TEL - Earnings call transcript Q3 2018

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity Q3 2018 Earnings Call. At this time, the telephone lines are in a listen-only mode. Later, there will be an opportunity for questions-and-answers with instructions given at that time. And as a reminder, today's call is being recorded. I'll now turn the conference call over to your host, Vice President of Investor Relations, Mr. Shah. Sujal ahead. go Please

Sujal Shah

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

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

te.com. our the you non-GAAP can Investor Relations this the morning In slide discussion portion to the address addition, of our review at we the and related slide on measures these press will in along press sections presentation our that items. presentation, of of use with the found accompanying release we ask release tables, certain use be and and The website

of one We're allotted question an second make give but the ask Finally, the we're opportunity questions that increasing queue on you to call, rejoin today's can the take to Q&A ask to to everyone time. of the to themselves ask question. happy questions, everyone asking and to number participants follow-up sure we limit portion due during

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

Terrence R. Curtin

and thank cover third for for results joining you, us our outlook today XXXX. and to updated everyone, quarter Sujal, Thanks,

slides, Before against and full recap and the strategy let I year elements the get our into earnings model. business guide briefly me quarterly results of our

demand another successful quarter and we demonstrate an ongoing growing which investments and with markets the executions, in results Our of pipeline serve. growth in support attractive quarter above to

for growth the to of this organic growth X% quarter X% end organic the in midpoint third X% we we our long-term and also X% delivered the our and upper expect organic is full year line, target. growth top On at at the

world to our by connected Our be focus in this co-creating to consistently end trends our on by markets. is with our our outgrow this TE leveraging leading customers increasingly position and enabling driven revenue secular global and continues growth

and share reflects which annual the per year. growth the full target growth earnings we're our acquisitions, share growth adjusted increased guidance while disciplined balanced raising by in our invest we XX% line, our adjusted organic business midpoint maintaining continue This consistent bottom also remains dividends, earnings over of business our XX% through with a buybacks, perspective, as to double-digit a share the On year per approach is and support strategy levels as well growth our From and prior opportunities model. capital on earnings ROIC the mid-teens. to in the

this and X% our declined have did than was data in declines. and expected. appliances regions our combined organic by XX% all our slide representing earnings devices X% the Communications SubCom. organic revenue per share. slides, in of businesses to businesses all across also reported organically So $X.X above if and review X across in well businesses you our with as well guidance grew with Transportation, Solutions, markets, the In deliver all in We as regions. three the growth well as start Industrial with were TE's XX% of organically and above highlights offset as business, segment we adjusted year-over-year Sales We let's growth and move exception did growth with SubCom year-over-year. our to I'll saw growth We double-digit and could, growth each performance organic from as third grew and the growth with we in our X% billion in more we organically, In XX% quarter. segment, growth all

the of highlights the that segments. the quarter that earnings margins primarily a were SubCom share you Industrial negatively a the impact in side, points our operating with XX And adjusted at And it's that Transportation Industrial earnings year-over-year of our expansion On The favorable this we margin XX.X% benefit segment back margins, was in delivered an three, with the one of dynamics delay earnings currency margin XX% our key adjusted quarter margin both perspective, from operating expected our in and earnings, due by in by in where per margin well the year, I'm we In and year-over-year. points adjusted call. translation. per impacted operational with I from it, was year-over-year we $X.XX versus when up share strong performance a Earnings impact first basis driven we tough had strong at last XXX to program growth, along headwind. even delivered quarter quarter. look we growth declined quarter comparison overall the very as revenue Communications when SubCom proud adjusted third as look as the a margins basis very highlighted segment, from the

currency full the tailwind exchange a being earnings quarter Turning third first rates, versus three in from offset stronger share year. we changed to quarