expect to happen in the supply chain this year. But that's really an organic comment. FX, we sort of give you that separately. Operator: Our next question comes from Matt Sheerin from Stifel. Matt Sheerin: Terrence, I wanted to ask another question regarding the strength you're seeing in devices, and specifically the cloud computing. Could you just talk about the customer base there? I know there's a big concentration of big hyperscale players. But how diversified is that market? And as you're gaining share, is it new players or just winning with existing customers? Terrence Curtin: When we talk about that customer base in the cloud, it is the hyperscalers of the planet. So when you look at it, that is still a concentrated customer base overall. But it's broad across all of them. And our market share is strong across all of them. So, it isn't like we're only tied to one of them, but it is very broad. And really, what's nice, and I said on the call is, as they're pushing the speeds up to 400 gig, clearly, as they're trying to keep up with the artificial intelligence, which creates more compute and storage clearly, there are things that they're looking to us to bring our technology to. And those wins are across the base of them. So, pleased with the performance there. And I think it really goes back to how we reposition our D&D business around the ultimate high speed versus what we were five, ten years ago. And it just shows the ongoing sheer momentum and the technology we bring to that space. And clearly, when you look at the margin, our team is performing very well in that segment. Operator: Your next question comes from the line of Shreyas Patil from Wolfe Research. Shreyas Patil: Maybe just following up on the earlier one regarding the data and devices. So, just how should we be thinking about the structural growth rate that we could be seeing in that segment? Obviously, this quarter you're up almost 50%. But we've been seeing very strong growth really every quarter for the last several quarters now. So, just trying to understand how we can think about that. For Communications overall, I think you've talked about high-teens margins previously. And so, how should we think about that settling out against the 27% that you did this quarter? Terrence Curtin: Let me take the first half and I'll ask Heath to take the second half. When I think about it, and as I said to Scott's question a little bit earlier, some of the orders we're seeing in D&D right now are also scheduled out to make sure our supply is in place for those customers. I think you're going to continue to see our D&D business run at the high revenue levels it's at throughout this year. And really, how cloud CapEx builds off of that will be very important as we look into 2023 and beyond. But I do think when you continue to see the needs, as well as the efficiency that needs to be driven out of these data centers, feel very good about the momentum there, as well as the pipeline wins that we have. So, let me let Heath talk about the margin side. Heath Mitts: Listen, we're very happy with the margins that the CS segment has produced here going back not just in the quarter we just reported, but really going back over the past year, year-and-a-half. And the team has just done an exceptional job. The reality of it is there is a little bit of a mix element to this as well, in that we do have higher margins, modestly higher margins in our appliance business relative to our data and device business. And Terence talked about the strength in data and devices, but we do see a little bit of correction that we've expected in appliances coming here in the second half of our fiscal year. And so, there is a bit of a mix impact in terms of how that comes down. Now your question around what we've said from a business model perspective in terms of high teens, which if you go back many years ago was just an aspiration to get to the high teens for this segment, and now we're performing so much stronger. Listen, more to come. We get it. But I say still the high teens in a normalized environment still makes sense. And the team is just doing a terrific job and we'll see where we end up longer term. It's doing a terrific job and we'll see where we end up longer term. Okay, thank you for us. It looks like we have no further questions. So I want to thank everyone for joining us this morning. If you do have any questions, please contact Investor Relations at T EA. Thank you and have a great morning. Ladies and gentlemen, your conference will be made available for replay beginning at 11:30am. Eastern time today, January 26. On the investor relations portion of T conductivities websites that will conclude your conference for today. Sujal Shah: It looks like we have no further questions. So, I want to thank everyone for joining us this morning. If you do have any questions, please contact Investor Relations at TE. Thank you and have a great morning. Operator: Ladies and gentlemen, your conference will be made available for replay beginning at 11:30 AM Eastern Time today, January 26, on the Investor Relations portion of TE Connectivity's website. That will conclude your conference for today.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity Fourth Quarter and Final Fiscal 2021 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning. And thank you for joining our conference call to discuss TE Connectivity's fourth quarter and full-year 2021 results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information, and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning, and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables along with the slide presentation can be found on the Investor Relations portion of our Web site at te.com. Due to the large number of participants on the Q&A portion of today's call, we're asking everyone to limit themselves to one question. We are willing to take follow-up questions, but ask that you rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you, Sujal, and I also appreciate everyone joining us [technical difficulty]… Operator: Ladies and gentlemen, this is the Operator. We are currently having technical difficulties. Your call will resume shortly. Until that time, you will be placed on mute. Thank you for your patience. Ladies and gentlemen, thank you for standing by. We will now resume our call. Terrence, you may begin. Terrence Curtin: Thank you. And I apologize for that technical difficulty. And I'll start at the beginning again of my comments, just to make sure, where we broke off. But I'm going to talk about our results for the fourth quarter as well as fiscal 2021, as well as the outlook for the fiscal 2022 first quarter. So, before Heath and I get into the slides, let me frame out the performance relative to the broader market environment that we're operating. I am pleased with our results in the fourth quarter, as well as the strong performance that we delivered for the full-year. We continue to experience global GDP growth, with strong end market demand across most end markets that we're strategically positioned TE to focus on. And this broad growth that we're seeing is both in the consumer and capital spending areas, and let me bring some color to that and how that relates to TE. On the consumer side, demand for autos and of sciences remains strong, and we continue to see increases in medical procedures that benefit medical device sales. On the capital spending side, we see increased investments that relate to cloud and datacenters, factory automation, semiconductor capacity, as well as the need for more renewable energy sources. And when you look at the results we're going to talk about today, you're going to see this broad strength reflected in our orders and our backlog that will benefit us as we go into 2022, as well as our results in 2021. While certainly this demand environment is a positive, the balance of this is that the reality is we're still in a world that's dealing with COVID, and global supply chains that have not been able to keep up with these strong demand trends. Within this backdrop, we are continuing to capitalize on growth opportunities across our served markets. In the fourth quarter, we delivered 16% organic growth despite auto production declines caused by our auto customer supply chain. This performance demonstrates the strength as well as the diversity of our portfolio. We have strategically positioned TE around certain secular trends, and you're seeing the market outperformance in each of our segments as a result of this positioning. In Transportation, our leadership position is enabling us to deliver content growth from both electrification of the car, as well as increased adoption of electric vehicles globally. In Industrial, we're benefiting from accelerated global capital spending around factories. And in Communications, we're driving content and share gain in cloud applications. In addition to the strong top line growth outperformance versus our markets this year, we have executed well to deliver market expansion in each of our three segments. The last proof point that I think is important is, and shows the strength of the portfolio, is how our full-year results compare to pre-pandemic levels of 2019. Both our sales and adjusted earnings per share in fiscal '21 were up double digits versus 2019, and we expanded adjusted operating margins by over 100 basis points by continuing the margin journey that we're on. More importantly, we also remain excited about the additional growth and margin opportunities that we still have ahead of us. Now with that as a backdrop, let me get into the slides, and I'll discuss the highlights that we have listed on slide three. Our teams had strong execution results in the fourth quarter despite reductions in auto production and ongoing challenges in the broader global supply chain. We generated sales of $3.8 billion, with 16% organic growth, and adjusted earnings per share ahead of guidance, at $1.69, which was up 46% year-over-year. Adjusted operating margins were 18.5% as a result of the increases across all three segments. And I'll share more details about segment results a little bit later. When you look at the full-year, year-over-year sales were up 23%, adjusted operating margins expanded approximately 400 basis points, and adjusted earnings per share was up over 50%, to $6.51. Also as important as earnings is where we generated in free cash flow. Our free cash flow was about $2 billion, with approximately 100% conversion to adjusted net income for the year, demonstrating our strong cash generation model. We also continue to remain balanced in our capital deployment, with about three-quarters of our free cash flow returned to owners this past year, and the remainder used for M&A, including the ERNI acquisition, in the Industrial segment, that we mentioned last quarter. When you look at our orders in the fourth quarter, they remain strong at $4.1 billion, with strength in each segment, and our book-to-bill was at 1.08. With these orders and where we position TE, we do expect the strong performance of our portfolio to continue into the first quarter, with approximately $3.7 billion in sales, which will be up mid-single digits organically year-over-year despite a roughly 20% expected decline in year-over-year auto production. We expect strong double-digit growth in both our Industrial and Communications segments, and I think this is another point that reinforces diversity of the markets that we serve. Adjusted earnings per share is expected to be approximately $1.60 in the first quarter, and this will be up 9% year-over-year. Now, let me talk about the markets and frame it to where we were just 90 days ago, when we last spoke. In Transportation, consumer demand for autos remained robust, but clearly ongoing challenges with semiconductors and the broader supply chain continue to impact our auto OEM customers' ability to produce. Global auto production came in lower than we expected just 90 days ago, as our customers reduced production to enable the supply chain to catch up. Auto production was approximately two million units lower than we anticipated in the fourth quarter. And we're expecting auto production to be in the 18 million unit range in our first quarter. This first quarter production will be well below the, nearly, 23 million units made in the first quarter of 2021. The key for us is that the trends around content growth for TE remains strong, and we expect content growth to be at the high end of the four to six-point range in fiscal '22, as we continue to benefit from increased electronification and higher production of electric vehicles. Now versus 90 days ago in our Industrial segment, the key is that we continue to see an improving backdrop which is benefiting our industrial equipment and energy businesses. And our medical business is growing year-over-year as interventional procedures increase. The one area that we've not seen improve is the commercial aerospace business, it's sort of staying stable. And we've not seen an inflection point in that business yet to higher or lower growth. In Communications, versus 90 days ago, we continue to see favorable end market trends with global growth in cloud capital expenditures and strength in residential demand benefiting our appliances business. Now, while that's a view of what we've seen versus 90 days ago from a market perspective, I also believe in this environment it's important to tell you what we're seeing in our supply chain. While challenges remain in the broader supply chain, we have seen some improvement in our availability of certain raw materials in our own supply chain versus 90 days ago. 90 days ago, we thought we were impacted by about $100 million of revenue due to us not having availability of supply, this quarter-end where only that's down to about $50 million. And with this improvement, this will enable us increased production and inventory levels accordingly, to ensure we can meet demand as our customers resolve their supply issues. Now, before I move into orders, that'll start on slide four, I do want to take a moment to mention a few key highlights on the progress we made this on our ESG initiatives. Earlier this year, we issued our 11th Corporate Responsibility Report, which discusses our One Connected World strategy which really encapsulates our ESG strategy. And we hope that you've read this report which highlights the efforts that would drive and internally related to our impact on the planet, as well as the innovation our engineers bring to our customers to make sure we're enabling sustainable applications. Some of the key highlights I want to mention is that on the environmental side we set up a new goal to decrease Scope 1 and Scope 2 greenhouse gas emissions by over 40% on an absolute basis by 2030. And this new goal is above and beyond the 35% reduction. We've already made an absolute greenhouse gas emission reduction over the past decade. We also continue to make progress in sourcing renewable electricity. And today I'm happy to say over 20% of TE's production currently uses carbon free electricity. And also this past year, we began to report Scope 3 emissions back in July. If you look at social initiatives, we set a goal to increase women in leadership position by over 26% by 2025. And I'm happy to say we continue to focus on employee safety and engagement throughout the pandemic. We've gotten good feedback from our employees how we've been there for them during this difficult time. So, clearly, I'm pleased with the continued progress that we're making towards, what our purposes as a company, which is to create a safer, sustainable, productive, and connected future. So, now let me please get into the orders on slide four, and we'll go through it by the segments on both of them and also on a geographic basis. For the fourth quarter, our orders were over $4 billion with year-over-year order growth in all regions. Our order trends and backlog remained strong in each segment and the order patterns we're seeing are as we expected. As we've been mentioning through the year and as you've seen in our book-to-bill ratios, order levels have been elevated with customers placing orders for delivery beyond the current quarter due to the broader supply chain situation. As a result, we're coming into fiscal 2022 with a strong backlog position that is higher than we typically see for our business. When we look at the order patterns at a segment level, industrial and communication orders are trending as expected with continued momentum in areas like factory automation and cloud applications. I also want to highlight and remind you that in the industrial and communications segment, we have a relatively large portion of our business that goes through our channel partners. And we're seeing our booking patterns begin to align more closely to our settlement, which is a good sign. The other key thing to highlight around our channel partners is that in 2021, we did not see inventory levels increase with them, even though they had a much higher level business levels that really they had a much higher turn in their inventory this year. Looking at transportation, we are seeing order levels match the production dynamics that are aligned with our guidance. When you look beyond the near-term noise of auto supply chain pressure, it is important to remember that consumer demand for autos remained strong and dealer inventories remain extremely low. So, we believe this was a very favorable setup for medium and longer term auto production growth. Now let me add some color on what we're seeing organically from a geographic perspective on a year-over-year basis. We continue to see growth in Asia where China orders were up 17% and growth across all three segments. In Europe, orders were up 21% and North America orders were up 26%. On a sequential basis, we saw orders decline in each region that reflect the order patterns I just talked about in our segments. But the one key difference is we did see growth in our transportation segment orders in China sequentially where our auto orders were up 9%. So, with that, with an order backdrop, let's get into the segment year-over-year results and they will be on your slides five through seven. So, starting with transportation, segment sales were up 16% organically year-over-year with growth in each of our businesses. Our auto business grew 12% organically despite the declines on auto production that I mentioned. We continue to benefit from increased production of electric vehicles as our technology and products are enabling high voltage architectures and applications with every leading customer on the planet. Hybrid and electric vehicle production grew 50% year-over-year, increasing from roughly 6 million units produced in 2020 to roughly 9 million units produced globally in 2021. We also continue to benefit from content growth to non-electric vehicles driven by ongoing safety, certainly data connectivity, comfort and autonomy features. As a result of these content drivers, our content per vehicle has accelerated over the past couple of years from the -- in the low 60s per vehicle into the mid-70s this year. And we expect to continue to outperform auto production going forward as the content that we've setup and the wins we have continues to grow. Turning to our commercial transportation business, we saw 38% of organic growth with increases across all submarket verticals. We are continuing to benefit from stricter emission standards and the increased operator adoption of Euro 6, which reinforces our solid position in China. We're also pleased to announce that two leading heavy truck OEMs have awarded us the high voltage connectivity wins on their new electric vehicle platforms that they're rolling out. This will provide future content growth and reinforce our market leadership position in the commercial transportation market. In our sensors business in the segment, we saw 15% organic growth driven by transportation applications with the new program ramps that we've talked to you about in the past few years. And for this segment, adjusted operating margins expanded nearly 500 basis points to 18% driven by higher volume and strong operational performance by our team. Now, turning to the industrial segment, our sales increased 6% organically year-over-year. Industrial equipment was up 32% organically with double-digit growth in all regions driven by momentum and factory automation applications, where we continue to see the benefit from accelerating capital expenditures in areas like semiconductor manufacturing as well as in the automotive space. Our AD&M business declined 18% organically year-over-year, driven by the continued market weakness I talked about earlier. And in our energy business, we saw 8% organic growth driven by increases in renewables, especially global solar applications. And it was nice that our medical business grew 5% year-over-year and it's growing in line with the recovery that we're seeing in the interventional procedures. At a margin level, the segment expanded margin year-over-year by 200 basis points to 15.9% driven by strong operational performance. Now, let me turn to communications. And clearly, our teams continue to demonstrate strong operational execution while capitalizing on the growth trends in the markets that we serve in this segment. Sales grew 36% organically year-over-year for the segment and in both businesses. In data and devices, performance continues to be driven by the position we built in high speed solutions for cloud applications. We continue to see capital expenditures increasing by our cloud customers, and our content growth enable us to grow cloud related sales at double the market rate this year. In our appliance business, we saw double-digit growth in all regions driven by both consumer demand as well as continued share gains. It's clear that our communications team continues to deliver at an outstanding performance with record adjusted operating margins of 24.7% and this was up 300 basis points versus a strong quarter in the prior year. Overall, our segment teams are capitalizing on the growth trends in their end markets. That's demonstrating the diversity of our portfolio while delivering on strong operational execution in a challenging supply chain environment. You're seeing this reflected on our results both for our fourth quarter as well as our full year and we expect this to continue into 2022. So, with that as a segment and a market overview, let me turn it on to Heath, who'll get into more details on the financials as well as our expectations going forward. Heath Mitts: Thank you, Terrence, and good morning everyone. Please turn to slide eight, where I will provide more details on the Q4 financials. Sales of $3.8 billion were up 17% on a reported basis and 16% on an organic basis year-over-year. Currency exchange rates positively impacted sales by $51 million versus the prior year. Adjusted operating income was $706 million with an adjusted operating margin of 18.5% with strong year-over-year fall-throughs. GAAP operating income was $660 million and included $38 million of restructuring and other charges and $8 million of acquisition related charges. For the full year, restructuring charges were $208 million in line with expectations, and I expect restructuring charges to decline in fiscal '22 to approximately $150 million. Adjusted EPS was $1.69 and GAAP EPS was $2.40 for the quarter, and included a tax related benefit of $0.92, primarily related to decreases in our valuation allowances associated with tax planning. We also had a charge of $0.07 related to the annuitization of the reapportion of our U.S. pension liabilities. Additionally, we had restructuring, acquisition and other charges of $0.14. Free cash flow was approximately $535 million for the quarter. And during the quarter, we utilized approximately $300 million for acquisitions, including ERNI in our industrial segment, which Terrence mentioned earlier. The adjusted effective tax rate in Q4 was 20% and approximately 19% for the full year. For 2022, we expect an adjusted effective tax rate around 19%, but continue to expect our cash tax rate to be in the mid-teens. So, turning to slide nine, this slide puts some perspective on our performance this year and shows how we perform from fiscal '19 to '21. Over this time period, we had to overcome a challenge in operating environment and our performance is demonstrating the strength and diversity of our portfolio and the strong execution of our teams. We are back above to the 2019 pre-COVID levels on every financial metric, with sales up 11%, adjusted operating margins expanding over a 100 basis points, adjusted earnings per share increasing by 17%, and free cash flow up 29%. I am pleased with how our teams perform to deliver the strong results through this cycle. To provide some segment level examples, our transportation sales are up approximately 15% versus fiscal '19, despite auto production declining over 11% during that same timeframe. Similarly, in our communication segment, sales are up approximately 25% over this time period, significantly out of performing our end markets. This also demonstrates some of the content benefits we are seeing across the portfolio. Turning to year-over-year comparisons, fiscal '21 sales of $14.9 billion were up 23% on a reported basis and 18% organically year-over-year. Currency exchange rates positively impacted sales by $444 million versus the prior year. We would expect currency exchange rates to be a year-over-year headwind in our first quarter and could remain a headwind for fiscal '22, if the dollar remains at the current levels relative to other currencies. Adjusted operating margins of 18.1% and expanded by nearly 400 basis points year-over-year with expansion in every segment. Our adjusted earnings per share expanded 53% year-over-year to $6.51. I'm pleased with our performance given the inflationary pressures we are experiencing. We have -- as we have discussed in prior quarters, we have implemented price increases across to our business in fiscal '21, and we expect further increases in fiscal '22. Turning to cash flow, we generate approximately a 100% conversion to adjusted net income with record free cash of approximately $2.1 billion for the year. As we go forward, we are confident that end demand will be robust for our products and given our strong balance sheet, we are in a position to do strategic inventory builds to meet anticipated customer demand, given the broader supply chain uncertainty. In FY'21, we continue to maintain our balanced capital strategy, returning capital to shareholders and remaining active in M&A. During the year, we returned over $1.5 billion to shareholders and utilized over $400 million for acquisitions. Going forward, we remain committed to our balanced capital deployment strategy and expect to return two-thirds of our free cash flow to shareholders, while supporting our inorganic growth initiatives through bolt-on acquisitions. Before we go to questions, I want to reiterate that we are performing well in this environment, despite challenges in the broader supply chain. Our results for the quarter and for the year demonstrate the strength and diversity of our portfolio with contributions from each of our three segments. Our first quarter guidance represents the continuation of our strong performance, and we are excited about the growth and margin expansion opportunities as we move forward. Now, let's open it up for question. Emma, can you please give the instructions for the Q&A session? Operator: [Operator Instructions] Your first question comes from the line of Chris Snyder with UBS. Your line is open. Chris Snyder: Thank you. In the prepared remarks, you guys said that you expect auto outgrowth to come in at the high end of the 4% to 6% guided range for fiscal '22. So, just want to confirm that, a, I heard that right, and b, that includes any impacts from supply chain? And then what should we make of the company driving low double-digit outgrowth on a two-year stock? My math says you guys outperformed by mid-teens this year, just compared to the mid-single-digit guided range? Terrence Curtin: Now, thanks, Chris. And you have a couple questions in the question, so thanks for it. And the first thing is you're right; just to confirm what you heard. When we're looking at the programs that we won and looking at into 2022, we do something at the high end of the content outperformance range we've given you, at that 6%. And we do think that will include any noise around supply chain is included in that count and outperformance, because like we always say, be careful looking at CPV on a quarter basis or content growth on the quarter, there's supply chain dynamics. And I think what's important to us is, two years ago, we were in the slow 60s of content per vehicle. We talked to you about the trends around electrification of the car, power train getting -- turning electric, as well as autonomy in the car. And what's nice is we sort of view this year, we're in the mid 70s of content, and we continue to feel very confident around getting up into that mid 80s range. And we are benefiting from the electrical vehicle ramp that's happening around the world, that's grown 50% this year, like I said. Right now, people are saying, even in what IHS views on our basis to be a flat production environment, electric vehicles are going to grow another 50% next year. And I feel we're going to capitalize on it with the program wins we have. And this year, about 20% of our automotive revenue is driven by electric vehicles, even though it's not 20% of the total cars made on the planet. So, just reinforces again the content that we've been driving, where we've positioned TE around. And certainly there's supply chain that will make production a little lumpy, but when we look at 2022 and beyond, we think there's a pretty good setup where demand is, where inventory levels are for production as well, that at some point will also be a catalyst on top of the content that we tee up on. So, hopefully, I touched upon all your questions there, Chris. Chris Snyder: [Multiple speakers]… Sujal Shah: All right, thank you, Chris. Thank you. Can we have the next question, please? Operator: Your next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney: Yes, good morning, and thanks very much for taking the question. A question on orders, the book-to-bill was positive but orders were down 9% sequentially. I was hoping you could speak to the linearity of the orders relative to typical trends. And then talk about how TE is interpreting what the order data is signaling? Thank you. Terrence Curtin: Sure, thanks for the question. Yes, I think we have to go back the past couple quarters, we told there was a lot of orders coming in as people were working with their supply chains. But what we started to see is that, in this quarter, the scheduling out continues, which is a good sign, I think people are accepting the lead times they have throughout the components in their supply chain. Last time I read, I think semiconductors were about half-a-year lead time. So, we see customers looking at scheduling out. So, while our backlog is stronger clearly in dollars, it's also scheduled out longer. And we're seeing customers adapting to that. The other thing is the end dynamics have been very strong. So, when you think about car demand you also see our auto customers also keeping them scheduled out, so, net-net, we actually think this trend is a positive sign. We always said we thought our orders would get closer to billings than our billings getting closer to the orders we've had for the past couple of quarters, and actually that they're starting to get scheduled out more is a good sign. I would say the only area that we see any end market softness right now is around auto production, but that's supply chain driven. And what we saw, how those orders moved out aligning to how our customers want to produce the order trend sort of mirrored exactly what's going on. So, I think it's getting a little bit more predictable even though it's scheduled out a lot longer. Sujal Shah: Okay, thank you, Mark. Could we have the next question, please? Operator: Your next question comes from the line of Amit Daryanani with Evercore. Amit Daryanani: Perfect. Thanks a lot, and good morning, everyone. Sujal Shah: Hey, Amit. Amit Daryanani: Hi. First, I guess the question is for you, yes, as you reflect on your fiscal '21 results in aggregate, I was hoping you just talk about how do you think the supply chain pressures, component availability, inflation, all this stuff impacted fiscal '21 revenue and EPS, and then as I think about fiscal '22, do you think all of this becomes less of a headwind or stays about the same, and what would the ramification be in your P&L in [indiscernible] drivers? Terrence Curtin: Sure, Amit. I'm going to let Heath take that because there's a lot of different parts to that. Heath Mitts: Sure. Amit, thank you for the question. Certainly, as we progressed over the past 90 days since the last time we spoke, we have starting to see, from an availability standpoint things to improve, things have gotten a little bit better with some of our inputs, particularly with the resins side of things. Now, we are still seeing inflationary pressures, particularly on metals, resins, and probably most pronounced on freight costs. And we do expect those inflationary pressures to continue into '22. Now, on the flipside of that, as you're acutely aware, and normally we would see price pressures of somewhere 1% to 2% of erosion each year, in FY'21, that was largely neutral. We did not see those price pressures; we were more back at par. And we actually expect, in '22, as we move forward, to see some price increases as we battle through some of these inflationary pressures, so a lot of moving parts there. Again, I think from an availability standpoint things are improving. And we're working through, using price as one of the levers that we have to combat the inflationary pressures. Sujal Shah: All right, thank you, Amit. Could we have the next question, please? Operator: Your next question comes from the line of Scott Davis with Melius. Your line is open. Scott Davis: Good morning, guys. Sujal Shah: Hey, Scott, good morning. Scott Davis: Congrats on 2021, it was a great year for you guys, and good luck for '22. Sujal Shah: Thank you, Scott. Scott Davis: And in that context, the incremental margins you put up, 42% I think it was in Q4, pretty big numbers. But if I kind of back into the guidance in 1Q it kind of implies a bit of a slowdown. So, is there any color around that at all or just being a little bit extra conservative? And can we expect the type of incrementals that you've been putting up to be in the ballpark of sustainable? Heath Mitts: Scott, I appreciate the question. This is Heath. The -- you're right about the Q4 flow-through, and our flow-through for FY'21 in total was in that range of the 30% to 35% range, which is our expectation. As we move into '22, just to highlight, we -- ERNI, the acquisition, layers in '22, and did not have any impact on our '21 numbers, again, based on the timing of the closure of that transaction. In Q1 alone, if you were to adjust out for ERNI, which will come in at a couple $100 million of revenue, but, well, will not add much from an EPS perspective in our first year while we work through the integration and all the value levers that we're going to pull for ERNI, that alone bring our flow-through in the first quarter down to the level that you were referring to. If you were to back that out you'd be up in the 30% range again. But, again, we feel very good about value-creating opportunities that ERNI brings to us. And we'll pound through the year to offset that pressure that it puts on our flow-through and margins. Scott Davis: Okay, thank you. Sujal Shah: Okay, thank you, Scott. Thank you. Could we have the next question, please? Operator: Your next question comes from the line of Wamsi Mohan with Bank of America. Wamsi Mohan: Hi, yes, thank you. Good morning. Terrence, I know you're not guiding fiscal '22 explicitly, but how are you thinking about the growth in the end markets? And I just want to ask a clarification around the ASB comment that was made earlier on the fall. So, some of this outperformance, the magnitude of this right mid-teens for the year or mid-20s for the quarter is well about that 4% to 6% range. Some of that is supply chain dynamics, some of it is ASB, some of it is mix. Anything you can do to help parse those different things would be super helpful. Thank you. Terrence Curtin: Yes, so let me get in the markets there, Wamsi. And when we sit there, I do want to go back to what I said in the script, that we do have a constructive demand environment across when you get out to the end applications that we're in. And the only place that we haven't seen a constructive market is certainly around the aerospace side, and that will come at some point, I'm not sure that'll be in 2022 for us, but that will come at some point. Just to break it down by the segments a little bit, in Transportation, and like you said, Wamsi, we didn't guide that. I'll give you how we sort of see the external data points around markets. In automotive, right now, people in IHS are saying it's going to be around 77 million cars made next year globally, that's pretty flat. That has supply chain constraints in it in the semi side continuing. Could there be upside to that, the supply chain [gets fork out] [Ph], potentially, but I would also say the content that we talked about at the -- being at the high end of the 4% to 6% inclusive of any supply chain noise, we feel pretty good about. In the commercial transportation space, this year was a great year by our team. We grew 2X to market. It demonstrates our leading position, also the content that we're getting around emissions that are all over heavy trucks, as well as the data connectivity on heavy trucks. Next year, we're going to have a slowdown in China in the market, I think that's very well known. But on a flattish environment to slightly down environment in commercial -- broader commercial vehicles, we think content will -- could create growth there. And I talked about the new EV wins that we have on the heavy truck, that won't benefit '22, it'll be further out. In the industrial space, the recovery feels like it's just getting started. And we're starting to see improvements in medical. Our industrial and factory automation side is very strong. Energy has stayed strong throughout the entire '19 forward. We see that continuing, especially with the benefits from renewable sources, and we're in the mid teens of our revenue, we think that can move up in our energy business around solar, and certainly wind. And in the communication segment what I would tell you as we look forward is, you have cloud CapEx is going to increase another 10% next year. And when you think about we've grown 2X to market here over the past three years, our cloud revenue has doubled since 2019, and we're going to have growth on top of that with that cloud CapEx picture. And then in appliances, the consumer is strong; certainly we have to watch that. If the consumer slows down a little bit there could be a little bit of a headwind. But right now, we're sort of assuming that's a flattish market globally. So, we believe it's a pretty constructive setup, certainly supply chain [blinks] [Ph] a big piece of it. We hope our supply chain continues to improve, like we saw over the past 90 days. And we'll take advantage of that as we build a little bit of inventory, early in the year, to make sure we capitalize on the setup. On the pieces around the second part of your question, when you look at this year, other than the market, the bigger piece of our growth is really around content. So, any way you want to parcel it, I think Heath framed the price side. Normally, we have 1% to 2% negative price last year or basically flat. That shows the pricing that we've been pushing through, that we started in January, in the distribution area. And we're in the middle of automotive contractual negotiations as we speak. So, I think there's more to come there. But, clearly, the bigger piece last year has to do marketing content, and that's what we get excited about as we go forward, and I gave you that -- a couple examples there between auto and also on the cloud side. Sujal Shah: Okay, thank you, Wamsi. Could we have the next question, please? Operator: Your next question comes from the line of David Kelley with Jefferies. Your line is open. David Kelley: Hi, good morning. Thanks for taking my question. Maybe to follow up on the 20% EV sales mix in automotive, Terrence, I think you made that comment, the prepared remarks. Just wanted to confirm that, a, that is EVs, and doesn't include hybrids? And then just curious, your EV sales have begun to scale. Is the content per vehicle tracking at that two times relative to internal combustion that you have expected and just curious if you're thinking about any potential upside from there going forward. Terrence Curtin: Thanks, David. So, first of all, from a clarification, thank you for asking it. When we talk EV, we do include hybrid, we include both elements of them. So, when you take that and even the numbers I quote about the 9 million units made globally that are electric that includes hybrids and plug-in hybrids. So, that's totally the area we get the bigger content as you bring in the electric powertrain in both areas. So, if you take our automotive revenue this year with what you would add on electric vehicle, both on the high voltage content and low voltage together, that's a little bit above 20%. And the content sort of run in the 2x and it's right on top of it. And like we've always said, when you think about TE, there isn't things that get cannibalized on our product, the low voltage things come over. When you start putting in that electric powertrain, you have charger inlets, you actually have to get the power into the battery. We play along those connectivity, certainly how it comes into the sell-side. And also some of the things we do from a switching of power as you bring the power back and forth, and that creates the content above the low voltage position. So, it is important there. The other thing I would just don't want to lose sight on, and I said in my script was as you get into the heavy truck, I know we've given examples, but I did mention in the prepared remarks, we want two programs with two of the top five truck manufacturers world. And these are turning from prototypes into real platforms. And when you look at that in our commercial transportation business, that I talked about a little bit earlier, the content on those high voltage architectures can be over $1,000 per vehicle. And that's just on the high voltage architecture that doesn't even include some of the other elements that we would have one data. And I'm really excited about those wins because they also truly show our leadership position there in commercial transportation. When it comes to connectivity, we have a leading share by quite some distance. And our global customers are looking about how -- when they get to more electrified powertrains across their fleets and their offerings, they come to us and let's face it. You're dealing with voltages that are at a thousand versus what you would have in a car, you're dealing with vibration and certain durability, which we've talked about harsh environments. That's what we love and our engineers like to tackle those challenges and that we want to with the top five on their initial platforms, I see that continuing just to go across the other players and reinforcing our great commercial transportation business. Sujal Shah: Okay. Thank you, David. Can we have the next question, please? Operator: Your next question comes from the line of Joe Giordano with Cowen. Your line is open. Joe Giordano: Hi, guys. Good morning. Terrence Curtin: Hi, Joe. Joe Giordano: Can you hear me? Hi. Okay. Heath, I just wanted to kind of clarify a couple things here. With the orders running arguably a little bit hot and out far and Terrence's commentary about there's still $50 million of stuff that you would have liked to have shipped out but couldn't, it was 100 last quarter. I'm just curious on the inventory bill, because it was pretty substantial in the quarter. And I get why you'd want to have some protection there, but just want to square like the ability to build that kind of inventory with also the inability to get things off the door and high orders. So, can you kind of -- just kind of square that for me? Heath Mitts: Sure, Joe. I mean, first of all, as diverse as our portfolio is as many different products you can imagine the complexity of our manufacturing environment and our supply chain, right. So, it's not just one part and it's not as simple as just saying what we can and can't produce, right. So, our availability of materials has largely been resins and metals. As I mentioned earlier, resins particularly are improving and metals we're working our way through. So, as we look forward and we continue to anticipate resolution of some of those input challenges that we have, it does give us the ability to start having a little bit more foresight into what we wanted to do strategic build heads for, right. I mean, if you think about where we're sitting here, right, we're not going to sit here and predict when some of the semicon challenges for our auto customers specifically get resolved, you should ask them or the semicon companies, right. But what we do know is that there's really, really strong demand out there for automobiles. And that's not just the U.S. comment, that's really globally. And the shortage of those vehicles on dealer lots give us a lot of ability to play offense here in terms of being bullish about when that demand comes back. We want to make sure that we are ready for our customers and not going to be holding up any kind of ramp that they may have. Now, when that ramp happens is still TBD, but -- and I'm not going to signal that this number inventory build is going to be massive, but we are going to take advantage of a little bit of a slowdown in the auto production world and get ahead of it, so we're ready. Sujal Shah: Okay. Thank you, Joe. Can we have the next question, please? Operator: Your next question comes from the line of Christopher Glynn with Oppenheimer. Your line is open. Christopher Glynn: Hi, thanks for taking the question. Good morning. Terrence Curtin: Hi, Chris. Good morning. Christopher Glynn: I am curious about margin outlook generally and CS. Do you expect some margin progress at each segment at -- in fiscal 2022? And for communications in particular comments maybe flattish appliance markets, but the second half comps are kind off the charts. How should we think about the leverage to the -- decremental margins for the CS segment? Heath Mitts: Well, I think it's a good question, Chris. And it's one that we've talked to you about the -- the 30% flow through is still what we're gearing up for, for the year in terms of that now see within that -- I think you'll see that the strength more out of the industrial and out of the transportation businesses, the communication side as we've talked about has been running fairly hot, but it has now for several quarters in a row. And it really shows that these volume levels, what it looks like particularly out of appliances. Terrence mentioned that we're anticipating a flatter appliance market as we work our way through the year. I'm not suggesting that's all going to happen here in the first quarter, but we're probably taking on an approach there where we see a little bit of contraction in the margins albeit more to come as we able to see what volume levels end up looking like. So, in terms of the decrementals on that, I think you could roll it through roughly the same kind of math, but we target about 30% flow through on the organic side. And that's really where our focus continues to be as part of our business model for FY 2022. Sujal Shah: All right. Thank you, Chris. Can we have the next question, please? Operator: Your next question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is now open. Samik Chatterjee: Yes. Thanks for taking my question. Terrence Curtin: Hi, Samik. Samik Chatterjee: A couple of clarifications, hi, on auto trends communications seem like it moderated quarter-over-quarter the auto trends a bit more than the other two segments. So, is there something going on there? I know you spoke about strong demand from the cloud customers. And then similarly, I think you mentioned in your prepared remarks, China automotive orders being up. Is that EV or is that still like an inventory bill, just if you can clarify those two auto trends. Thank you. Terrence Curtin: Yes, I would say CS other than just things getting a little bit more normalized and scheduled out. There's nothing unique in there, Samik. In regard to the auto, I think, one of the things just to highlight, you know, it's nice to see the China auto go up. Certainly, they're being impacted as well by some of the supply elements that are happening on the world. And this is traditionally the strong China build quarter. And we're not getting a strong China build quarter because of the supply chain issues that's going through. So, I would say you should read into there's more EV or less EV in there. I think it's pretty much in line with what we said on a global basis because Asia still is the predominant largest region of electric vehicles compared to the other two regions. So, we were pleased to see that trend in China continuing to stay up and grow. Certainly, the supply chain continues to need to help us there because it is an important market for us. Sujal Shah: Okay. Thank you, Samik. Can we have the next question, please? Operator: Your next question comes from the line of Joseph Spak with RBC Capital Markets. Your line is open. Joseph Spak: Thanks. Good morning. First just a tough clarification, I don't know if I heard this, but how much are you assuming global production for auto is up, down or maybe flat quarter-over-quarter. And then if you could just talk a little bit about how or receptivity to recovering pricing for commodities maybe by end market how that's going for you. Terrence Curtin: Yes. So, first off, on auto production; auto production was about 2 million units light in our quarter we just had versus where we guided. In the first quarter, we're assuming 18 million unit range for auto production in our first quarter, which is compared to $23 million last year's first quarter. So, that's how 20% down I mentioned on the line. And certainly, we're not guiding for the year, but I believe IHS has [indiscernible] fiscal period around 77 million units for the year, which will be flat year-over-year. In regard to pricing, pricing is very different by our end markets. When you say receptivity, I wouldn't say anybody likes pricing. So, I wouldn't say people are saying, I'm happy about it. But I would say, we're pulling the different levers as Heath said, some we can pull quicker in places where like, we go through our channel partners, smaller customers in places like auto, it's more contractual agreements and that's -- we're in the middle of those. And that'll continue to be a recovery point throughout this year. So, it is very different. And I think the stats that Heath laid out sort of frames it nicely at what the benefit we'd gotten as well as how we're thinking about it into 2022. Sujal Shah: Okay. Thank you, Joe. We have the next question, please. Operator: Your next question comes from the line of William Stein with Truist Securities. Your line is open. William Stein: Great. Thank you for taking my question. I have -- I have a question about the communications end market that's been doing very well the last few quarters, all segment really, but in particular, the comms end market, to what degree is the upside we're seeing there related specifically, in cloud service providers upgrading to 200 in one case, and I think 400 gigabit per second, intra data center comms, which we think has been going on for a while versus sort of more broad-based CapEx exposure. And does your growth here reflect more of broader end market growth or broader or narrow end market growth or share gains from either new or approved products? Thank you. Terrence Curtin: Thanks. Well, couple of things, if the market and the growth we're benefiting overall from high-speed applications. So, when you look at D&D overall, it is anywhere where you're having high-speed, getting put in and then that can be anywhere in the network. Certainly, the bigger growth lever is with the cloud providers and our position across those five providers, as I think I've mentioned in other calls, has really been pretty even as we gained share. And we aren't weighted to one of the cloud providers globally versus another, but we are benefiting from their capital spending trends. And that capital spending trend is they're very much focused, not only on speed. They're also focusing on how they continue and implement AI to make sure that how do they get more specific compute and scaling computing power, and also helps them get to their cost of total ownership, including their impact on energy usage down. And what we've continued to see, as they're making their investments, which are aligned with what you said, we're seeing them wanting to spend another 10% around their cloud and data center going into next year. And the content that we're getting is very strong with the share gains as well. That is why you saw us out of -- in that specific product niche we grew about 65% this year, where their CapEx went up 30%. And these are things being deployed real time as they're trying to keep up their cloud offerings. And we've become a very good partner, technical as well as service partner form. And we've actually strengthened during the COVID time. Sujal Shah: Okay. Thank you, Will. Can we have the next question, please? Operator: Your next question comes from the line of Matthew Sheerin with Stifel. Your line is now open. Matthew Sheerin: Yes. Thanks. Good morning. I wanted to ask a follow-up on the inventory issues. First, looking at your customer base, are you seeing any pockets of inventory build it, we're seeing that from some of your peers from their auto customers? And also if you look at your channel partners, particularly, proclivity industrial markets, which have been strong, any signs of build there? And from your own perspective, Heath, he talked about, building inventory as you get into fiscal '22. Can you tell us how that impacts your free cash flow and the conversion rate, which is typically around the 100%? Terrence Curtin: Yes. So, Matt, let me take the part around what we see out in inventory in the world. And then, we'll get to -- Heath will talk about our inventory. First of all, for the channel partners, I would tell you, our channel partner orders have accelerated over the past three quarters, but they have leveled out now. So, similar to the other work comments I've made, we have seen leveling, we've been able to service more to them as our supplies improve, but we have not seen their inventory increase on our product side. So, their turn levels have accelerated here, and they're touching product more to get it out because of how quick they're turning it. So, inventory levels in '21 have remained relatively flat while they've had significant as they're trying to help the customers and their supply chain solutions to those. When it comes to our customers, we do see customers holding more inventory, some customers have scheduled out further. But we also have customers that in some areas are still very low in certain inventory pockets. So, certainly the supply chain is trying to get to a normalized, I would say, on both sides of the equation you see it. And it's also what's happening in auto land. You need about 30,000 parts to make a car. If one of them isn't there in one [plant] [Ph] the car is not being made. So, when we look at it, we're always going to have supply chain noise whether it's building or coming down a little bit, but we do view that noise. And it's back to the comments we said about content, we feel good about the 6% content growth over production next year, including any supply chain noise. Heath Mitts: And, Matt, on the question about our inventory bill, I think it gets down to relative to our cash conversion rate, and I think it gets down to the timing. The way we're looking at it now is it's probably more of a first-half issue where some inventory builds, and then as we can bleed that off, we're taking -- basically taking advantage of some slow auto production here in the earlier part of the year. So, as part of that, I think that just gets into the timing. It could put a little bit of pressure on that, 100%. But we have other levers as well that we're looking at, and will continue to assess that. And I think we'll be able to give you a better update on that answer here a quarter or two from now. Sujal Shah: Okay, thank you, Matt. Could we have the next question, please? Operator: Your next question comes from the line of Steven Fox with Fox Advisors. Your line is now open. Steven Fox: Hi, good morning. Just on the 110 basis points improvement, since '19, on the operating margins. I was wondering if you could break down sort of how you got there between volumes, restructuring, and maybe some of the offsets, and any implications for the risks of achieving 30% incremental margins this year? Thanks. Heath Mitts: Sure, Steve. Yes, listen, I mean you're -- you've been covering us for a long time, and you're well aware of the restructuring endeavors that we've undertaken. And we've been very focused in on particular areas around Industrial this year, around some things that we did on a footprint basis, in Europe, that we're continuing to execute on within Transportation. And then we're benefiting greatly from the Communications side with a lot of that heavy lifting done several years ago on the footprint side. So, as we look forward, there's no doubt that as we think about that, that ability to grow over 100 basis points from '19 to '20, restructuring played meaningful part of that. But I would also tell you that some of the things that we were able to do around holding off in 2021, the price erosion through some of the actions that we undertook, as well as the ability to offset some of the inflationary pressures with productivity were a meaningful part. And then volume goes a low way. As you know, this is a scaled business, and having volume means a lot. So, I don't know if we've ever actually broke down, externally, what percentage of that increase is in certain buckets, but you can imagine there was contributions across the board on that side of things. In terms of, as I mentioned earlier, listen, as we sit here, and although we're not guiding for the full-year, we feel good about our ability to hold to our business model of margin expansion through -- even if it's modest this year, through the flow-through of that 30%. Sujal Shah: Okay, thank you, Steve. Could we have the next question, please? Operator: Your next question comes from the line of Jim Suva with Citigroup. Your line is open. Jim Suva: Thank you so much for the details. Terrence Curtin: Hey, Jim Jim Suva: It's great to see that your restructuring costs are going lower. Just kind of curious, that would to me imply that your operating margin track continues to remain where your -- well, at this 30% margin growth or even better. And with this recent acquisition or ERNI, should we think about there may have to be a little bit step up in restructuring? Or I'm just trying to get at kind of your goals for restructuring. It sounds like a lot of the heavy work is behind us, but then again, it could be timing, and there was a pandemic, and all these type of other things. So, if you could talk to us about restructuring that would be great. Heath Mitts: Sure, Jim. And I you and I have had a lot of discussions about this over the last few years, I appreciate the question. Honestly, as I sit there and look at where the buckets are, the bigger item -- the bigger projects that we have underway in terms of rightsizing the footprint. Some of the things that we talked historically about, getting right-sized in Industrial and getting to the right places of manufacturing for automotive, particularly in Europe. A lot of those things are underway, those charges have been taken, and we're working through those. What we're seeing more of now, Jim, is the impact of some of the more recent acquisitions. And when acquisitions come into our portfolio, inevitably, they come in as multiple sites. And in some cases we do need to go and collapse those into our existing footprint. Or in some cases they avail opportunities to take legacy TE locations and move into the acquired site. So, some of the things that we're now seeing, whether that's with ERNI or with some of the sensors activities that we acquired here in the last few years all -- is driving some of those restructuring efforts, and plays into the overall return and valuation considerations for the acquisitions that we do in terms of the return and value creation opportunities. So, we're starting to make that move. We're not quite there in terms of cleaning up some of the legacy locations, but we're getting closer. Sujal Shah: Okay, thank you, Jim. Could we have the next question, please? Operator: Your next question comes from the line of Luke Junk from Baird. Your line is open. Luke Junk: Good morning. Thanks for taking the question. A lot of near-term focus here, I wanted to ask more of a strategic question, and that is, Terrence, how do you play offense or position TE to grow above market in areas that have lagged in the recovery, specifically thinking about areas like medical, which is, encouragingly, just starting to come back right now or something like [COMAIR] [Ph] continue to become a better position on the backend given the size and scale of your organization versus, say, small competitors in those markets? Terrence Curtin: I think during this time, certainly I think our customers have looked for and seen stress around the supply chain from the smaller competitors. So, I do think any of us that are larger will benefit during this time. So, that that is something I think is a benefit for the larger companies in our space. When you talk about those two areas; medical, we haven't talked about for the past couple of years due to the impact that we did have on procedures. But when you look at how procedures are increasing, the innovation that we've been doing with our customers has not slowed down during this time. But, certainly, the levels of procedures went way down due to COVID dynamics. So, I do think you'll see us talking more about medical again, from a growth perspective, more like we had historically than you've experienced the past couple of years. In COMAIR it's a little bit different. I think medical had a temporary pause due to procedures. COMAIR is one that, you know, has been hit hard. It's been hit hard. Certainly you're starting to see some discussion around single-aisle aircraft, you get into dual-aisle aircraft, dual-aisle aircraft is probably further away. And in those cases, I'm not sure you're going to have as much new innovation happening, even though we do have wins on what's happening in space, certainly low-earth satellite. As well as we're also working with some of the newer EV OTL providers, depending upon what ramp that goes. So, I think net-net, certainly a much more bullish tone around medical. I think in COMAIR, because that -- how it really got hit as the overall market and our customers also got disorientated, that they had to reposition, really is the one that's going to be a little bit longer out. I feel we have a very good position there, certainly a leading position. But I'm not sure we're going to be able to talk to that to work out on what the growth trajectory is longer-term based upon what our customers do. Sujal Shah: Okay, thank you, Luke. Could we have the next question, please? Operator: Your next question comes from the line of Nik Todorov with Longbow Research. Nik Todorov: Yes, thanks, and good morning, everyone. When you look at your auto sales growth, whether it's fiscal year '21 or calendar year '21, it looks like sales will outgrow production by more than 20%. So, can you help us understand the components within that? I think you touched on this. How much is content versus pricing, how much if FX, and how much is driven by some inventory build that you talked about the -- that customer? Thanks. Terrence Curtin: Sure. Hey, Nik, we did not grow 20% above production, so we didn't. We did have content outperformance. The market was up about double-digit this year. And if you take the real element we were in double digits of content outperformance, a very strong 50% increase in EV, certainly continued growth in traditional cars, ICE engines, we saw content growth, price was only a little bit. So, net-net, I would just ask you maybe to look at your math; it wasn't 20% by any means. And once again, that content momentum, we're on the mid-70s, we've shared with you our path to get up to mid-80s based upon the trends around powertrain, trends around data connectivity, certainly traditional safety features. And we feel very good about where we're positioned and also how well we're positioned globally with every [OEA] [Ph]. That's one of the specialties about TE; we're essentially on every car in the planet. Sujal Shah: Okay, thank you, Nik. Could we have the next question, please? Operator: [Operator Instructions] Your next question comes from the line of Rod Lache with Wolfe Research. Shreyas Patil: Hey, this is Shreyas on for Rod. I just wanted to come back to the question around orders, and specifically within the automotive segment. And I guess what I'm trying to think through, and as I look at 2021, how much of a benefit there was from kind of unusual order activity from OEM customers, just so that we can think about that going forward. I know you're talking about six points of outgrowth excluding that, but I just wondered if you could size that. And then on the EV side, I know you've talked about $120 of content per vehicle, so that's on average. But given the growth that you're seeing, do you see -- and some of the wins that you've had, which I think have exceeded $120 of content. Do you see an opportunity for that to maybe increase faster over time, and maybe even be higher than that $120? Thanks. Terrence Curtin: Well, I think a couple of things there. When you look at production next year, the 6% that we said is content above production, we said includes any supply chain noise. So, you said excluded, and my comment said include -- include any of that noise that you have on supply chain that we had every year. In regard to content, the comments that I made earlier about the 2X, we are running 2X, that would be both on all electric vehicles, including hybrids. And I think that penetration is continually going to play out. I think the one thing that's important, certainly we share things around vehicle content that are very specific models. But you also have to remember, there's also the models that are more mainline, traditional, average median income type cars that are in that content as well. So, net-net, I like where we're gaining our share, continue the traction we have on content. And if electric vehicles go faster and we win more programs we can maybe be above that. But right now, we expect, next year, we'll be at that 6% high end of the range. Sujal Shah: All right, thank you, Shreyas. I want to thank everybody for joining us this morning. And if you have more questions, please contact Investor Relations at TE. Thank you, and have a nice morning. Terrence Curtin: Thank you, everybody. Operator: -- conference will be made available for replay beginning at 11:30 AM Eastern Time today, October 27, on the Investor Relations portion of TE Connectivity's Web site. That will conclude your conference for today.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the TE Connectivity Third Quarter Earnings Call for Fiscal Year 2021. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Mr. Sujal Shah. Sir, please go ahead. Sujal Shah: Good morning and thank you for joining our conference call to discuss TE Connectivity's third quarter results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables along with the slide presentation can be found on the Investor Relations portion of our website at te.com. Due to the large number of participants on the Q&A portion of today's call, we're asking everyone to limit themselves to one question to make sure we can give everyone an opportunity to ask questions during the allotted time. We are willing to take follow-up questions but ask that you rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence Curtin: Thank you Sujal, and I also appreciate everyone joining us today to cover our results for the third quarter, as well as our expectations for our fourth fiscal quarter. Before Heath and I get into the slides and the details of the quarter, I want to frame our view of the environment that we're operating in as well as our performance. We are in an economy that is showing strong GDP growth globally, driven by the recovery from last year's COVID shutdowns with consumer spending that is robust, as well as corporations around the world increasing investment to capitalize on this recovery. In addition to the recovery, it's also important to note that we've strategically focused TE around select secular trends and these trends are accelerating in the key markets that we serve. You'll see this in our transportation segment with electric vehicle adoption accelerating in our communications segment around cloud investment and in our industrial segment with capital spending accelerating globally around factory automation as well as digitization. While we have a recovery that is happening faster and is more robust than we all thought, the reality is that the world is dealing with supply chains trying to catch up to this faster recovery. This is causing volatility for our customers as well as everyone that's in our customer supply chains. In this backdrop, we are performing well in this environment and our strong results for the quarter and our performance so far this year demonstrates the strength and diversity of our portfolio. You'll see this with contributions from each of our three segments. We are generating sales, adjusted operating margins and adjusted earnings per share that are above pre-COVID levels and we remain excited about the additional growth and margin opportunities that we'll be on this year. With this backdrop, let me provide some key messages from today's call about our performance. First, I am pleased with our execution in the third quarter and the quarterly records that we achieved. These records include sales of over $3.8 billion, adjusted earnings per share of $1.79 and adjusted operating margins of over 19%. Our results were ahead of our expectations, driven by the continued recovery in most end markets that we serve, our broad leadership positions and strong operational performance by our teams. It's also important to note that, while we are in a recovery, our growth also continues to be driven by the secular trends across our markets that are driving our market outperformance this year and will continue to drive the outperformance going forward. Another key factor that you see is that, we are continuing to demonstrate our strong free cash generation model, and continue to expect free cash flow conversion to approximately 100% for this full fiscal year. And as we look forward, you'll see and we'll talk about our orders in quarter three remain consistent with our second quarter, and we expect our quarter four sales to be roughly flat to our quarter three sales. And we expect that these revenue levers will translate into strong performance with $1.65 in adjusted earnings per share in the fourth quarter. As I mentioned, our results are demonstrating the strength and diversity of our portfolio, with growth and margin contributions from each segment. In communications, you see the growth opportunities in the cloud and the ongoing increase in capital expenditure trends by the cloud providers. In our industrial segment, you see increased investments in capacity and higher levels of factory automation. And in transportation, you see content growth trends for electrification, as well as further electronification of both autos and trucks. And in each of our segments, we are delivering strong operational performance, which are evident in the margins. And when we look back to our discussion we had in October, we did indicate that our first quarter would be the peak of global quarterly auto production for our fiscal year, but not the peak of our earnings. This is playing out as we anticipated because of our diverse portfolio. For this fiscal year, we are expecting over 20% growth in sales, approximately 400 basis points of adjusted operating margin expansion and over 50% growth in adjusted earnings per share. I am very pleased with this level of progress towards our business model and our team's ability to execute, especially with some of the markets continuing to recover and the broader challenges we've faced in the supply chain. So, now, let me turn -- and I want to take a moment to frame the current market environment and our business relative to where we were just 90 days ago when we last spoke. So, starting with transportation. Consumer demand for autos remains robust, but ongoing challenges with semiconductor supply continue to impact our customers' ability to produce. Global auto production came in slightly lower than expected in the third quarter, and we're expecting auto production to be approximately 19 million units in our fourth quarter. The trends around our content growth remain strong in the transportation segment. Our content per vehicle has accelerated from the low $60 range, a few years ago into the $70 range this year. We continue to benefit from increased electronification and higher production of electric vehicles, which will enable us to continue to outperform auto production going forward, as content continues to grow. In our industrial segment, we continue to see an industrial backdrop that is improving, which is benefiting our industrial equipment, as well as our energy businesses. Also, in our quarter, our orders in medical have begun to recover, and we returned to growth as interventional procedures have started to increase again. And the one area, where we are not seeing acceleration is in our AD&M business, but I will highlight, the business does feel stable at current revenue levels. From 90 days ago, let me talk about communications. The end market trends that we mentioned last quarter are continuing. Consumer demand continues to be robust in appliances and capital expenditure trends remain strong in cloud applications. And while that to look at where we were versus 90 days ago by our segments, I do want us all to remember that we are in a world that's still dealing with COVID and the uncertainties around variants. While all our global factories are operational, we continue to watch developments in each of the regions we operate and our focus has been and will continue to be on keeping our employees safe, while also helping our customers capitalize on the improving economic conditions. So now let me get into the slides and please turn to Slide 3, so I can get into some additional details for the third quarter, as well as our expectations for the fourth quarter. In the third quarter, sales of $3.8 billion were better than our expectations and were up over 50% year-over-year, demonstrating strong performance through the economic recovery with growth in all segments. Also on a sequential basis, sales were up 3% and our earnings per share was up 14% with sequential margin expansion in each segment. Compared to last quarter, industrial segment sales were up 5%, driven by ongoing strength in industrial equipment and increases in energy and medical. And in the communications segment, sales were up 16% with double-digit growth in both data and devices and appliances on a sequential basis. And in our transportation segment, our sales were in line with our expectations. When you look at orders in the quarter, they remained strong at $4.5 billion consistent with the levels we had in the second quarter. And this reflects market improvement along with ongoing inventory replenishment by our customers. If you think about the balance sheet, we continue to maintain the capital strategy between making sure we're returning capital to shareholders as well as M&A. Earlier this month, we entered into an agreement to acquire ERNI, a European connector manufacturer that has a complementary product line and serving the industrial market. This acquisition has a purchase price of approximately $300 million and is consistent with the bolt-on strategy around acquisitions that we talked to you about. As we look forward, we expect our strong performance to continue into our fourth quarter. We expect sales to be up in the high teens over the year to approximately $3.8 billion. Adjusted earnings per share is expected to be approximately $1.65 and this will be up 40% year-over-year. And as you can see on the slide, we've included our full year numbers and our performance relative to both fiscal 2020 and 2019 which I highlighted earlier. So let's turn to Slide 4 and I'll get into orders a little bit more. For the third quarter, our orders remained strong at approximately $4.5 billion consistent with the second quarter levels that I mentioned earlier. Order levels continue to reflect economic recovery and replenishment across a number of our end markets. Year-over-year, we saw orders growth in all businesses and in all regions. Transportation orders remained elevated due to the market recovery, as well as the auto industry supply dynamics. In our industrial segment, orders grew 8% sequentially and with growth in industrial equipment, energy and medical and flat orders in AD&M which indicates the stabilization that I mentioned earlier. In communications, sequential order growth was driven by strength in data and devices. So let me also add some color on orders and what we're seeing from a geographic perspective on a sequential basis. We continue to see growth in Asia where our China orders were up 6% sequentially. In Europe, our orders were down 7% sequentially and in North America, our orders were essentially flat versus last quarter. So with that as a backdrop around orders, let me get into our segment results that you'll see on slides 5 through 7 and I'll cover this briefly. Starting with transportation, our sales were up approximately 70% organically year-over-year with growth in each of our businesses. Our auto business grew 90% organically and we are benefiting from the market recovery and are demonstrating continued content outperformance due to our leading global position. We continue to benefit from increased production of electric vehicles, as TE's technology and products are enabling high-voltage architectures and applications with every leading OEM on the planet. In commercial transportation, we saw 56% organic growth driven by the market recovery, ongoing emission trends as well as content outperformance. We are continuing to benefit from stricter emission standards around the world and increased operator adoption of Euro 6, which reinforces our solid position in China. The other key point is that we continue to gain momentum with wins on electric powertrain platforms and trucks, which while this doesn't give revenue or orders today, it will provide future content growth for our leading position in commercial transportation. In sensors, we saw 20% organic growth, driven primarily by auto applications and we also saw growth in the commercial transportation and industrial applications as well. For the segment, adjusted operating margins expanded sequentially to 19.4% on essentially flat sales. So let me turn to the industrial segment. And in this segment, sales increased 13% organically year-over-year. In our industrial equipment business, sales were up 36% organically with growth in all regions and benefiting from the momentum in factory automation applications where we continue to benefit from accelerating capital expenditures in areas like semiconductor and automotive manufacturing. Our AD&M business, sales declined 7% organically, driven by the continued weakness in the commercial aerospace market. In our energy business, we saw 9% organic growth driven by increases in renewables, especially global solar applications. And lastly, in our medical business as I mentioned earlier, a return to growth in the quarter and was up 10% organically year-over-year with the recovery in interventional procedures around the world. From a margin perspective, adjusted operating margin for the segment expanded year-over-year by nearly 300 basis points to 15.8% despite the volume declines in our AD&M business. And this was driven by solid operational performance by the teams. Now let me turn to the communications segment. And our team continues to demonstrate strong operational execution, while capitalizing on the growth trends in the markets that we serve. Sales grew 31% in the segment organically year-over-year with robust growth in both data and devices and appliances. In data and devices, we grew 16% organically year-over-year due to the solid position we built in high-speed solutions for cloud applications. We continue to see capital expenditures increasing by our customers and our content growth is enabling us to grow cloud-related sales at double the market rate this year. In appliances, sales grew 57% organically versus the prior year with growth in all regions driven by market improvement, our leading global market position, and ongoing share gains. I do want to say that our communications team continues to deliver outstanding performance to complement the higher sales levels that they're executing to. And you see this with our adjusted operating margin in the segment of 23.5%, which is up 760 basis points versus the prior year. Overall, across our segments our teams are capitalizing on growth trends in their end markets demonstrating the diversity of our portfolio while delivering strong operational execution. And with that, let me turn it over to Heath, who will get into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence and good morning everyone. Please turn to slide eight where I will provide more details on the Q3 financials. Adjusted operating income was $734 million, up significantly year-over-year with an adjusted operating margin of 19.1%. GAAP operating income was $714 million and included $11 million of restructuring and other charges and $9 million of acquisition-related charges. We still expect total restructuring charges to approximate $200 million for fiscal 2021 as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was $1.79 and GAAP EPS was $1.74 for the quarter which included restructuring acquisition and other charges of approximately $0.05. The adjusted effective tax rate in Q3 came in as we expected at approximately 18% with our fourth quarter tax rate expected to be around 20%. We expect to continue our -- we continue to expect our adjusted effective tax rate for the full year to be around 19%. Importantly, we expect our cash tax rate to stay well below our reported ETR for the full year. If we turn to slide nine, our results and progress you see on the slide reflects the strength and diversity of our portfolio and business model execution. As Terrence mentioned, we delivered record performance in Q3 on sales, adjusted operating margins, and adjusted EPS. We are not only showing progress versus the prior year, but we are also delivering higher sales margins and adjusted EPS versus fiscal 2019, which represents a pre-COVID baseline. Sales of $3.8 billion were up over 50% versus the prior year and up 3% sequentially with solid performance in each of our segments. Currency exchange rates positively impacted sales by $138 million versus the prior year. Adjusted EPS of $1.79 was up significantly year-over-year and up 14% sequentially reflecting our strong operational performance. Adjusted operating margins were 19.1% also up significantly versus the prior year. Year-to-date our adjusted operating margins are running at around 18% and our fourth quarter is expected to be a continuation of this strong performance. Turning to cash flow, in the quarter cash from operating activities was $682 million. We had very strong free cash flow for the quarter of $539 million and year-to-date free cash flow is approximately $1.5 billion. In Q3, we returned approximately $445 million to shareholders through dividends and share repurchases. Our cash flow performance demonstrates the strength of our cash generation model. And we continue to expect free cash flow conversion to approximate 100% for the full year. We remain committed to our disciplined use of capital. And overtime, we continue to expect two-thirds of our free cash flow to be returned to shareholders and one-third to be used for acquisitions. As Terrence noted, we entered into an agreement to acquire ERNI earlier this month. And we expect to close by the end of this quarter. ERNI has revenues of approximately $200 million annually, and will be reported as part of our industrial equipment business. Before we go to questions, I want to reiterate, that we are performing well in this environment, despite challenges in the broader supply chain. Our results for the quarter and our performance so far this year, demonstrate the strength and diversity of our portfolio with contributions from each of our three segments. We delivered record performance in Q3. Our fourth quarter guidance represents a continuation of our strong performance. And we are excited about growth and margin opportunities beyond this fiscal year in line with our business model. Let's now open up for questions. Sujal? Sujal Shah: Okay. Ludy, could you please give the instructions for the Q&A session? Question-and: Operator: [Operator Instructions] Our first question comes from the line of Mark Delaney at Goldman Sachs. Your line is open. Mark Delaney: Yes. Good morning. And thanks very much for taking my questions. Terrence you mentioned several secular trends that the company is addressing and longer term that TE can grow revenue and margins. So I was hoping you could speak a bit more about, what the company is seeing with respect to this industry backdrop? And what that may mean for the company's fundamentals in the intermediate to longer term. Terrence Curtin: Yeah. Thanks Mark. And I think when you sit there, you see the performance we put up which we're very proud of. But in many ways, a lot of where the recovery is across our business is still pretty early. And I think the first thing framed to your question is probably around where can, we meet demand a little bit. And I would still tell you one of the things is, with this quarter with some of the supply chain elements that happened within TE, there is about $100 million of revenue we estimate across our segments that due to our supply chain we couldn't get out to customers. So we are still trying to get up to the level of demand that's out there. And certainly with the supply chain issues, we estimate it's about in quarter three, $100 million. We think it will be a similar amount in quarter four. But -- and that's really where materials impact us around metals and resins. And we think that will be with us a little bit. But, when you think through the markets and you think about where auto production is at right now, auto production this year with the $19 million we expect in the fourth quarter is still significantly below 2019 levels, that $81 million units this year will still be down from $88 million in 2019. And certainly are being troubled a little bit by some of the semiconductor supply chain. So we think, as you think through the cycle, auto production can go up as we do look forward. Certainly content is going to help us. We also have in industrial. As I mentioned in my comments, it really feels like, it's just getting started. Our medical business is picking up. Our energy business that was pretty resilient continues to be strong. And you're seeing what we started a couple of quarters ago around industrial equipment. We continue to see that picking up as you have CapEx. And then in communications cloud CapEx was up 20% this year. It's expected to be up 10% next year. So we still see there are big drivers for us that will help us. And on the margin side, we still have margin improvement that we need to deliver in two or three segments and they are our largest segments. So certainly, we're working through the supply chain elements that I think everybody in the plant is working through. And we still see margin improvement back up to where we told you on our business model going forward. So the cycle is a recovery. And one of the things we feel very good about is the consumer is showing up whether it be to buy cars, whether it be to buy appliances. And companies now are showing up. So it'll probably be lumpy but I would tell you it feels very good from the drivers that we positioned TE around. Sujal Shah: Okay. Thank you, Mark. Next question please. Operator: Our next question comes from the line of David Kelley of Jefferies. Your line is open. David Kelley: Hi, good morning, Terrence and thanks for taking my question. Wanted to focus maybe on the fourth quarter earnings guidance implies based on our math sequentially lower margins relative to the third quarter. It feels like we're seeing rising input costs some ongoing supply chain disruptions but also improved pricing and clearly volume recovery. So with that out of mind could you talk about some of the dynamics that play here in context of how you're thinking about the fourth quarter margin trajectory? Heath Mitts: Sure, David. This is Heath. I'll take the questions. Listen I mean, first of all I think what we effectively had commented in my prepared statement was we're running at around 18% year-to-date in terms of margins. And we see that more or less continuing as we work our way into the fourth quarter. If you pick a particular quarter you're going to have timing issues given the – how diverse we are how we're set up globally. You're going to have timing issues in any one particular quarter. So I think you've got to be careful about just picking out a quarter and trying to compare it forward or backwards. Within our world there is price-cost differences between the different businesses. In some cases we're able to pass along that price more quickly, particularly if it runs through our channel partners where we have distribution in some of our businesses. Some are heavier dependent upon that. And in places where we don't have that distribution partner and that mechanism to pass along price that quickly it takes a little bit longer. So the realization of that is very mixed within our portfolio. The other thing to consider is we're still as we've talked about in the past we're still on this restructuring journey with some of our footprint optimization. And as part of that you're going to have timing issues of when you start to realize some of those savings versus the cost of getting some of those things done and you spend a little bit ahead of before you take things offline. So there's all kinds of different moving parts in a portfolio like ours. From an EPS perspective sequentially, we will have from a third quarter to fourth quarter we will have a tax headwind. Our tax rate is going to step up a couple of hundred basis points and that's fairly normal in terms of timing for the fourth quarter. So some of the EPS drop sequentially is tied to that tax rate. Sujal Shah: Okay. Thank you, David. Next question please. Operator: Our next question comes from the line of Amit Daryanani of Evercore. Your line is open. Amit Daryanani : Good morning. Thanks for taking my question. I guess Terrence, wondered if you could maybe expand a bit more on the supply chain dynamics you've talked about. There's been fair bit of discussion around this by everyone including your peers. So I'd love to get your perspective on what does really all of it mean for TEL. And maybe you can explain what are the supply chain pressures you're referring to. And then what impact does it have with your operations and P&L broadly? Thank you. Terrence Curtin: Yes. No, thanks for the question. Let me -- supply chain, I guess, we're all using more than we would like to use on coal. So, let me make sure, what it means to TE. First of all, let's -- it all starts with end demand in our customers. So, let me spend a little bit on what we're feeling from customers. Certainly, customers are trying to make sure, they recover. And in some cases, when you think about what we go into, and you can take a car. A car has 30,000 parts. If one or two or three parts, they can't procure, they struggle making a car. And so, what you have right now because of the recovery being faster, you have everybody's scrambling. And also, you have a lot of the data signals that are coming down from our customers are changing a lot as they're trying to make sure they meet customer demand. So, the first thing I would say from a supply chain is, pretty severe volatility, coming from our customers, as they're trying to make sure, they get up and running. And unfortunately, in some cases, you've seen customers having to stop production because of things like semiconductors. So that creates volatility. Now, when you look in our world, it is important that when you think about TE, we are a manufacturer. We start from very base materials with what we innovate we make. And so, from that viewpoint, the biggest things that we use are things that are plastic, certainly resins from commodity all the way up to very highly engineered things that help with flame retardancy and temperature, as well as metals that are used for conductivity. So, when you sit there in those two key areas, we did have some areas, where resin supply was impacted, and certainly metal supply has been impacted. And what that has created for us is not only is supply impacted, we've had to do some things that aren't as natural for TE, which is we might have supply due to our global supply chain in certain parts of the world, and we may be shipping things around the world. So, not only the availability, it's also created some of those pressures as you said it in your question that we're managing. Because guess what, we're trying to really make sure, we ramp, we help our customers. And the reality of it is, this is going to be with us. We've been dealing with it in the recovery. I wouldn't say it's getting better. But I would say, we're going to continue to begin with it through our fiscal year and into early next year, as we're trying to pick up to a world that's recovering. And this type of recovery, whether you see it in our orders or in the supply chain, means there's a fast recovery that's happening out there, as people are trying to catch up to. So hopefully, that gives some flavor. And I think, our teams have actually been managing it through the volume, the price and the productivity, as you've seen our results. Sujal Shah: Okay. Thank you, Amit. We have the next question please. Operator: Our next question comes from the line of Joseph Spak of RBC. Your line is open. Joseph Spak: Thanks. Good morning. Terrence, you talked about some of the BEV wins and how that doesn't really impact the numbers today, but it helps for future growth. I was wondering, if you could help dimensionalize that for us at all. Like, maybe quantify the bookings in this quarter or the lifetime backlog? And how fast are some of those factors going? How should we think about that? Terrence Curtin: So, number one is from a momentum perspective, the momentum that we've talked about has not changed. And there's really two factors. We benefit from our global position. We also benefit from the technology that we bring as you move to high-voltage architecture, whether that being connecting, it being to sensors that are resolvers and current sensors when you get into electric motors. And when you look at it to conceptualize a little bit, I'll go back to what I talked a little bit about last call or the call before which is what it means to our content. A few years back, we were in the low $60s before in content. We're in the 70s now. And when you think about that $10 increase in content, approximately half of that is due to high voltage. So that's about $5 of content at the total TE level across all production that has translated into revenue. And that's a key driver as we say for our content can grow above $80. So realize there's only 9 million electric vehicles made this year. What's great is that that adoption continues to accelerate. It didn't stop during COVID. And certainly, as that accelerates, that's going to continue to drive content outperformance for us. And it actually just continues to accelerate all around the world and it's nice to see the traction in places even like the United States which has always been a slower adopter of the technology actually pick up as well as the models that are coming out from all our global customers are showing how this trend is picking up. Sujal Shah: Okay. Thank you, Joe. Can we have the next question, please? Operator: Our next question comes from the line of Scott Davis at Melius Research. Your line is open. Scott Davis: Good morning guys. Terrence Curtin: Hey, Scott. Scott Davis: Great to see you surviving this mess that's out there and thriving. But I kind of just wanted to follow-up on that last question a little in the context of the Chevy Bolt recall. And perhaps the architecture that is being utilized there on the high voltage side. Is there -- are there learnings from that recall and that perhaps increases your content growth going forward and having more backup and safety systems around particularly around high voltage. Is there anything to be gleaned there or nothing new? Terrence Curtin: Scott, great question. And good to hear from you. I think the thing that you look at I wouldn't say -- when you think about does that learning out of that recall provide extra content? I wouldn't say it does, but I think it shows how fast the technology is moving as well as when you look at the architecture evolution, the pace of which it's coming at. When you think about combustion engines and how long they took to develop as well as everybody getting their models out, you will have situations where there will be events that there will be learnings of what -- how do you need to harden the electrical architecture. I don't think that will create incremental content opportunity. But what I would tell you for TE is when those issues occur, we're the type of company that they look to. Because we're working on up to 1000 volts. We play not only from the charger inlet, we play into where the motors go the high-voltage there. You also play on what's happening on the cell-to-cell or module-to-module connections as well as the sensing that occurs. So certainly, GM will really work hard to make sure those types of events won't occur in the future. But actually, it also creates a bigger opportunity for stickiness for us. And certainly, on the new truck platforms at GM, we have very strong content that's in line with that 2X content we've talked to you about. Sujal Shah: Okay. Thank you, Scott. Can we have the next question, please? Operator: Next question comes from the line of Chris Snyder with UBS. Your line is open. Chris Snyder: Thank you. My question is around TE's high voltage differentiation. The company has invested significantly in both -- in developing, but also scaling these solutions globally in recent years. And is this leading to high-voltage share gains relative to low voltage? It also seems like the OEMs would lean more heavily on top suppliers, just given how important these initial EV rollouts are? And then particularly, within high voltage as it's a new, but also extremely critical component for them? Terrence Curtin: Yeah. So Chris, when we look at it I think – let me take a step back just for a second. With what we do around our interconnect and sensing portfolio, anywhere you have data, you have power, you have sensing and guess what getting into smaller packages and then higher power and higher data that's what our engineers do. And so when you deal with high-voltage architecture in a car, certainly, our customers that's why they like the position we have and it's a global position as I said where we design all around the world with all the OEMs. So when you think about it, it is – one point, I want to highlight is the low voltage architecture carries over for us, because you're not putting in your low voltage applications onto the battery and the motors. So our low voltage carries over. And where we really get into – and I mentioned it to Scott's question it starts at the charging inlet. It goes into, how does – you get the connections and the sensing occur, around the high-voltage connection that you need around the motors. It gets into the battery solutions. It gets into the contactors that we provide to switch the power over as you go from DC to AC and back, as well as the position in the current sensors. So it's completely across, and I think the other thing that's unique for us versus some others that might be a Tier 1 – now we're Tier 2. Our customers really like that we're agnostic. We are there to solve their challenges that they're trying to get to. How are they trying to solve fast charging? What type of cells are they using in their battery pack? And that agnostic element is what they really like about our global position as they come into and we focus on the connection systems. We don't get complicated about harnesses and other things. That's what the Tier 1's do. But it's really about the connection technology that we invest in as they think about the platforms and how they have to evolve these platforms. And that's where you get the content increase that we mentioned and we shared examples. But it gives us a real content opportunity to double our content in electric vehicles. And like I said earlier, the content growth you're seeing in TE about half of it over the past couple of years is due to high voltage wins. Sujal Shah: Okay. Thank you, Chris. Could we have the next question please? Operator: Our next question comes from the line of Wamsi Mohan of Bank of America. Your line is open. Wamsi Mohan: Yes. Thank you. Terrence you had a pretty solid fiscal third quarter. You're guiding to a pretty strong exit for this fiscal year. Can you maybe share some early thoughts into next fiscal year? It feels like there should be some nice production growth since other end markets seem to be in recovery mode as well. So, any bookends around dimensioning fiscal 2022 will be helpful? Thank you. Terrence Curtin: Thanks, Wamsi. And I guess, I have to give you the caveat that, we only guide for the fourth quarter, and we'll talk to you in 90 days about what we see going into 2022. But I just do want to reflect on what we say our business model is maybe before I talk to markets. It is about the content we've talked about even to your questions. It is about where our underlying production – go in the different – various markets that we serve. And it is about also continuing to capitalize on some of the execution things that Heath talked about on restructuring. We're still not at the target margin in two of our three segments, and its how do we use that capital to return it to you. So I do think it's important – that's the way we think about TE, and it's important that we keep it in front of us. And some of this I talked about. In transportation, we do still see a runway around production. Semiconductors had been a little bit of a governor this year. That probably will get fixed I think people see in 2022 at some point. But also that the consumer demand and inventory being depleted on car lots really are something that you could see auto production going up. Certainly our content will continue. In industrial, manufacturing CapEx is accelerating. I mentioned we're seeing it, in semiconductor we're benefiting from that. We're seeing it in the automation. We're benefiting from that. And what we're seeing in medical as well as energy looks like very nice legs to it. The one spot that we don't sort of see any signs of acceleration is around aerospace and defense. And that's just something -- there's good consumer trends. We aren't seeing it yet in that supply chain. And then, in communications, I would just say, cloud we expect to be strong, when it comes to appliances. The consumers are showing up strong. That probably will normalize at some point. I don't know if that will be in 2022 or later. But certainly we're benefiting from a very strong appliance cycle here around the consumer. So, really like how the end markets could be teeing up for 2022 and we'll share more with you in 90 days. Sujal Shah: Okay. Thank you, Wamsi. Could we have next question please. Operator: Next question coming from the line of Joe Giordano of Cowen. Your line is open. Joe Giordano: Hey, guys. Good morning. Terrence Curtin: Hey, Joe. Joe Giordano: Hey. Just curious on -- in auto on the customer inventory side of component parts, a lot of different commentary coming out so far in earnings season from what different companies are seeing. Just curious what you do internally to kind of make sure you're understanding whether order -- what percentage of orders that you're getting are for like actual production of cars right now? And how much is for your own customers building some stock? So, like what's the internal procedure for kind of fleshing that out? Terrence Curtin: Well, a couple of things that we do. So, it's not unreasonable to assume that people will be trying to hold a little bit more buffer stock right now. But as I said, we're not even able to make current full demand and I said that was about $100 million. We do actually make sure as we check with our customers. Actually in some cases, we visit their warehouses to make sure we don't see hoarding occurring. And we also talk to our OEM customers. Because let's realize in some cases we ship into Tier 1s. And there's lots of discussions between the OEM, the Tier 1s to make sure flow continues to happen. So, I'm sure in some parts, there maybe some people trying to build up a little bit extra buffer stock, especially in the supply chain environment. I would tell you we're still trying to get to make sure we keep demand flowing to keep production going with the OEM lines. Sujal Shah: Okay. Thank you, Joe. Could we have next question please. Operator: Our next question comes from the line of Christopher Glynn of Oppenheimer. Your line is open. Christopher Glynn: Yes. Thanks. Also wanted to double down a little bit on the relationship between orders and consumption, and as pertains to revenue. I'm wondering if there's any mismatch relative to the actual production now with the transportation segment specifically that we might qualify our view of production advancement next year? And then, as far as orders go, would we anticipate a quarter or two where maybe you have the reciprocal of what we're seeing now and kind of mismatched the other way with the continued outsized book-to-bills for the trailing periods? Terrence Curtin: You asked about three questions there. So no let me start at the total company level first. And we've had $4.5 billion of orders last quarter and this quarter. And if you take this quarter, we built $3.8 billion. I think when you look at that gap, that gap is certainly larger than normal. There is about $100 million of that gap that is real demand that due to our supply chain we could not fulfill. When you look at that remaining gap, I sort of think about it in a couple of buckets, and certainly, we look at it a lot. We study it by our different end markets. There is probably about half of that element which relates to our distribution partners. That is where people may not be able to get goods from us, they're looking to our channel partners to procure, and from that viewpoint we have seen an increase -- a very strong increase over the past two quarters in our channel partner orders. But what I would tell you, our channel partner inventory is at the same levels as last year. So their turn is up very big. They're placing orders. Certainly, we're not able to meet them to the levels that they're ordering. The other portion would be from our direct OEM customers and it will be that they're trying to make sure TE parts are not that one, two or three parts that they can't make something. So we have seen people go out an extra quarter in some of their ordering patterns due to the current environment. And I think as the supply chain continues to get better what you would see in places like transportation -- and transportation book-to-bill is typically around one. It's not typically 1.1, 1.2. And I think as the supply chain catches up you will see things get more normal and get closer to where they should be as they normalize and the whole supply chain gets better. So I would expect at some time orders will get closer to billings clearly as the supply chain continues to improve and things become better. Sujal Shah: Okay. Thank you Chris. Operator, next question please. Operator: Our next question comes from the line of Samik Chatterjee of JPMorgan. Your line is open. Samik Chatterjee: Hi. Good morning. Thanks for taking my question. I guess, Terrence just wanted to follow-up on your comment about order trends by geography. And seem like Europe is kind of the outlier there where you're still -- you're seeing some weakness in the order. So just if you can talk about what you're seeing in terms of the difference there in Europe and the recovery there. And why probably kind of the order trends being kind of an outlier to the other regions? Terrence Curtin: No. Honestly, when you look at that, I know it's down by about 7% sequentially. I would say, when you look at that that's more around some of the normal summer shutdowns in transportation. Then I would say, it's a big deceleration. I would say, we continue to see orders even as we're into July stay at elevated levels, because the conditions we're in aren't changing. And I wouldn't say, it's one barometer negative or positive. It's just a little bit slower. And certainly we would normally see that as some of our customers do summer shutdowns in Europe in the automotive space and they are still doing those. Sujal Shah: Okay. Thank you Samik. Operator, next question please. Operator: Next question is from William Stein of Truist. Your line is open. William Stein: Great. Thanks for taking my question. Terrence you mentioned earlier this fact of manufacturing where a car has 30,000 parts or whatever it is and you need all of them to make the car, not just a subset. Even if you're missing a couple you have a problem. It's certainly true in almost all products. In autos though, I'm sure you'd acknowledge that there are cases where these companies can decide, well, there's a feature or two that we can isolate and perhaps decontent it and get a car shipped. We're picking this trend up pretty clearly from multiple sources that we're seeing decontenting going on in order to get around the shortages. I'm wondering if TE is seeing this. If so to what degree? And in particular does it take away from your growth in sort of the next couple of quarters in any way where perhaps a more content-rich car would have provided a better opportunity. But what the company is shipping is something of a smaller content opportunity or vice versa? Terrence Curtin: Hey, Will, great question. Number one let's face it. The auto manufacturers are being creative because there's consumer demand. And let's face it they want to get the vehicles out. And if there's a feature where they can't get a component, they certainly are taking some of those features out near-term. I would tell you on our revenue while we do see that around certain OEMs that is not having a meaningful effect. Where we play in the core architecture and the electrical network as well as in the backbone in an EV, you may lose a couple of interconnects, but that is not that much from a big-picture content. And even if you look at our content growth this year over production, it's not evident in any way. So I would also say in this type of environment while you have some of that decontenting, they are also being able to add options to it, which we also benefit from. But that isn't meaningful and a big number either. So it would probably impact others more than us. But with our breadth that we have across where we play in the architecture, while they're doing it it's not having a meaningful impact on TE. Sujal Shah: Okay. Thank you Will. Next question please. Operator: Your next question from Matt Sheerin of Stifel. Your line is open. Matt Sheerin: Yes, good morning. Terrence, I wanted to just ask about the strength that you're seeing in the communications segment and specifically the cloud business and the margins there. It looked like record margins. So the question is how sustainable is that? And then within the cloud demand side, how diversified are you? I know obviously there's just a handful of really big hyperscale players, but in terms of the diversification and the lumpiness of that business if you could provide more color? Terrence Curtin: Sure Matt and thanks. So a couple of things. Let me talk about the cloud element and then I'll talk about segment margins. On the cloud element, what's really been nice is -- and those of you that follow us, we very much -- our D&D business years ago, we basically made the strategic decision to get at consumer so we could focus on just high speed. And I remember when we had less than $100 million with our cloud customers. It's well over $300 million today. And our market share at one point in time was with one of the cloud providers. Our market share is pretty even across all the cloud providers and not only the US cloud provider but also globally. So the breadth and the strengthening of it as well as the share gain it's both the growth of the CapEx and their investment but also how our teams executed on share gain as well and bringing important technology to it. And it has been a strong cloud environment. I think I mentioned already close to 20% CapEx growth in cloud. What's nice is next year we still see double digit again. And as you not only get that underlying growth, it goes back to the secular trend around content is content to next generation as new chips come out on those servers we also benefit from our next-generation products from what the content is. So we feel very good with where we're positioned there. When you look at the segment margin performance by the team has been very strong. It's benefited not only by what we've done in cloud. I would also say our appliance business and that global leading position that growth there in that business has also very much contributed to the margin in that segment. So we still think that's a high-teens business through cycle. So with having both segments being very strong -- it's benefiting the margin there. And it's something that as probably appliance normalizes we could have some pressure. But net-net that that segment is above target margins is something we're proud of. Sujal Shah: Okay. Thank you, Matt. Can we have the next question, please. Operator: Next question is from Steven Fox. Your line is open. Steven Fox: Hi. Good morning, everyone. Terrence and Heath, I was just curious if you could talk about when you start considering some of these supply chain pressures and inflation pressures to be sort of a new normal and how you might change managing your supply chain? How you might change hedging? How your customers might change? And within that context can you just, sort of, give us a baseline for what you're doing on hedging inflation? Thanks. Heath Mitts: Sure. Steven, this is Heath. I'll take that. Our biggest input pressures that we have when we talk about things that are impacting our P&L would be around resins and being around certain specialty metals right that we use in our products. In many cases for the metals we do have a hedging program. That generally hedges out about 18 months of our anticipated usage or purchase and subsequent usage. So when we see inflation or deflation relative to the metals that tends to kind of layer in more quietly into our results both directions. So that is unchanged and we'll continue to do that. The bigger issue that we are seeing when we are looking at some of these -- and we throw them into the broader supply chain bucket is we do have local sourcing which is really good. It enables a lot of nimbleness and agility for our businesses whether that's in Asia, Europe or in the Americas to be able to procure product locally versus shipping things around the world. It also has the challenges that when we do have supply chain disruption in a particular location or in a particular region whether that's driven by natural causes like floods or otherwise the situation down in Texas earlier this year where a lot of the chemical companies came offline and put a lot of pressure through the resins and so forth in the Americas. Those types of things when they happen -- or floods in Germany. So when those things happen we still have to be responsive to our customers. So sometimes that means we are then moving some of our supply around the world and that can get very expensive. So the freight costs it's a long-winded way of saying some of the freight costs layer into some of the supply chain pressures as well from us because of some of our structure. For us we're going to continue to take advantage of those local supply chains and we just need to make sure that we have that flexibility going forward. In terms of our ability to manage it and when do we foresee it being part of the new norm I don't know. I mean the semicon doesn't impact us directly, but impacts our customers. So you're probably better equipped to come up with answers to when semicon shortages dissipate. In terms of some of the other things relative directly to us I would say, we're working through those and feel pretty good about how we're ready to jump into FY 2022. Sujal Shah: Okay. Thank you, Steve. Can we have the next question please? Operator: Next question coming from the line of Jim Suva of Citigroup. Your line is open. Jim Suva: Thank you. And my one question is actually a follow-on to your response Heath that you just gave. And not talking about the semiconductor shortages, but the resins input costs and all that You talked about hedging and such. I'm wondering as shipping costs have been around for a while now, the same amount of time all through COVID and these additional raw material costs. I'm wondering is there come time to start like repricing some of your contracts with customers or put in indexing for raw materials. Or all your answers so far talk more about hedging and dealing with your supply and stuff. So, I'm just wondering is it time to go back to talk to the customer or are we just not there yet. Terrence Curtin: No Jim. It's Terrence. Twofold. We've been there quite frankly. So, to sort of go where we are on it across our channel partners, we did a price increase. And this is 20% of our business in January. We just implemented another price increase and we're going to continue to look in this environment. And our direct customers, we are having those discussions right now. We do have metal riders in many of our agreements that are sort of like towers. If you bust out of an area on metal, we have ability to recapture. And then when you deal with resins and freight which are newer, we are having those discussions with our customers. It's very different by industry. And that's what has been going on and that they will layer in at different times. But I feel we are having those discussions real time. Sujal Shah: Okay. Thank you, Jim. Next question please? Operator: Next question coming from the line of Luke Junk of Baird. Your line is open. Luke Junk: Thank you. Probably a question for Heath this morning. I was hoping you could walk us through the sequential margin walk in industrial margins, given the step-up that we saw versus first half levels. And also looking forward here, maybe just in the fourth quarter if you could give us any help on what the -- what that margin outlook might look like in industrial specifically? Heath Mitts: Sure. Well, I mean first of all thanks for the questions. We've been pretty public with the journey that we're on within the industrial segment margins, right? And we started this in the low teens and with the multiyear trajectory through a lot of rooftop consolidations of getting this business into the high teens. We're kind of -- we're in that journey. We made a lot of improvements here in the quarter. Certainly, a couple of the things that industrial benefits from. One, the restructuring activity that has been underway continues. That comes in chunks of time as operations get taken offline. And so, you might have some costs in one quarter before something comes offline. And that tends to create quarter-to-quarter lumpiness, but we smooth it out over a year or longer. You can kind of see that result. The other thing is, and Terrence just hit on this, the industrial segment does benefit from the opportunity on the price side because more of the industrial business goes through distribution. And so fairly large chunks of our industrial segments did have the opportunity to not only do price increases back at the beginning of the calendar year, but in July implemented additional price increases. And that does have more of a near-term benefit for the segment versus some of the other segments where it's more of a direct to OEM relationship and it takes a little bit longer to work that way through. So those are a couple of the pieces. As we look forward in the fourth -- into the fourth quarter, listen, timing on things, you're always going to have that with the business as big and complex as we are. Our Industrial segment, being a $4 billion segment, has a lot of moving pieces. But I feel very good about the trajectory, as we move from the first half to second half or third quarter to fourth quarter. But I think even more importantly, as we work our way into 2022 and beyond, there is still margin upside for the segment and the team is hyper-focused on that, so more to come. Thanks for the question. Sujal Shah: Thank you, Luke. Can we have the next question, please? Operator: Next question is from Nik Todorov of Longbow Research. Your line is open. Nik Todorov: Yes. Thanks. Good morning. I think the near-term dynamics on supply chain are well publicized. But my question is, Terrence, do you see any impact on the longer-term dynamics like design by your customers, specifically in automotive. Do you see any changes in the way they operate or think about design in the current environment? And if you do, what's the impact that you have from these changes on your business? Thanks. Terrence Curtin: Two-fold. From a design perspective, when I think about the velocity and even coming through COVID, the velocity did not change during COVID. So, if anything, especially in transportation, specifically on EVs, you see the launches that are happening. You see the innovation that's happening real time. What typically happens with customers, I think, with all of us, is just seeing the pace continues to accelerate, because the consumer expects it. So -- and that's -- that I think not only is in transportation, it’s everywhere, but it's also how it goes through their supply chain. And also, some of the benefits we get in our industrial business over people's investments, including our own around how their factories have to be more flexible and digitized. When it comes to the question about supply chain design, clearly customers will reflect going through this period of what needs to be different. And the more JIT [ph] you are, they'll probably pick some spots of what do they have to do differently. I would say, we're not seeing anything near term. We don't see people thinking about vertically integrating interconnects versus maybe some other areas, especially in the transition to EV. But what's good is, we're very close to our customers. And hopefully, we can take advantage of it for opportunity for TE versus risk, as they work through it. Because, once again, being with every OEM, we have a pretty good purview, especially in automotive as we go forward. Sujal Shah: Okay. Thank you, Nik. Can we have the next question, please? Operator: And our last question coming from the line of Rod Lache of Wolfe Research. Your line is open. Shreyas Patil: Hey. This is Shreyas Patil on for Rod. Just two quick ones. One, could you help quantify the supply chain impact that you saw in the quarter? I believe last quarter you mentioned it was a $50 million headwind. And then, second, just looking at the year-over-year comparison, I know, it's a bit challenging given the base effect. But it looked like your incremental margin, ex currency, was maybe closer to 40%. And I think in the past you've talked about 30% to 35% incremental margins. So, maybe, just how we should think about that, going forward? Heath Mitts: Sure. This is Heath. I'll take the question. I think, in the quarter, and Terrence mentioned this earlier, that we quantify the supply chain impact to us and define it more or less as our availability to -- or in some cases, inability to get the input materials that we need. But that impact to us was about $100 million and I would say that probably two-thirds of that would have been in transportation. So our inability to ship was about $100 million that I would quantify on the topline for the supply chain impact. And obviously, the teams are scrambling day by day to recover that and keep customers happy. In terms of the flow-through, listen, the year-over-year flow-through I would -- we're proud of it. We're proud of it when we look at it and not just in the third quarter and anticipated flow-through in the fourth quarter, but also on a year-to-date and full year basis. And we are proud of it. I think yes, I would caution you last -- our compares last year were so far off relative to the severe downtick and that had a disproportionate impact to our margins as well last year. So, when we look at that on the downtick versus the recovery a year later, you're going to see some -- in a quarter -- in a given quarter, you're going to see some outsized numbers. I don't -- I would not want to guide you to reset your expectation that 40% is the new norm for our flow-through. We are still confident in that 30% to 35% number which was up -- which we took up earlier this year due to some of the restructuring activities that have been underway and I think it normalizes into that range. But you're going to have a quarter noise from time to time particularly in a year-over-year basis like we had in the third quarter. Sujal Shah: Okay. Thanks for the question Shreyas. And I want to thank everybody for joining us this morning. If you have more questions please contact Investor Relations at TE. Thank you and have a good morning. Operator: Thank you. Ladies and gentlemen, your conference will be made available for replay beginning at 11:30 A.M. Eastern Time today July 28, 2021 on the Investor Relations portion of TE Connectivity's website. That concludes your conference for today. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the TE Connectivity Second Quarter Earnings Call for Fiscal Year 2021. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to your host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning and thank you for joining our conference call to discuss TE Connectivity's second quarter results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables along with the slide presentation can be found on the Investor Relations portion of our website at te.com. Due to the large number of participants on the Q&A portion of today's call, we're asking everyone to limit themselves to one question to make sure we can give everyone an opportunity to ask questions during the allotted time. We are willing to take follow-up questions but ask that you rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence R. Curtin: Thank you Sujal and thank you everyone for joining us today to cover our results for the second quarter as well as our expectations for the third quarter of our fiscal 2021. Before I get into the slides let me give you some perspective on our second quarter and I think as you will see in our results we are continuing to demonstrate the strength of our diverse portfolio and the benefit of content growth across our businesses. We are delivering organic growth ahead of our markets as well as strong operational performance and free cash flow generation. I would say this performance is in a world with an improving economic backdrop that is dealing with global supply chains that are trying to keep up with the broader macro recovery. We are continuing to execute to our business model, and you can see this in our second quarter results, as well as the guidance that we provide for the third quarter and I'll talk about it a little bit more today. So let me also provide some key messages about today's call. First off, I am very pleased with our execution in the second quarter. We delivered sales growth of 17% and generated record quarterly adjusted earnings per share of a $1.57 and this EPS represents growth of 22% year-over-year. Our sales were ahead of our expectations and it was broad across each segment driven by the continued recovery in most end markets we serve our broad leadership positions and the benefits of the secular trends that we've strategically positioned TE to capitalize on. Also, our adjusted operating margins expanded 80 basis points year-over-year to 17% and this was driven by margin expansion in both our transportation and communications segments. I also believe that you're going to continue to see us demonstrate our strong cash generation and truly evidence of that is our year-to-date free cash flow, which was approximately $1 billion, which is also a company record for the first half of the fiscal year. And as we look into our third quarter, we are expecting our strong performance to continue with sales and adjusted earnings per share at similar levels to what we just delivered in the second quarter. With that as a little bit of a backdrop I do want to take a moment to frame out the Kurtenbach [ph] environment and our business relative to where we were just 90 days ago when we last spoke. In our transportation segment, consumer demand in autos continues to remain strong and auto production is remaining stable in the range of 19 million to 20 million units per quarter globally, even with the well-documented semi shortages. And we've also seen further strength in our commercial transportation end markets. The trend around content growth remains strong as we continue to benefit from increased electronification of vehicles and higher production of electric vehicles, which will enable us to continue to outperform auto production going forward. In our industrial segment, we see increased momentum in the recovery of industrial equipment markets due to factory automation and increasing manufacturing capital expenditure trends. Also in our industrial segment, the commercial aerospace and medical businesses are still being impacted by COVID and this is similar to what we mentioned last quarter. But we do continue to see indicators of stability in our orders in both of these businesses. In our communication segment, the market trend we mentioned last quarter are continuing. Consumer demand is getting stronger, and globally we've seen an increase in appliance demand. We continue to see strong ongoing capital expenditure trends in the cloud applications, as well as acceleration of demand around the data center. And when you think about these trends I just covered in our segments as a backdrop, the faster than expected recovery in the markets that I mentioned has resulted in some challenges as the industries we serve replenish their supply chain and look to further secure supply. While this dynamic has benefited our orders, which remain strong, it has called for broader supply chain pressure and the pressure we're experiencing is factored into our expectations for the third quarter guidance and Heath will provide more color on this in his session. And the last thing I want to highlight is let's remember that we are still in a world that's still on COVID. We continue to see countries go into lockdown again and this is impacting some of our customers and their supply chains. And certainly while vaccines are getting rolled out in certain parts of the world, the pace of the deployment and availability of the vaccines varies greatly by country so some uncertainty remains. Our focus has been and will continue to be on keeping our employees safe while also helping our customers capitalize on the improving economic conditions. So with that as a backdrop, let me get into the slides and I'd appreciate maybe if you could turn to Slide 3 to provide some additional details for our second quarter and our expectations for the third quarter. Second quarter sales of $3.7 billion were better than our expectations in each of our segments. They were up 17% on a reported basis and 11% organically year-over-year. We have 15% organic growth in our transportation segment with double-digit growth across all businesses. We also had very strong performance in our communications segment with organic growth of 29%, which was strong double-digit growth in both of the businesses in that segment. And in our industrial segment, sales were down 4% organically due to the ongoing weakness in the commercial aerospace market. From an orders perspective, second quarter orders were $4.6 billion and this was up 36% year-over-year. It reflects both the improvement in the markets that I mentioned, along with inventory replenishment in the supply chain by our customers. Our earnings per share was a record at a $1.57 in the quarter, and this was up 22% year-over-year and was driven entirely by our operating performance, resulting in adjusted operating margins being up 80 basis points year-over-year. I am pleased that we were able to manage the water supply chain pressures which all companies are dealing with and had margin expansion. From a free cash flow perspective, in the second quarter free cash flow was $477 million, with approximately $340 million being returned to shareholders. As we look forward, we expect our strong performance to continue into the third quarter, with sales on adjusted earnings per share being similar to our second quarter levels. For the third quarter we expect sales to be approximately $3.7 billion, and this is up significantly year-over-year on both a reported and an organic basis and we expect adjusted earnings per share to be a $1.57, which is in line with the levels we just saw in the quarter we just closed. So let's turn to Slide 4 and I will cover the order trends that we're seeing. As I already stated in the quarter, our orders were very strong at approximately $4.6 billion and we had a book-to-bill of 1.22. Orders in transportation and in communications were up 50% and 45% respectively, and this increase reflects both market recovery and supply chain replenishment in both of those segments. In these segments, customers are not only placing orders to meet current production needs, but also replenishing the supply chains that were depleted during fiscal 2020. I would also highlight that with some of the shortages in semiconductors and certain passive components, we are seeing some areas where customers are placing orders to secure supply beyond our lead times. In our industrial segment, it is a different picture than what we're seeing in transportation and communications. But what is nice is that despite the year-over-year sales decline we had in the segment, we have seen orders growth of 7%, and that's driven by the continued recovery in the industrial equipment market, partially offset by the weakness in commercial aerospace that I mentioned. Let me also on orders, add some color to what we're seeing organically on a geographic basis. And I'm going to do this on a sequential basis to show where order momentum is. In China our orders were up 3% from a strong base from fiscal quarter one. And that growth was really driven by our industrial and communications segments. Orders on a sequential basis in Europe were up 14% and North America sequential orders were up 22%, and that was broad based growth across all our segments in those two regions. So let me get into our year-over-year segment results, and they're on Slides 5 through 7. I'm going to touch upon each segment briefly before I turn over to Heath. Transportation sales were up 15% organically year-over-year with growth in each of the businesses. In auto our sales were up 14% organically and year-to-date we are generating content outperformance over production in our expected 4% to 6% range. We continue to benefit from our leading global position and increased production of electric vehicles and as you've probably seen, a number of EV launches are increasing by our customers around the world. In commercial transportation, similar to our first quarter, we saw 25% organic growth driven by ongoing emission trends, content outperformance, and ongoing share gains. We are continuing to benefit from stricter emission standards and the increased operator adoption of Euro 5 and 6 in China, which reinforces our strong position in that country. We saw growth in all regions in our commercial transportation business, along with double-digit growth in all market verticals that we serve in this business. The other nice thing that we continue to see is we see increased wins on electric power train platforms and trucks which give us confidence about the future content potential in this market in out years. In our sensors business we saw 13% organic growth with growth in all markets and double-digit growth in auto applications. We do continue to expand our design win pipeline in auto sensing and expect growth as these platforms continue to increase in volume. From a margin perspective, adjusted operating margins for this segment, excuse me, expanded 80 basis points to 18.1%, driven by higher volumes versus the prior year and despite the supply chain pressures. So if we now turn to the industrial segment, as I said earlier, our sales did decline 4% organically year-over-year. During the quarter, this segment continued to be impacted by the decline in the commercial aerospace market with our aerospace, defense, and marine business declining 21% organically year-over-year. As I covered already, based upon the order patterns, we do believe this business is showing signs of stabilization at the current order levels. When you think about our industrial equipment market, it was very strong and up 16% organically with growth in all regions and increasing strength in factory automation applications where we're benefiting from accelerating capital expenditures in areas like semiconductor equipment as well as along the auto manufacturing supply chain. We continue to see weakness in our medical business in our industrial segment, and it was down 13% organically year-over-year. And this is being driven by ongoing delays and interventional elective procedures caused by COVID and the dynamics we're experiencing in medical are consistent with what our customers are seeing. And we expect this market to return to growth as these procedures start to increase later in the year. And lastly, in the industrial segment, our energy business we saw 4% organic growth and this was driven by increase in penetration of renewables, especially benefiting from solar applications around the world. From a margin perspective in industrial solutions, our margins declined year-over-year to 12.5% and that was really driven by the significant drop in commercial aerospace volumes. So let me cover the communications segment and in this segment we continue to benefit from both the market recovery and share gains while delivering very strong operational performance. Sales in this segment grew 29% organically year-over-year, with strong growth in both data and devices and appliances. In data and devices our sales grew 24% organically year-over-year due to the strong position we have built in high speed solutions for cloud applications. Favorable secular trends in cloud services are leading to increased capital expenditures by our customers, and our content and share gains are enabling us to grow on cloud related sales at double the market rate. Now, just to give you an example, at one of the major cloud providers, we are now providing 6X the content on the next generation server applications versus the prior generation. In our appliances business we are also seeing strong growth trends. Sales grew 35% organically year-over-year, driven by our leading global market position, share gains, and ongoing market improvement across all regions. From the margin perspective, our communications segment and team delivered very strong execution in the quarter and delivered 21% adjusted operating margins and these were up 720 basis points versus the prior year. I am pleased with the way our team has worked through the supply chain pressures to deliver these strong operating margin expansion in this environment, and our communication teams are capitalizing on growth trends in their end markets while delivering strong operational execution and you see this reflected in our results. So with that, let me turn it over to Heath to get into more details on the financials and our expectations going forward. Heath Mitts: Well thank you, Terrence and good morning everyone. Please turn to Slide 8, where I will provide more details on the Q2 financials. Adjusted operating income was 637 million up approximately 23% year-over-year with an adjusted operating margin of 17%. GAAP operating income was 612 million and included 17 million of restructuring and other charges and 8 million of acquisition related charges. We continue to optimize our manufacturing footprint and improve the cost structure of the organization and can change to expect total restructuring charges in the ballpark of 200 million for fiscal 2021. Adjusted EPS was a $1.57 and GAAP EPS was a $1.51 for the quarter and included restructuring, acquisition, and other charges of $0.06. The adjusted effective tax rate in Q2 was approximately 17%. For the third quarter we expect our tax rate to be up slightly sequentially and continue to expect an adjusted effective tax rate around 19% for fiscal 2021. Importantly, we expect our cash tax rate to stay well below our reported ETR for the full year. Now turning to Slide 9, sales of 3.7 billion were up 17% versus the prior year and 6% sequentially demonstrating the strength of our portfolio. Currency exchange rates positively impacted sales by 150 million versus the prior year. Adjusted EPS of $1.57 was up 22% year-over-year and 7% sequentially reflecting our strong operational performance. Adjusted operating margins were 17% and expanded 80 basis points versus the prior year. While we would have expected higher fall through on this level of sales growth, we saw impacts of higher freight charges and other supply chain pressures in the quarter and these will continue into the third quarter. And as you are aware, these supply chain issues are having a broader impact on our customers and suppliers as well. As Terrence mentioned, the supply chain is catching up to the increased level of demand we are seeing in many of our end markets and given these dynamics, I'm pleased with the results we delivered in the quarter and our momentum going forward as shown in our third quarter guidance. In the quarter cash from operating activities was 580 million. We had very strong, free cash flow for the quarter of 477 million and a year-to-date free cash flow that was approximately $1 billion, which is a record for the first half of the fiscal year. We returned approximately 340 million to shareholders through dividends and share repurchases in the quarter are strong. Free cash flow performance demonstrates the strength of our cash generation model and we expect to -- and we continue to expect free cash flow conversion to approximate a 100% for the full year. We remain committed to our disciplined use of cash and over time we expect two thirds of our free cash flow to be returned to shareholders and one third to be used for acquisitions. Before we go to questions, I want to reiterate that we remain excited about how we have positioned our portfolio with leadership positions in the markets we serve along with organic growth and margin expansion opportunities ahead of us. To summarize, the outlook for many of the markets we serve is consistent with what we are seeing 90 days ago, along with some acceleration of growth in the commercial transportation, industrial equipment, and communications markets. We are continuing to see the benefits of secular trends across our portfolio and are capitalizing on these opportunities. The economic recovery has been faster than expected, and we are seeing a corresponding near term pressures in the broader supply chain as a result. These impacts will be resolved and nothing has changed with respect to our growth and margin expansion expectations. We are executing well on things we can control and our outlook for Q3 continues to reflect the strength of our portfolio. We expect to continue to generate strong free cash flow, maintain a disciplined and balanced capital strategy, and drive through our business model performance. And we've remained focused on value creation for our stakeholders going forward. Now let's open it up for questions. Sujal Shah: Okay, thank you Heath. Michelle, could you please give the instructions for the Q&A session? Operator: [Operator Instructions]. And your first question will come from Craig Hettenbach from Morgan Stanley. Your line is open. Craig Hettenbach: Thank you. Question for Terrence, there were a number of references to replenishment on the call. So can you just talk about the strength you are seeing in the business, when customers you think will get caught up on inventory and importantly the type of sell through you're seeing? Terrence R. Curtin: Sure, thanks Craig and let me -- you see that in our orders and I think one of the things is we're all dealing with a recovery across those markets that are seeing that improved recovery at a faster rate than we all expected. And inventory levels are low. When we see the orders that we see, we do see people trying not only to make -- get the products in for what they want to make, but also to get the supply chains up that ensure that there aren't some of the stresses that we hear about in other components. So when you look at that, I think we're all in the middle of that real time. These are stresses that you get when you have a recovery that's in motion. I do think we need a couple of quarters for that to play out because it is pretty broad based and stocks were taken very low. And even when you think about our channel partners, our channel partners are holding turn levels that are lower than normal, and they're trying to catch up. So it is very broad across those markets that you see the strength in and it will take a couple of quarters to get truly everything probably replenished. Sujal Shah: Okay, thank you, Craig. Could we have the next question please. Operator: Yes. Your next question comes from Wamsi Mohan from Bank of America. Your line is open. Wamsi Mohan: Yes, thank you. Terrence, you alluded to a few things within the communications segment performance. Can you remind us how much of that is cloud now and are you expecting this growth to sustain here and how sustainable are these margins? Terrence R. Curtin: Yeah, thanks Wamsi. In communications I think one of the things that we have to keep in front of us is it was our segment that was least impacted last year. And so I think that even makes, when you look at the results, that segment has a Puget or more impressive because they didn't have the dip that our transportation segment had when the western world shut down auto production. And so the growth that you see first off is in D&D. It is primarily driven by cloud applications and I think it's both the acceleration of cloud CAPEX in addition to where we position ourselves from a market share perspective and we continue to do a nice job in that team, continuing to build more momentum from a share perspective and that's really driving that growth. The other thing that you have in that segment is our client's business has a great global position, and we're also benefiting from as certainly appliances have accelerated globally around the world. You're seeing the benefit of that business and you're also seeing how globally two businesses are. So certainly I talked about it in orders, but these businesses are very globally balanced and you're seeing the growth. So feel good about the positioning we've done on the top line. I would also say with the volumes that we're at, we would expect that this segment would be higher margin than what we've told you historically. So we always said this was probably middle teen at these types of levels. You'd probably be in the middle higher teens over time. And it just shows that the work that we've done to improve the portfolio here, the trends we have put it around as well as the operational execution team has done. So thanks Wamsi for the question. Sujal Shah: Thank you Wamsi. Could we have the next question, please. Operator: Your next question comes from Amit Daryanani from Evercore. Your line is open. Amit Daryanani: Yes, good morning, everyone. Thanks for taking my question. Terrence, I was wondering if you would maybe solve the deviation between the strength we're seeing on both the book-to-bill and the order number that you put out more so in the June quarter guide, right, I mean, if I think about the book-to-bill of 1.22, I would applaud June quarter guide would be north of 4 billion in revenues. So I would just love to understand what is the delta between the book-to-bill versus your guide? And related to that the orders trends you're talking about, is there any deviation between channel versus OEM there? Terrence R. Curtin: So let me just take it, I'm going to take your last piece first, if that's okay. When you look at it, the trends where you're seeing the acceleration and also with some of the supply chain stresses, you do see orders in the channel were probably a couple of hundred million higher than what we build. And our channel sales grew similar to what the total company grew. So you do see the channel partners trying, their inventories are low, they're trying to catch up. But I wouldn't say it's different than what we're seeing direct. It is about how do we make sure the supply chain levels to support this faster recovery get into place. When you look at our book-to-bill of 1.22, as you all know, this is not a business that's typically a backlog business and what we're seeing because things were so depleted, you have customers that are sitting out there not only getting orders for production, but also trying to replenish and there's pain points in the world. So, there's certain product sets that we have some constraints on. There's pain points on some of our input materials and Heath talked about some of the pressures on inflation side. So I think what you have is the orders are a lot higher than our guidance and our guidance is really the things that we see we're going to schedule out and deliver. And, it will normalize over time that there'll be more check, but right now you have a supply chain replenishment going on after COVID in 2020. It took a lot of supply chains to a full-stop. Sujal Shah: Okay, thank you Amit. Can we have the next question, please? Operator: Yes. Your next question comes from Joseph Spak from RBC Capital Markets. Your line is open. Joseph Spak: Thank you very much. If we look at the actual incrementals in the quarter and compare that to sort of that low 30s, that delta is about $50 million. So is that order of magnitude what you sort of experienced from logistical headwinds? And then I know you mentioned that could continue, so maybe you could talk about some of the puts and takes on the margin as we head into your fiscal third quarter? Heath Mitts: Sure. Joseph, this is Heath, I'll take the question. You're right on with your assumption. We would have expected these volume levels to be north of 30% flow through as we've talked about. And so the delta on a year-over-year basis to where we came in, probably puts you into that type of number in terms of, in terms of the flow through and then the impact that it had on margins. As we work our way through the year, there's certain things that will continue that we will continue to expect to feel the pressure on, whether that's free charges, freight inflation, or inflation on input materials otherwise. What the team is hammering through those, and we have different levers that we can pull to pass some of those things along as well as where we deal with the timing issues on some of that. But I would expect our margins to modestly improve as we work our way forward here into the third and fourth quarter, based on some of the actions that are underway and our ability to combat some of the inflationary pressures out there. Sujal Shah: Okay. Thank you, Joe. Could we have the next question, please? Operator: Yes. Your next question comes from Chris Snyder from UBS. Your line is open. Chris Snyder: Thank you. My question is on EV wins and the pipeline of demand coming to market. Just given the increased focus on high voltage, are you seeing better share relative to ICE and for these new awards, should we expect initial unit production will carry a CPV above 120 until scale is reached? Terrence R. Curtin: Yeah, no thanks. So a couple of things let's remember that our share is very heavy on a leading position in what we do already. So I wouldn't say share is higher, I would say it's in line with our leading share across automotive and transportation. What is ICE and you talked about it is where do you see the momentum around EV and, just if we went back a few years, it was 5 million electric vehicles if you take pure electric and hybrid. This year we think it's going to be closer to 10 million vehicles. And you see Europe continuing with the emission programs there, certainly Asia has always been strong in there, and these are both regions that we have very strong presence. So when we think about content, what's nice is EV continue to see the adoption, you see the new models coming out, the models are much more attractive than the consumer acceptance of those strong. And it pulls in line with our overall content growth and the CPV. We do expect to be that 2X on those high voltage, because what happens with our train. So it is one of the things that with an improving recovery, the secular trends of where we positioned TE whether it's the electric vehicle in the car. And as I talked about in my script was we also are seeing innovation along the heavy truck fleet that is becoming more platform driven, they are going to have more model launches probably out in the 2025, 2026, and that's going to be a content driver and we have wins on those. So those secular trends, in the backdrop of an improving economy just creates more growth opportunity for us. Sujal Shah: Okay. Thank you, Chris. Can we have the next question, please? Operator: The next question comes from Samik Chatterjee from J.P. Morgan. Your line is open. Samik Chatterjee: Great, thank you for taking my questions. I wanted to ask an automotive as well. You had strong results in automotive, despite the uncertainty we're seeing there with the same kind of shortages, just wanted to Terrence what are you hearing from your automotive -- in terms of how they want to manage the supply chain, are they still sticking to the model or are they ordering ahead and when to start expect some of these shortages in terms of impact on production to start to moderate? Terrence R. Curtin: Well, I think when every OEM, number one is happy with where the consumer is showing up. And if we were here six months from now, while we were ramping, one of the things we talked about is the consumer showing up. And I think that's just great for the industry and our OEMs are trying to work through the supply chain pressures, at a bigger extent than even we're dealing with. So, what was nice and certainly semiconductors are the big news out there and it is very well documented. Now that impacted production a little bit less than a million units in quarter two. I think it's going to be a similar number in quarter three, but global auto production, staying in that 19 million to 20 million unit range. And what's nice is probably this year auto production will be back to 2019 levels, and that's a little bit quicker than we would have said six months ago. So the OEMs are very much working hard to get the cars out to the consumers. We're all working very much together knowing that right now, as it's ramping back up to a very high level, and we're all trying to make sure how do we keep the OEMs going. And so the discussions today are very much around how do we work together to make sure our OEM customers get to capitalize on this opportunity. And yeah, there is a lot of volatility right now due to the supply chain. And I think we're going to have to continue to work through that, through the rest of our fiscal year. Sujal Shah: Alright. Thank you Samik. Can we have the next question please? Operator: Yes. Your next question comes from Mark Delaney from Goldman Sachs. Your line is open. Mark Delaney: Yes. Good morning. And thanks very much for taking the question. Heath, you reiterated the view that free cash flow conversion for this year could be approximately 100% of net income. Can you talk about whether or not there's anything unusual benefiting free cash flow conversion this year and recognize there's going to be some puts and takes in any given year going forward, but is that the right type of approximate level to be expecting on free cash flow conversion going forward? Thank you. Heath Mitts: Well Mark, thanks for the question. I think we've -- one of the things that as I look at the free cash flow and the components and leverage we get to pull there, there as we've worked our way through the last few years, one of the things you have seen is CAPEX as a percentage of sales, moderated a bit more closer to that 5% number versus higher we were running a couple of three years ago. That capacity that we have put in place is certainly we are benefiting from that now. And particularly as we move forward, I think that number of 5%, maybe tad under that this year is helpful in terms of how that converts cash flow. The other thing that we obviously benefit from is the way we manage our tax structure and our ability to pay our cash tax rate being much lower than well below our ETR. And so there's a few of those types of things, but working capital this year has been a good story for us and our ability to maintain receivable days and payable days, improving year-upon-year despite this volatile environment has been good. So nothing unusual in our FY21 numbers or outlook from a cash flow perspective. I continued to -- we continue to monitor it and we're not starving the businesses for investments. The organic revenue growth gets first priority as you can imagine. So we feel good about how we have positioned that and going forward now, if there's a year coming forward that we have a more significant step up in terms of an investment or restructuring or something, we will highlight that. But, I think we are in a good position right now. Sujal Shah: Alright. Thank you, Mark. Can we have the next question, please. Operator: Your next question comes from Joe Giordano from Cowen. Your line is open. Joseph Giordano: Hey good morning. Terrence R. Curtin: Hey Joe. Joseph Giordano: [Technical Difficulty]. Just if I look back in auto last year in the 2Q, I think you had some 40 basis points of benefit from supply chain replenishment then. So if I look at the results from this quarter, and I assume that you grew kind of like in your 600 basis points above production, like, is that how I should think about this, that supply chain this quarter was like 900 basis points, and it should still be like a pretty favorable number for the next few quarters? Terrence R. Curtin: I think it's very difficult to just look at content in one quarter, Joe and you're right. With last year in this quarter, we did have supply chain benefit, because we saw people sort of getting into COVID, we were rolling out trying to secure supply. You need to look at it over a longer term. And, I think that's the more appropriate way to look at it. As we said on last quarter, and when we sort of look at mix of vehicles this year, we sort of view we should be in the mid 70s, without supply chain effects this year. And that's something that is, if you look at what's driven that versus the lower to mid-60s a few years ago, half of that is due to our positioning around electric vehicle, and certainly data has autonomy. Infrastructure gets put in the car. And then the other half is just electronification as our core products that continues to be sourcing as the car gets more features on it. So I still think this year without supply chain we are in that same figure we told you last quarter. I think when you get into where supply chains are trying to move in, it is difficult to get it into one number in a quarter. Sujal Shah: Okay, thank you Joe. Can we have the next question please? Operator: Next question comes from Scott Davis from Melius Research. Your line is open. Scott Davis: Hey, good morning, guys. Terrence R. Curtin: Hey Scott. Scott Davis: How do you handle, how are the contracts handled when you have kind of these excess orders, no double ordering or folks that are want more, I mean, can you get additional price and help offset some of the cost issues and such? Terrence R. Curtin: Sure, so on pricing Scott, so when you think about in distribution it was about 20% of our business. We did price increases and we do them every six months. We did some in January, we have other ones rolling out in July for some of the inflation pressures. What we do have with some of our larger customers, metal writers that have adjusters for metal. So as he talked about, we do expect modest margin expansion as we go into the third quarter. Some of it is as those things kick in, as we continue to try to manage through it. So it is very different by the markets we plan. But there will be price increases aligned with how we have the mechanisms sorted with our customers. Sujal Shah: Okay, thank you, Scott. Can we have the next question, please? Operator: Your next question comes from Christopher Glynn from Oppenheimer. Your line is open. Christopher Glynn: Thanks. Good morning, everybody. Higher level question on industrial automation cycle, how you see that shaping up. The comparisons and the macro are helping you but during COVID, a lot of people learn to do more with personnel disruptions and robotics has been pretty emerging category. I'm wondering if you're seeing the makings of an automation super cycle in terms of investment over the next handful of years? Terrence R. Curtin: What I would tell you is if you went back, certainly last year, that space got hit. And the year before that it wasn't a positive cycle. There were elements around auto production going down that were impacting as well. What we see and what we see it pretty consistently globally, you're going to have many semiconductor manufacturing equipment that's accelerating. You're seeing the investments around the auto supply chain, you see a lot of those around the electric vehicle and the battery side of it. Certainly warehousing is no surprise either. So what we have seen pretty consistently, globally, is an acceleration that last quarter, we told you, we saw some emerging, fine to hope we really saw an acceleration this quarter. And I do think just with the backdrop we're in, I do think you're going to have a positive cycle here around automation investment. As people see an economic recovery that continues, and let's face it, the two markets where we haven't seen it, are in Comair and medical which were both impacted by COVID. Where we play in medical, so I do think you could have a stronger like here of an industrial capital equipment cycle that's stronger coming out of COVID. Sujal Shah: Alright, thank you, Chris. Can we have the next question, please? Operator: And your next question comes from David Kelly from Jeffries. Your line is open. David Kelly: Hi, thanks. And good morning, Terrence, Heath, and Sujal. A quick follow up question on the prior distribution channel exposure, just hoping you could maybe give us a deeper sense of the order trends there and if you don't mind, can you remind us of your distribution mix within communications and our struggles as well? Terrence R. Curtin: Sure, when you take our distribution mix, it is about 20% of the total company. But what you do have that mix is higher in our industrial segment, as well as our CS segment. Now, in those cases you're up 40% plus. In automotive, there's not a lot of distribution, that's a direct just in time, you don't have that. So you do have higher weightings in communications and industrial. And, our revenue growth was in line with the total company revenue growth, sort of mid-teens. But we did see our book-to-bill in that area was higher meant total company, it was more like a 150 book-to-bill. And their inventory levels are low. And it's not surprising with as the world accelerated people are trying to secure inventory. They're also trying to rebuild their inventory levels to more appropriate turn. So the book-to-bill was very strong there. And I just think it's another positive sign of an improving economy and certainly as we look forward. Sujal Shah: Alright, thank you, David. Can we have the next question, please? Operator: Your next question comes from Jim Suva from Citigroup. Your line is open. Jim Suva: Thank you. And Terrence, in your prepared comments, you made a comment about the orders being stronger than your lead times. When there's chip shortages and the lead times are stretching out, you normally see that a lot. So can you just help us kind of bridge why would customers be ordering a lot more beyond your lead times, is it just inventory replenishment or do you think that they're fearful of more supply chain issues because if your lead times are normal, it seems like they could just put in normal orders versus stretched lead times? Thank you. Terrence R. Curtin: Yeah Jim, couple of things. So let's realize in automotive it's adjustment type system, there really isn't lead times. So in that part of our business, it is just in time. And the rest of our business our lead times are four to six weeks. When typical, we do have some pain points and I would probably say in some areas, we're a little bit further out than that, but not anywhere close to some of the semis. I think you do have replenishment going on, people did take volumes down to down low and the economy is doing better. In addition, people see semis and some other passives having shortages. It isn't surprising that people are saying, hey, I want to make sure I get my orders on to make sure I don't get surprised and other components and tier two products. So, I think that's why you see what's happening with distribution. I think it's also in some of those markets that are very hot, that you see that happening and honestly, our lead times aren’t moving out significantly, except in very finite product sets where we have some pain points. Sujal Shah: Alright, thank you Jim. Can we have the next question, please? Operator: Your next question comes from Luke Junk from Baird. Your line is open. Luke Junk: Good morning. Terence I was hoping you could discuss some of the key opportunities in your energy business as it relates to the proliferation of electric vehicles, increasingly an area that we're getting questions on, if you could just speak to the role that key has to play in terms of grid hardening, which of course is in focus on the Texas storms this winter, renewables mentioned in your comments and similar? Terrence R. Curtin: Yeah, so on our energy business in our industrial segment, it is important where we play in that is really along the grid. It is very much around the electrical infrastructure and it is very global. And, the key factors that really drive growth there is hardening as you said, but also where we pivoted our portfolio and our team has done a nice job has been, how do we get our share when you deal with wind applications where you have very high voltage connections that need to come back and hook into the grid, as well as the solar applications, which are not in panel connections, but really taking the energy that comes off the solar grid into the core grid. And what's nice is, the growth that we've seen in our energy business that has been pretty consistent over the past year is really due to our repositioning around renewables. Historically, this would have been a very slow growth business where you have seen it, you saw the 4% this quarter, and that exposure of those renewables is really driving the growth there. And certainly how EV is driving into energy usage would also benefit that. So we are benefiting from all the carbon neutral initiatives on the planet. And certainly, how do we make sure we get our fair share with our pretty broad product set to make sure those connections in those grid occur is what we get excited about. Sujal Shah: Okay, thanks Luke. Can we have the next question, please? Operator: Next question comes from Nik Todorov from Longbow Research. Your line is open. Nikolay Todorov: Yeah, thanks. Good morning, everyone. Terrence, we've seen some reports that some auto OEMs are doing much better than others in the current environment, because they have shifted away from just in time over the years. As we deal with broader supply chain issues and I know that's more on the semi side but how do you see customer inventory policy on the auto side changing, do you see any structural shift away from just in time? Terrence R. Curtin: What I would tell you is, with what we're dealing with currently, we're trying to meet demand. We have not seen significant shifts. Do the OEMs reflect after this, it'll be interesting. I think that'll be a discussion we have with our customers, but right now our customer is really focused on making sure they get product out the door. And, in some cases, just realize we don't have some of the production lead time that a semiconductor company would have when they think about their fab. So, what we do is different. But certainly there's stress and strain in the system. And some of the tier 1s that are also in that equation, play a pretty big role not just the OEMs and they took inventory levels down very low. And that's what we're all trying to catch up on. Sujal Shah: Okay, thank you Nik. Can we have the next question, please? Operator: And your next question comes from William Stein from Truist Securities. Your line is open. William Stein: Terrence, I think it was you who used the word inflation to describe something that's happening to at least part of your costs. Maybe it was Heath, but whomever takes it is fine, I'd like you to maybe tell us about whether that's something that you're seeing in input costs, material costs for example or labor or if it's just supply chain related costs. And I think you also noted that you'd expect this to be clawed back over time, is that through essentially a deflation in those costs or is it something you think you're going to be able to pass on to customers? Thank you. Heath Mitts: William, this is Heath. I will take the question. Certainly, we're feeling the biggest inflation right now is on the freight side. The freight inflation has been significant as we battled through there and there's a variety of reasons for that, including higher air freight and so forth in terms of that. And that's not unique to TE. Certainly, I think that's been well publicized across the overall supply chain. We are as we move towards the second half of our year, we are seeing a little bit higher input costs, particularly with resins and some of that's pretty directly attributable to the weather issues that were in Texas here earlier, this past quarter. And then copper prices as we've continued to monitor those, we've seen those creep up. Now in some cases, we have hedges in place in terms of how we hedge our metals cost. So you don't see -- you see that kind of layering a little bit slower in and out of the P&L, as we hedge about 50% of our exposure out about 18 months for metals. So, as we get through their labor costs is not a major issue on the inflation side, but labor availability in certain places that are still being more impacted by COVID continues to drive some inefficiencies, and there's no doubt whether that's in Mexico or in Central Europe and otherwise. We still are battling through where -- COVID where we have significant operations, and that's evermore around availability than inflation. In terms of the callback, I think Terrence outlined it a couple questions ago, in some cases, we have contractual ability to do that in terms of passing through writers, as we've seen inflation come in more aggressively. In some cases, it's a broader pricing discussion with a customer and then within channel, certainly, we will utilize the ability to take prices up, tie with inflation for that piece of the business. And then, depending upon the business, there's surcharges and different types of mechanisms that are put in place. But I'd say the timing issue is a portion of it. There's no way I'm going to sit here and say, we're going to claw back 100% of what we're pounding through right now. But we also have productivity engines in place to help offset some of these things. So more to come. Sujal Shah: Okay, thank you Will. Can we have the next question, please? Operator: Next question comes from Matt Sheerin from Stifel. Your line is open. Matt Sheerin: Yeah thanks. Good morning, everyone. My question is around the industrial solutions area, particularly how we should be thinking about operating margin going forward. You were down year-over-year, for reasons you talked about particularly weakness in the aerospace area. Sounds like that's bottoming, it sounds like you're continuing to see growth in the broader industrial market. So what should we be thinking about a margin expansion from here, I know you've been targeting high teens, is it a function of volumes here or there's still some restructuring benefits that we should be expecting? Thanks. Heath Mitts: Matt, this is Heath. I will take the question, and thank you. Well, first of all nothing has changed in terms of our outlook as we've been on a multi-year journey to get the footprint right in the industrial segment. And that involves reduction of consolidation of a lot of rooftops, nothing has changed there in terms of our multi-year plan to get to mid to high teens operating margins. Certainly within the quarter we were impacted by a very -- by the mix of businesses where the growth or lack of growth is coming from commercial aerospace is a very profitable piece of the segment. And as that's down, year-over-year, that it has a pinch point in terms of margins. However, there's other things that factor into this as well, in terms of how we think about the restructuring that's going on, in some cases when we do have costs ahead of some of the savings as we're moving factories into new locations. In addition, the segment was not immune from some of the supply chain challenges. So a variety of things. I am confident as we move into the second half of our year that we will see improvement there. Sujal Shah: Okay, thank you, Matt. Can we have the next question, please? Operator: Your next question is from Steven Fox from Fox Advisors. Your line is open. Steven Fox: Hi, thanks. Good morning. I might have misinterpreted this, but it sounded like you mentioned, market share gains more than normal. I was just curious if there's any common thread across while you're gaining share or if there's anything you would point to within the different segments that are driving share gains? Thanks. Heath Mitts: No, what I would say Steve, I don't -- I think one of the things that's important is we did want to highlight those areas where we do feel their share gain, not just marking improvement. And there are areas that I think we've differentiated during COVID, where they created some opportunities. And I think you see that in both units in the CS segment. Certainly, in regard to our industrial transportation business and how we have continued to gain share there. So there's some of the bigger highlights, but we did want to make sure in those areas, not only market recovery, we also had -- took advantage of market share in some key markets that are also contributing to our results. Sujal Shah: Okay, thank you, Steve. Can we have the next question please? Operator: Your next question comes from Rod Lache from Wolfe Research. Your line is open. Shreyas Patil: Hey, this is Shreyas Patil on for Rod. You talked about -- you mentioned the content opportunity that you're seeing in battery electric vehicles versus ICE it's about a 2X opportunity. And I think in the past, you've talked about $60 of content on an ICE vehicle, increasing 120 on [indiscernible]. But with certain programs, it seems like you're actually -- the actual content on those vehicles is much higher. So I'm trying to get a sense of amongst the programs that you're either -- that you're winning, how do you think about the content on those vehicles, how should we be thinking about that and what's the opportunity there going forward? Terrence R. Curtin: When the vehicles are winning, one of the things that you have long as the architecture, continues to get scaled and aligned. There is a broader breadth of content per vehicle on electric vehicles for us, and you sort of have on a traditional ICE, and that we get excited about that. And, there are some new electric vehicles, it's the traditional 2X and there's some that are much higher, where our customers have asked us to do more. So there is a broader breadth, and you have on a traditional ICE or in a traditional ICE it really comes down to feature set. But what's nice is the number of EVs that you see are accelerating. And at TE what we get really excited about is, as this continues the need to scale to make sure these vehicles are affordable for all consumers, not just on the higher end, that's where we continue to provide scale. And we've always said that, as we think through price as it scales, some of these very high CPV elements we have talked about will come down a little bit because they have to for the affordability of the cars. And that's assumed in all our content assumption. So feel very good about the adoption that it is as global as it is, I think it really stood the test to COVID. But also is when you look at how the architecture of the car needs to continue to scale. That's what we get excited about because automotive is still a scale business. And I think we've proved that with our leading position in what we've done on the ICE and what's nice is our ICE products carry over, because they're mainly in the electrical architecture that carries over into the EV. So there isn't real cannibalization, because the power train is not as big from electrical side from an ICE, it just goes way up when you get to a EV or hybrid. Sujal Shah: Okay, thank you. Can we have the next question, please? Operator: Next question comes from David Williams from Loop Capital. Your line is open. David Williams: Hey, good morning, and thanks for letting me ask the question. Wanted to ask maybe on the mix shift from the automotive OEMs. Obviously, they have pivoted to the higher end, maybe even more luxury vehicles. As we see that shift mix maybe move back towards a mid-range to lower range vehicles as the semi shortage eases, how do you think that impacts maybe revenue and a margin impact there? Terrence R. Curtin: Well, when you look at that, certainly the OEMs are getting to make the vehicles they want to make and they make money off. And I think that's one of the things that are nice about this improving economy. But I would also say many of the OEMs are also have changed their platform pretty dramatically about what vehicles and platforms they make. So certainly when you have increased options that are put on cars, we will get a little bit of benefit and content in our traditional product. And that's what ebbs and flows over time. And I would also make sure we take a global perspective of it. I know that very much in the U.S. there's a view of a pickup trucks and that has more content but when you think about TE, you need to really think globally. And some of those trends aren't as real elsewhere in the world as they may be in the North American market. Sujal Shah: Okay, thank you, David. Can we have the next question, please? Operator: Your next question comes from Wamsi Mohan from Bank of America. Your line is open. Wamsi Mohan: Yes, thanks for taking my follow-up. Terrence, I was wondering if you could comment, I know it's still early days but if you could comment on any puts and takes associated with the infrastructure plan, particularly given the amount of investment in EV infrastructure or how that might be a tailwind for TE versus any potential tax headwinds from the proposed tax hikes? Thank you. Terrence R. Curtin: Well, on both sides of those equations, obviously, there's a lot of things out there. So, sizing that today is very difficult, though, when that there is a lot of things being thrown around. So let's just keep that as an overlay. But I think if you think about any infrastructure, how could that benefit TE I think is important. And, certainly I answered a question earlier about energy infrastructure. Certainly there's investments that have to happen there that would benefit our energy business. If you get infrastructure put in for battery electric capacity in North America versus relying on other parts of the world, certainly our factory automation team would do it. And any other infrastructure, I think that the other benefit should be is and we've been very clear on it, we only view acceleration of electric vehicles in Asia and Europe, are going to happen quicker than the United States, because there has not been as much government support around getting those vehicles adopted. So that could also benefit our auto business. So they're just some of the bigger elements, and then you get in your traditional infrastructure where you would have a very strong position in commercial transportation depending upon what happens with roads, and if that creates a machinery cycle. We would participate very well on increases around certainly the heavy equipment side due to our industrial transportation. But there's some of the positives that could occur. Certainly, we got to see how the bills and the plan shake out. I will let Heath handle packs and I'll hand it off to him for that piece of it. Heath Mitts: Thanks, Terrence. Yeah, and Wamsi you probably recall, on the tech side again, there's a lot of things that are still to be determined. But as you recall, when the last tax reform, lower the corporate rate, it didn't have a big impact on us, given our structure and where we're domiciled and where our profit pools lie. So, early look at any of these proposal kind of indicate we probably wouldn't have that much of an impact on us in the other direction, either. So, more to come as things get solidified there, but I think it's important to look at not just the impact there, but where we pay cash taxes. And so not a huge concern at this point, but stay tuned. Sujal Shah: Okay, we have no further questions. I want to thank everyone for joining us on the call this morning. And if you have further questions, please contact Investor Relations at TE. Thank you and have a great day. Operator: Ladies and gentlemen, your conference will be made available for replay beginning at 11:30 AM Eastern time today, April 21, 2021 on the investor relations portion of TE Connectivity’s website. This will conclude your conference for today. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the TE Connectivity First Quarter Earnings Call for Fiscal Year 2021. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead. Sujal Shah: Good morning and thank you for joining our conference call to discuss TE Connectivity's first quarter results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables along with the slide presentation can be found on the Investor Relations portion of our website at te.com. Due to the large number of participants on the Q&A portion of today's call, we're asking everyone to limit themselves to one question to make sure we can give everyone an opportunity to ask questions during the allotted time. We are willing to take follow-up questions but ask that you rejoin the queue if you have a second question. Now let me turn the call over to Terrence for opening comments. Terrence R. Curtin: Thanks Sujal, and thank you everyone for joining us today to cover our results for our first fiscal quarter and also our expectations for our second fiscal quarter of 2021. Before I get into the slides, I would like to share some perspective on our first quarter. As you will see in the results, we are benefiting from our diverse portfolio and are continuing to execute on our margin expansion plans. While markets have been very dynamic over the past year, we are seeing improving conditions across the majority of them. Against this backdrop, we are demonstrating not only the resiliency of our operations, but also the ability to drive organic content growth ahead of our markets whilst expanding operating margins and demonstrating strong free cash flow generation that is in line with our business model. We are positioned to continue to benefit from secular trends and growing markets while driving the margin expansion plans that we've highlighted to you, and you'll see the benefit of these efforts in our first quarter results, as well as our guidance for the second quarter. With that as a quick backdrop let me now frame out some of the key messages of today's call. First, I am very pleased with our execution in the first quarter and I believe our teams delivered strong results. We delivered sales growth of 11% and adjusted earnings per share growth of 21% year-over-year, demonstrating the strength and diversity of the portfolio and the benefits from our operational improvements. Our sales were ahead of our expectations in each segment, but with the greatest outperformance in transportation, where we continue to generate strong content growth from electrification of the powertrain as well as increased data in the vehicle. Our adjusted operating margins expanded 190 basis points year-over-year to 17.7%, with margin growth in both transportation and our communications segment and a slight decline in our industrial segment where we maintain mid-teens margin performance despite a sales decline. We continue to demonstrate our strong cash generation model with our quarter one free cash flow being at a first quarter record of approximately $530 million. We continue to expect approximately 100% free cash flow conversion to adjusted net income for this fiscal year. And as we look to our second quarter, we are expecting our strong performance to continue. We expect sales and adjusted earnings per share, similar to the first quarter at approximately $3.5 billion of revenue and a $1.47 in earnings per share. And like in the first quarter, we again expect double-digit sales and adjusted earnings per share growth year-over-year. Now, I'd like to take a moment to discuss our performance relative to where our markets were in the pre-COVID timeframe of our fiscal 2019. And we do hope this will provide a baseline for evaluating our performance and progress this year. At the overall company level, our revenue is approximately back to pre-COVID levels, despite the majority of our markets being below 2019 levels and I'd like to give you some color by the three different segments. In our communications segment, we have seen strong improvement in our end markets and this has helped enable sales to recover above pre-COVID levels and for example, in Data & Devices as well as in appliances, we're benefiting from continued data center build outs and home investments respectively. In our industrial segment, it is a very different environment. We have markets that continue to remain weak as a result of COVID impacts, commercial air, and medical markets and our sales are still well below pre-COVID levels. However, what we are seeing is it does look like order patterns are indicating that we could be touching along the bottom in both of these businesses and we could see some improvements later in the year. And in our transportation segment our auto and commercial transportation businesses are now generating revenue above the levels we saw prior to COVID even though global auto and truck production is still forecasted to be below fiscal 2019 levels. Content growth and share gains have driven the outperformance, reflecting our leadership position in these markets. TE products and technology are designed in the next generation of sustainable vehicles at every leading OEM worldwide. The real proof of the traction is our content per vehicle progression. In fiscal 2019, our content per vehicle in auto was in the low 60s and it's now trending into the low 70s range. As consumer adoption increases for hybrid and electric vehicles and we continue to bring more innovation to our customers, we expect our content per vehicle to expand into the 80s over time. What's surprises is consumer preference continue to drive the features and the technology and we will continue to benefit as vehicles become more safe, green, and connected, driving more content for connector and sensing solutions. While I am pleased with our results and the progress that we've made operationally, I'm even more excited about the sales growth and margin expansion opportunities that we still have ahead of us. We continue to execute on our margin expansion plans in transportation and industrial that we started prior to COVID and accelerated during the pandemic. I'm also very proud of the margin progression in communications, which has offset the volume related pressure that we're seeing in industrial as a result of the market impacts due to COVID. So now if we could turn to the slides and I'd ask you to turn to Slide 3 to provide some additional details for the first quarter and our expectation for the second quarter. Quarter one, sales of $3.5 billion were better than our expectations, up 11% on a reported basis and 6% organically year-over-year. We had 12% organic growth in both transportation and in communications with growth across all businesses in those two segments. Industrial segment sales were down 8% organically due to the COVID related impacts I already talked about. During the quarter, we saw orders of $4 billion and this was up 25% year-over-year, reflecting an improvement in the majority of the end markets we served and I'll come back to orders in a couple of slides. From an earnings per share perspective our adjusted earnings per share was a $1.47. This was up 21% year-over-year. It is a strong operational performance where we showed adjusted operating income being up approximately 25% year-over-year. As we look forward, we expect our strong performance to continue into our second quarter with sales on adjusted earnings per share being similar to first quarter levels, despite lower sequential auto production. For the second quarter, we expect sales to be approximately $3.5 billion and this is up approximately 10% year-over-year on a reported basis and mid-single-digits organically. Similar to our first quarter, year-over-year growth will be driven by transportation and communications, partially offset by an organic decline in industrial. Adjusted earnings per share is expected to be approximately a $1.47 in the second quarter and this will be up 14% year-over-year with adjusted operating margin expansion included in the earnings performance. So if you could let me turn to Slide 4 and I'll get into order trends that we're seeing. For the first quarter, our orders were approximately $4 billion with a book-to-bill of 1.15. I would like to highlight that this level of orders reflects improvements in a number of our end markets as well as some supply chain replenishment. As we see markets improving, it is not surprising that our orders reflect the impact of supply chains being replenished after the shutdowns that occurred in the U.S. and Europe in the third quarter of last year. We are also seeing customers placing advanced orders in some cases due to product constraints and the broader electronic component categories like semiconductors and certain passive components. And the guidance that we give does factor in the impacts of these supply chain dynamics. And looking at orders by segment, on a year-over-year basis, transportation and communication orders both grew 36% with broad based growth across all businesses. Industrial orders declined slightly year-over-year but on a sequential basis, we did see orders grow in all businesses in each segment. So let me also add some color on what we're seeing in orders from a geographic perspective and I'll provide this on an organic basis. In China our orders were up 33% in the first quarter, with growth driven by transportation and communications. We are benefiting from our strong position in auto, commercial transportation, and appliances and continue to see strong improvement across those markets in China. We also saw 26% year-over-year growth in Europe with growth in all segments. This represents a second consecutive quarter of orders growth in Europe, with some markets improving following the large drops from COVID back in the middle of last year. And in North America, our orders were flat with growth and transportation and communications being offset by declines in industrial. Now, what I'd like to do is touch upon our segment results briefly and I'll cover those on Slide 5 through 7, those slides to issue. Starting with transportation our sales were up 12% organically year-over-year with growth in each one of our businesses. In auto sales were up 11% organically versus global auto production growth in the low single digits. The outperformance is driven by continued strong content growth and some benefit from the supply chain replenishing. We are seeing gains from our leadership position in next generation products and technology and the value that we bring to our customers. As I mentioned earlier, we are seeing strong content growth from the move to an electric powertrain and increased data connectivity, as well as the continued electrification of the vehicle. In our commercial transportation business, we saw 25% organic growth driven by electronification trends which are helping content outperformance as well as ongoing share gains. We are also benefiting from higher emission standards and new increased operator adoption of Euro 5 and 6 in China and new emission standards in India. We saw growth in all regions, as well as all market verticals that we serve in our commercial transportation business and continue to benefit from our strong position in China. We are also seeing increased program wins in the electric power train and commercial transportation that will provide future content growth. In sensors, we saw 29% growth on a reported basis, which included the revenue contribution from the First Sensor acquisition. On an organic basis, sales increased 3%, driven by growth in auto applications. And we continue to expand our design win pipeline in auto sensing and expect growth of these platforms continue to increase in volume. From an operating margin perspective, the segment expanded margins by 200 basis points to 19.4%, driven by strong operational performance. Now, let me move over to the industrial segment where, as I mentioned, our sales declined 8% organically year-over-year and our adjusted operating margins were down slightly to 13.5%, despite the 8% organic sales decline. I am very proud we were able to maintain our mid-teens adjusted operating margins due to the cost actions that we initiated over the past couple of years. During the quarter, the segment continued to be impacted by the decline in the commercial aerospace market, with our AD&M business declining 22% organically. As I mentioned earlier, we do believe we're touching along the bottom in this business and could see improvement in Comm Air later in this year. Our industrial equipment business was up 8% organically with growth in all regions and strength in factory automation applications. And we continue to see weakness in our medical business with ongoing delays and interventional elective procedures that have been caused by COVID. We anticipate this to be a short-term dynamic in medical that is consistent with what our customers are saying and expect this market to return to growth as these procedures start to increase later in the year. And lastly, in our energy business, we saw a 4% organic decline driven by COVID impact on utility spending but we did see growth in renewable energy applications and the wind and solar applications. Now, let me turn to the communications segment where our sales grew 12% organically year-over-year with growth in both Data & Devices as well as appliances. We do continue to benefit from the recovery in China and Asia more broadly, which represents over half of our sales in the segment. In Data & Devices our sales grew 5% organically year-over-year due to the strong position we built in high speed solution for cloud applications and in appliances, we grew 21% organically year-over-year with growth across all regions and benefits from home investments and an improved housing market. I would have to say our communication team continues to perform very well delivering 17.6% adjusted operating margins, which is up 550 basis points versus the prior year. Now, with that segment overview, let me turn it over to Heath who will get into more details on the financials and our expectations going forward. Heath Mitts: Thank you, Terrence and good morning everyone. Please turn to Slide 8, where I will provide more details on the Q1 financials. Adjusted operating income was 624 million approximately 25% year-over-year, with an adjusted operating margin of 17.7%. GAAP operating income was 448 million and included 167 million of restructuring and other charges and 9 million of acquisition related charges. We plan for the restructuring to be front end loaded this year and continue to expect total restructuring charges in the ballpark of 200 million for fiscal 2021 as we continue to optimize our manufacturing footprint and improve the fixed cost structure of the organization. Adjusted EPS was a $1.47 and GAAP EPS was $1.13 for the quarter and included a tax related benefit of $0.09. We also had restructuring, acquisition and other charges of $0.43, that reconciliation has provided. The adjusted effective tax rate in Q1 was approximately 20%. For the second quarter, we expect our tax rate to be in the high teens and continue to expect an effective tax rate of around 19% for fiscal 2021. Importantly, we expect our cash tax rate to stay well below our reported ETR for the full year. So if you'll turn to Slide 9. Sales of 3.5 billion were 11% -- were up 11% on a reported basis and up 6% on an organic basis year-over-year. Currency exchange rates positively impacted sales by 106 million versus the prior year. We are demonstrating our business model execution with adjusted EPS of $1.47, up 21% year-over-year. Adjusted operating margins were 17.7% as I mentioned earlier, and that is an expansion of 190 basis points versus prior year. I am pleased with the progress we are making in driving improvements to our cost structure and our strong operational performance. And we continue to execute on our footprint consolidation and cost reduction plans in both transportation and industrial. And we are now benefiting from the heavy lifting that we've already completed in our communications segment. Transportation adjusted operating margin was 19.4%, which is nearing our business model target of 20%. Industrial adjusted operating margins remained in the mid-teens despite significant volume drops, which demonstrates the benefits of our cost actions we have been discussing with you over the past few years. I'm also very pleased with the 17.6% adjusted operating margin in communication, which reflects our strong operational execution that I mentioned earlier. In the quarter, cash from continuing operations was 640 million, and we have very strong cash flow for the quarter of approximately 530 million, which represents a first quarter record as Terrence mentioned. And we returned 286 million to shareholders through dividends and share repurchases. Our strong cash flow performance last year and into the first quarter of this year demonstrates the strength of our cash generation model and we continue to expect free cash flow conversion to approximate 100% for the full year. We remain committed to our disciplined use of cash and over time we expect two thirds of our free cash flow to be returned to shareholders and about a third to be used for acquisitions. And before we go on to questions, I want to reiterate that we remain excited about how we positioned our portfolio with leadership positions in the markets we serve, along with organic growth and margin expansion opportunities ahead of us. To summarize, we have discussed the benefits of secular trends across our portfolio. You are seeing content growth enabling sales performance above our markets in auto and commercial transportation, benefits from market recovery and Data & Devices and appliances and some markets that have been impacted by COVID in the industrial segment that are now showing signs of stabilization. We initiated cost actions well ahead of the COVID downturn and we're seeing strong margin expansion as a result of our efforts. We expect to continue to generate strong cash flow, maintain a disciplined and balanced capital strategy and drive to business model performance, our focus on value creation for our stakeholders going forward. So now let's open this up for questions. Sujal, Sherryl could you please give the instructions for the Q&A session. Operator: [Operator Instructions]. Your first question comes from the line of Craig Hettenbach. You may now ask your question. Craig Hettenbach: Yes, thank you and Terrence, thanks for the color on the current supply chain dynamic. If you can just expand on that, I know there's plenty of news around kind of bottlenecks out there, you mentioned semiconductors, just kind of a gauge of how you would frame what you're seeing in your business versus the demand out there and where we are in this kind of replenishment phase? Terrence R. Curtin: Hey, thanks Craig. And I would say, first of all, I think like many things COVID, the recovery is very uneven and it's impacting different businesses differently. So, the comments I made were very much around transportation. And markets that are soft like industrial, I would tell you we still have in places like medical and aerospace inventory still being burned. So I do think the factors impacting [ph] supply chain are very similar to how we painted the overall picture of the three segments. I think when you look at the supply chain, you go to transportation though, I think we ought to keep in perspective where auto production went to and how automotive is adjusting in time supply chain. So back in the third quarter, 12 million units were made that we made 22 million units on the planet, I think was quicker than we all would have thought the recovery was. And there will be some areas where there will be bottlenecks as everybody recovers. And, you heard that and certainly our customers have adjusted some of their production due to that and that's reflected in our guidance. But what's nice is on top of that, even though we're talking about supply chain is, where consumer inventory levels are very healthy. So when I think about what we try to track for long-term or how many cars are being bought on the planet, it's nice to see inventory levels on the lots. When you look at North America and China, probably being more towards middle to low end of normal ranges, Europe’s probably right around the middle. And, it's not surprising that the supply chain is being stretched a little bit due to the improving markets we're seeing. And some of our customers have adjusted their production, and that's in our guidance. Craig Hettenbach: Okay, thank you. Sujal Shah: Thank you. Can we have the next question, please. Operator: Your next question comes from the line of Amit Daryanani. Your line is open. Amit Daryanani, your line is now open. Amit Daryanani: Hi, sorry, I will stick to one question and I want to say congrats on some really good execution in the last six months with the way demand has recovered. I guess the question I have is when I look at the December quarter print and the March quarter guide, especially transportation up really strong and better than end unit production, I think the fewer folks will have is that, a strong first half, fiscal first half for you folks could be over shipping versus end demand and OEMs are just building a lot more inventory than they need. And, the risk would eventually be that in the back half of the year, your fiscal year back half ends up being a lot softer as OEMs start to normalize inventory. Could you just perhaps talk about what are you seeing from the OEM level that gives you confidence that this isn't overbuilding of inventory and there's a correction in the back half that we have to worry about? Terrence R. Curtin: I think the thing that you look at is certainly we have orders that are accelerating to the improving market. Supply chain does need to get to a normalized level where production is. I think when you look at auto production going from quarter one to quarter two, we do expect it to be down to about 20 million units in our second quarter versus 22 in the first quarter. So, that should also allow the supply chain to help normalize since there will be a little bit less production. And when we look at it, what's really nice is our growth is doing more to content and production than it is due to the supply chain replenishment. As we've always told you, in an individual quarter, you can get supply chain movement one way or the other. But when I think about content per vehicle, as I said on the call and really think about the $10 or so that our contents increased over the past couple of years, really about half of that is driven due to traditional electronification of the core being more electronics and the other half is being driven by the benefit of the wins we have in EMs as well as, I'm sorry, electric mobility, as well as what we've gained in content on the car having more data. So when we look at that, that's real content growth. Certainly in the quarter there may be a little bit of movement as supply-chain goes, but the bigger driver of our growth is content and that's what's really allowed our transportation segment to get back to pre-COVID levels. And what we all know will be production this year based upon the external estimates that will be less than pre-COVID. Sujal Shah: Okay, thank you Amit. Could we have the next question, please. Operator: Your next question comes from the line of David Kelly. Your line is open. David Kelly: Hi, good morning Terrence and Heath and appreciate you taking my question. Maybe just following up on that point and just to be clear, when you're talking about the buckets and the drivers of that content per vehicle ramp, was that in regard to the shift you've seen the low 60s to the low 70s? And just as a follow up, as we start thinking about the go forward drivers to that low $80 target, just curious, what percentage of that or the mix shift driver you expect from the electrification and EB trends specifically? Terrence R. Curtin: No, I think what you're going to see is balance as we go up into the 80s similarly, because I think one of the things that's important is what's nice about what we've seen over the past year is the electric vehicle seems to have seen -- stand the test of COVID. We talked about it last year about you had electric vehicle growth last year. This year we believe, electric vehicles on the planet are going to be up about 50% versus last year. Continued strong adoption in Europe, certainly the adoption that Asia has already had and it's going to break through 10% of global production. So content will continue to be benefited by our position and electric vehicle. But we also have to realize there is still content opportunity in traditional architecture, too. And those products also go into electric vehicles. So what's nice about what we talked about going to 60 to 70, it's going to be a similar picture as we go forward because where we play in the architectures on every vehicle. It's not just electric, it's also our legacy position and how globally strong we are with that position. So as we look forward all components whether it be electric vehicle powertrain movement, whether it be features in electronification of any vehicle as well as, as you get more data and all of those are drivers to our content. And just in the past few years you can see the reality of it and that's what we get excited about and I think it's what we get excited about as we look to forward growth. Sujal Shah: Okay, thank you David. Could we have the next question, please. Operator: Your next question comes from the line of Matt Sheerin. Your line is open. Matt Sheerin: Yes, thanks and good morning. Terrence I wanted to ask outside of transportation, the commentary on industrial, particularly the areas that you're seeing strength. How much of that is relative to supply chain inventory adjustments versus true demand and I know there's a decent amount of distribution exposure there. Are you seeing signs of good POS or sell through and any inventory build there? Terrence R. Curtin: So a couple of things Matt, thanks for your question. And, when you think about distribution, distribution touches both our CS and IS segments, industrial and communications segments, more than transportation. Our sales into the channel in the quarter we're on par with our total company sales growth. So that's 6%, pretty much how our sales are into our channel partners were. Sell out is -- their sell out has accelerated with some of the supply chain dynamics. They have a role to play. That's why they hold inventory. We have seen some of their orders increase, but I would say we're not over shipping into our distributors. Actually, their inventory levels on sort of the turn are actually lower than normal. So, that's some of the balancing that will be occurring here as the world normalizes hopefully, and net-net in industrial what I would tell you, while we may have some areas like in our industrial equipment that showed strength, I'll go back to our medical customers are still burning some inventory and so is aerospace and defense. So net-net, I would not say there is supply chain replenishment in industrial that we're benefiting from. Sujal Shah: Okay, thank you Matt. Could we have the next question please. Operator: Your next question comes from the line of Christopher Glynn. Your line is open. Christopher Glynn: Thank you. Good morning. Hey, guys, since -- CPV last couple of years, I know there may be some rounding, but it looks like maybe you're trending a little bit above your long-term range, I think we saw that for a couple of years in the 2017 to 2019 period too. Is that range hedged or anything or your commercial team is just executing better in wins or is it fleet mix that consumers are buying? Terrence R. Curtin: Well on CPV, the range we've always said is 4% to 6%. And I believe that range is still appropriate long term. There are something in there. Where does electric vehicle adoption go, certainly feature sets and so forth. But we feel very good about that range and certainly that range is not -- we do not limit our commercial teams to that range. So, it does come back to there's always consumer preference there. It is nice that the consumer preference has been picking up the features that we're benefiting from and we feel very good about that 4% to 6% range above auto production going forward. So, I don't think that range changes. And hopefully we stay towards a high end of it. Sujal Shah: Okay, thank you Chris. Could we have the next question. Operator: Your next question comes from the line of Scott Davis. Your line is open. Scott Davis: Great. Good morning, guys. Terrence R. Curtin: Hey, Scott. Scott Davis: Nice to hear your voices, hope you're well. Anyways, I wanted to just ask you for a little bit of an update on First Sensor, what -- kind of your early readout of what you're getting out of it, any details you can provide there would be great? Heath Mitts: Sure. Thanks, Scott this is Heath and appreciate the question. Sure, First Sensor we own a little over 70% of it still. There's -- given the German public company takeover dynamics, there's still a bit of a tail in terms of us acquiring the remaining 25 to 30 percentage points of the business with owners. But within that, First Sensor is behaving as we would expect it to, where we have market overlap, which is pretty considerable, whether that's in auto, general, industrial, medical, applications. It's trending right as we would expect as we see in other parts of both our sensor and our connected business. So everything's on track there now. It's given us about 50 million or so a quarter of -- 40 million to 50 million a quarter of revenue. And I would say that some of the work that we need to do relative to some of the operational synergies, footprint consolidation things not just on their end, but things that will eventually move into their facilities from our existing sensors business is still ongoing. So we're not expecting a lot of bottom line support this particular year. But trajectory still looks good as we move forward. Sujal Shah: Alright, thank you Scott. Could we have the next question, please. Operator: Your next question comes from the line of Wamsi Mohan. Your line is now open. Unidentified Analyst : Hey, this is Danielle asking on behalf of Wamsi. Can you just talk about kind of your position in the broader electric vehicle market and kind of key differentiators for key? Terrence R. Curtin: So first off is thanks for I think the first differentiator we have is our global position and where do we bring the innovation. And it starts with those design centers that are everywhere, current vehicles are designed in next generation vehicles and that's pretty special. And that's where we've leveraged our traditional position there. The other thing is when you get into the architecture of a car, our knowledge is that all parts of traditional architecture that do go over into an electric vehicle. So certainly there's a lot of discussion around the powertrain, how does that involve the batteries but also realize that architecture does come together as you bring low voltage and high voltage together and certainly come into the infotainment and data element of it that could go into autonomy. So we play across all those elements. I think it's a very unique position that TE has that also comes into the content opportunity. The other thing that is and these are investments that we started to make 10 years ago is when we look at electric vehicle, like I said earlier, we think there's going to be about 9 million made this year. 5 million of those will be in Asia. Europe continues to accelerate and one of the things we probably get more excited about is not only the vehicle technology, but where do you see support coming to make sure that electric vehicle penetration can get stronger. There's two big factors that come in, not only just -- not only consumer adoption, but you come into the two big things outside the car that relate to infrastructure as well as battery technology. And you continue to see developments in that space that with where EVs are going, we think will create continued momentum on EV adoption, as well as support of the infrastructure and certainly the battery technologies that are so important to it and that's happening globally. So, early on we were very much bullish on Asia, certainly Europe with some of their regulations, and certainly you continue to see at a lesser pace momentum here but where TE comes in on that architecture, where how that architecture comes together, the electric, the data, the signal that is our specialty. And it's really great how these trends we're going to benefit from and you saw it in our content numbers. Sujal Shah: Okay, thank you Danielle. Could we have the next question, please. Operator: Your next question comes from the line of Samik Chatterjee. Your line is open. Samik Chatterjee: Hi, good morning. Thanks for taking my question. I did want to go back to the content growth story again in autos and just focus a bit more on the sensor side of the business there. You kind of outlined $10 of content increase you have had over the kind of moving to $70 range, low 70s. Can I just clarify if that includes sensors at all or is it deminimus at this point and more kind of looking forward how should we think about the opportunity in terms of sensors that you can address today on a vehicle and what the aspirations are for what that content per vehicle for the sensors portfolio can look like? Terrence R. Curtin: Now thank you Samik and actually those figures I said earlier did not include sensors. That was our traditional interconnect solutions that we provide and when you think about sensors and you think about sensors back in 2019, you're talking about that's about $2 of content. We see that going up to about $5 in content there. So that would be additive to those figures I gave you. We're getting benefits of the launch. That's actually -- the auto launch is actually drove the organic growth. Our sensor business still has a big industrial piece to it that impacted those figures. But, sensors is a part that would be additive to those figures I said earlier. Sujal Shah: Okay, thank you Samik. Could we have the next question, please. Operator: Your next question comes from the line of Mark Delaney. Your line is open. Mark Delaney: Yes, good morning and thanks very much for taking the question. Good morning. You talked a lot about some of the near-term dynamics in the first half of the year and sort of the nice strength and recovery you're seeing. So I can better understand your thinking not just the second half outlook, but what you're thinking about investing in the business longer term in terms of where you're deploying capital, in terms of these acquisitions like for sensors or some of the R&D you're doing to really capture that content growth you're seeing in EVs, what's most interesting to the company, what are you most excited about going forward? Terrence R. Curtin: So, thanks for that question. And I do appreciate it Mark. I think when you think about when we look forward, I think there's one that I'll talk about short-term and then there's one that I think are important longer-term. I do actually think this period over the past year and the dynamics and the challenges that we've all gone through, we're getting to show our portfolio, the diversity of it, and why we like our portfolio. And a lot of people had questions of how this portfolio would act because it wasn't the same portfolio. And we do like our portfolio and you see that here. I think the other thing as we look forward is the content elements we've talked to you about when you think about transportation, the content opportunities we're talking about are still in early stages and electric vehicle is early stage, autonomies are early stage and that in many ways would content kickers we've been talking about and you're starting to see it in the numbers and they're going to be around for a while. But I would say it's not just limited to auto and transportation. You've seen how our communication segment has changed, certainly around our cloud investments and how we've gained share in cloud that has made that segment the performer. And when you think about industrial, medical will come back, Comm Air will come back and our positions are very strong. So there are things that are certainly they're hurting us now, but I think will be things that drive content longer in the future. And those are the things where data and power are going whether it's around sustainability as things being more connected, where things get more productive like factory automation, we still have content opportunity to drive growth that's going to be above market. The other thing I would just say, well, I'm pleased with the execution. Our margin improvement story is not over. Our transportation and our industrial segments we've been doing some heavy lifting to get to where we believe these businesses are entitled. It's nice to see our transportation segment on lower volume than peak being that close to the margin we think it should be at. But our industrial segment has room to go and, lastly I think it goes to the point that you sort of alluded to and your question is, we like our cash generating business model. It provides choices whether return capital or you do the bolt-ons like Scott's question to Heath around First Sensor and what's nice is we do have organic secular trends that we can do bolt-ons into. And we're going to maintain discipline as we go through it. So as we look forward, it's nice to see some improvement. We're always going to have a market that's probably cycling one way or the other with the diversity. But I do think with the portfolio showing up that we're pretty proud of, and we think there's more room to run on the growth on the margin side, which turns into earnings power and cash generation for value creation. Sujal Shah: Alright, thank you, Mark. Could we have the next question, please. Operator: Your next question comes from the line, Joe Giordano. Your line is open. Joseph Giordano: Yeah, good morning. Hey, it's great to see the total content scaling from you mentioned the 60s to 70s. I am just -- I wanted to talk maybe like longer term. I know we always -- you guys always mentioned like the EVs generally like two extra regular car. As we start hitting those inflection points where EV production scales like exponentially, what does that like spread look like? How much of that spread is like actually more physical volumes on the cars and how much is because the price of these products s significantly higher because the volumes are significantly lower and like, how does that change over time, did the price go down substantially, but the volume scale, so gross dollars it's very, very positive, but the spread between ICE and EV kind of compresses, how we think about that when we get to like significant deployment of EV? Terrence R. Curtin: Well, a couple of things, and our content assumption always assume, I do think we have to keep in reality, an ICE vehicle. If you take this year where people think mid 80 million vehicles will be made in 2020 alone, there is 70 some million of ICE vehicles made versus 9 million of electric vehicles made. So there is a scale advantage. Certainly our customers expect that and we do expect there will be price compression in our content as EV scale. We also have to make sure we bring our technology and our scale to make sure these vehicles are affordable. And so that's always been included. You will still have increased content. So I don't think you see it getting to an ICE engine content, but there will be some as you move up the volume curve on platforms and as the industry scales and we've always said that to you. So, that's how we've always said it and then we don't see that changing and it's something that's very important for the industry to make sure electric vehicles are on par with traditional engine so that consumers can choose what they want. Sujal Shah: Okay, thank you, Joe. Could we have the next question, please. Operator: Our next question comes from the line of Chris Snyder. Your line is open. Chris Snyder: Thank you for the time. Just another one on the content per vehicle and then particularly comments that CPV is in the low 70s today versus the low 60s, I believe you said in 2019. So some quick back of the envelope math there implies high single digit annual growth. So I guess is there any reason why this growth rate would slow maybe over the next two years, I understand longer-term there can be more pricing competition as that builds but I guess over the next few years, is there any reason to think that would slow, obviously the number building off a higher base, but EV unit production is inflecting and it seems like there could also be some sensor tail into it as well? Terrence R. Curtin: The way we look at it, it goes back to what I said before, we think it's 4% to 6% above global production and that depending what you assume on production grows from here. You would take the content and add to it. So I'm not sure it would slow. I mean, it will come into how consumer preferences are, but it's what we get excited about on content. So I don't see it slowing. I see it actually being a real engine for us and we've been investing around it and certainly we'd like to see that the revenue that's coming through on it we'll partner with our customers and we know we're solving their hardest challenges. Sujal Shah: Alright, thank you Chris. Can we have the next question please. Operator: Your next question comes from the line of Joseph Spak. Your line is now open. Joseph Spak: Thank you. Terrence, you mentioned a couple of times that you're excited about the margin progression opportunities. If we go all the way back to 2017 you laid out this 30 to 80 basis points a year, which, would have brought you close to 19%. Now I know a lot of outside factors have occurred since then, but you've also taken some other actions. So I'm just curious, do you have a view of the margin potential of this business looking out a few years, is 19% to 20% range still to go? Heath Mitts: Yeah, Jim this is Heath and I'll take that question. Yeah, the progression over time certainly is still part of our operating model and how we think about the go forward. Certainly, we've had to deal with some things that were unexpected relative to market conditions, no different than any other company out there. But, we still feel like we're in a pretty good place. Now, acquisitions are always going to feather into a point where, you have to overcome some of that dilutive impact initially, and then you build upon that moving forward. But I still feel very good about it, but I think you've got to kind of break it down into the segments as well. The segments, we've kind of targeted and talked about automotive being roughly a 20% operating income business, which is a both, avails a good return from an overall investment as well as provides opportunity to enable, reinvestment of the business for future growth. And that's a good return model. Industrial, which is in the low teens as we sit here today, but coming off of a pretty significant downturn, particularly in the commercial aerospace side, as well as in the medical side is still holding its head. But we would expect that over time, again, to be up into the high teens. So there's a fair amount of leverage there. And then in communications, we're in a pretty good place. We've done a lot of heavy lifting there going back several years and you're seeing the results there now when we get the types of volume reduction or I'm sorry, the types of volume increases that we've seen both in appliances and Data & Devices. You can see what the flow through is in our factory environment with an optimized footprint that we enjoyed today within communications. So, there is still leverage in both transportation and in industrial. And in addition to that, we're still tackling some of the costs in the operating expense line that you would expect us to and that's been coming down ratably particularly as percentage of sales and that will continue to be the case. So feel good about our ability to continue to expand margins for some time now. Sujal Shah: Alright, thank you, Joe. Could we have the next question, please. Operator: Your next question comes from the line of Luke Junk. Your line is open. Luke Junk: Good morning. Heath, maybe another question for you, wondering if you could put this quarter's margin performance in context of the 20% mid-term margin target for transportation solutions specifically. Just wondering how this quarter’s profitability impacts that trajectory going forward, maybe thinking in LEB terms specifically what it says about the production needed that 20% margin target relative to maybe what you would have thought pre-COVID? Heath Mitts: Well, it's a good question, right. I mean, we -- 19.4% is a solid number at that segment level, but you have to remember that we are still trending well below where we were just a couple of years ago in terms of total global auto production. So we did a little north of 20. So, global auto production in the quarter is a little north of 22 million units. If you think about where we were in 2018 and 2019, we're still trending pretty -- still below those quarter -- those quarterly numbers. So yes, what it shows you is what we can do on lower auto production relative some of those prior hurdles because we have tackled the fixed cost, but at the same time we are going after, we've been pretty public with you about some of the restructuring that we are doing and particularly in some of the what have been announced and we're working through some European footprint moves within our transportation segment. And, those are underway. In some cases, they're being pressured because we needed some volume out of those facilities, but we'll see more benefit from those restructuring plans as we get through 2021 and into 2022. The other thing I would say is when you see the types of recovery and Terrence mentioned going from 12 million units in the June quarter to 22 million units in the December quarter, that is a very steep ramp in terms of our ability to ramp up. And as part of that, you would expect there is some inefficiencies that are embedded in that and so, although we're pleased with the margins, there's still room to go with that. Sujal Shah: Alright, thank you, Luke. Could we have the next question, please. Operator: Your next question comes from the line of Jim Suva. Your line is open. Jim Suva: Thank you. My one question is on average selling prices, kind of looking ahead in the transportation segment. In the past I believe under conventional cars and autos, the price declines were kind of like 1% to 2%. Is that going to be similar as you look at more say battery connected HV cars that features similar percent or actually better percent declines or worse decline, the reason I ask is as you know, there's a lot of shortages in the automotive semiconductor industry and they're seeing better pricing declines and I know that you have more annual or longer term contracts, but I was kind of wondering longer term of that segment is the math formula of the 1% to 2% average price decline still intact or because these are newer technologies, they should actually decline faster or because they are newer technologies that could actually hold up better? Terrence R. Curtin: So again, a couple of things, thanks for the question. And I'll tie back to the question I got earlier. First off, when we look at pricing right now, we sort of view it as stable. Certainly, we don't make semiconductors so some of the shortages that are happening in that space we do. When you look longer term and that assume supply chain normalizes, we do expect our electric vehicle product portfolio to have a higher price curve just due to the volume. And that's something we've always said that's included in our 4% to 6%. And so depending upon how those volumes go and that's typically the arrangements that we have with our customers that are typically volume and we sit down and have those discussion with our customer. I would also tell you that when we think about content, we do expect content to be about 2X with EVs. And also the margin targets we give you also include that price on that Heath has talked about a few minutes ago. So net-net it will be a little bit higher as it scales in those product sets. But overall as part of our margin model and content model, we've always reviewed with you. Sujal Shah: Alright, thank you Jim. Could we have the next question, please. Operator: Your next question comes from the line at William Stein. Your line is open. William Stein: Great, thanks for taking my question. I'm hearing a louder chorus of voices talking about ECU consolidation as an aspect of the evolution of automotive networking architectures, things like domain architecture or some zonal architectures. Do you see this happening as well or is it more talk from some technology providers than sort of real action by the tier ones and OEs, and also, I'm curious how you expect this will influence connector units, pricing and your current position with customers? Thank you. Terrence R. Curtin: So well, this is not a new trend. So I think there's a big thing here. The trend of how do you bring feature integration and do an ECU and certainly the car has a lot of ECU, but how -- instead of adding a box to a car, when you want to add to the architecture, you're adding a feature into an ECU, which does help make sure the architecture doesn't get out of control. So, this is not a new trend, it's always been a trend. Certainly some people will go out and say, will there be only one mega ECU or two. I think that's not a new idea, but I think that's going to be much further out. Net-net what happens is the amount of interconnects that are in those ECU has become more complicated, which help us. And then certainly the interface is around where do you need the sense, what's going on in the car also creates more connections. And no different than the content picture I hope I painted earlier around where is content coming from. That $10 half of it is due to electric content, electric powertrain content, some data. But the other half is due to the low voltage architecture that continues to get more connections in it, as the car has more features to it. And you still need to have a connection to wherever the feature is back to a box. So certainly ECU, no different than what semiconductors do all the time which is it integrates more onto a trip. You're going to see that in the car. That creates more complex connecting solutions as that box has to connect into other applications in the car. And that's actually good for us. We think it adds more connections and it actually creates complexity, which our customers need this more from an innovation perspective. So I hope that frames it a little bit, um, and helps you with that question. Sujal Shah: Alright, thanks Will. Could we have the next question please. Operator: Your next question comes from the line of David Williams [ph]. Your line is open. Unidentified Analyst : Hey, good morning and thanks for letting me ask the question. Just wanted to kind of see if you could read into some of the trends you're seeing within the data center, the strength there, and maybe what your view is for the year in terms of that -- those trends? Terrence R. Curtin: Well, the data center what's -- it's one of those markets I would tell you was not COVID impacted from the cycle and that's just continued. So when we look at cloud and data center spending, we're looking at another double-digit increase this year. And, I think the story that we're getting in the unit, in our Data & Devices units there certainly when you look at where semiconductors are growing, that's also a supporter of it. And, we see the cloud spending just continuing. And what's really nice that's over as our team, Heath talked about the margin progression. One of the things as we also work margin is where we were going to point our engineers at. And what we're also very pleased with is our share gain and position that we've earned across all the cloud providers. And not only on the margin side, the team should be congratulated to also what they've done and how do we bring the innovation to those cloud providers. Sujal Shah: Okay. Thank you, David. Could we have the next question please. Operator: Your next question comes from the line of Nik Todorov. Your line is open. Nikolay Todorov: Yeah, good morning. Thanks everyone. Terrence, I think I heard you talk about increased design wins in the electrification and the commercial transportation. I wonder if you can give us a little bit more color on that and maybe compare at what stage do you think that the EV in commercial transportation is relative to where EV and my vehicle is today, or maybe where light vehicle EV was a year or two years ago? Terrence R. Curtin: Yeah, thanks for the question, Nick. And when you look at it, we've all had the discussions around auto a lot and we have -- we've talked to you before about electric vehicles and trucks and a lot of things happening around the last mile fleet. What I said is, over this past year, we've seen a very significant increase in more platform work by the major commercial truck OEMs. And when you look at that increased activity, it seems to be more serious activity than the dabbling projects. And what is really nice is when you think about our position in commercial transportation. It's in many ways, very similar to our automotive position. It's global, it's agnostic to the architecture, that's why we like being a tier two. And when we sit there and we look at what our teams are working on, we're seeing an acceleration. So, certainly when we look at commercial transportation the breadth of vehicles that are in there, whether it's mining, whether it's Class A trucks and so forth, it's pretty broad, but we do get excited about the content opportunity there as well. And it does feel where we are today from a program activity is probably where we were three to four years ago. And automotive just giving you a gut feel on that, of where this momentum is starting to accelerate. And it's truly nice that we're going to leverage our position like we did in automotive. And that can be a content lever in ICT. Sujal Shah: Okay, thank you, Nik. It looks like there's no further questions. So if you have any questions, please contact investor relations at TE. Thank you for joining us and have a nice day. Operator: Ladies and gentlemen, your conference will be made available for replay beginning at 11.30 AM Eastern Time today, January 27, 2021 on the investor relations portion of TE Connectivity’s website. That will conclude your conference for today.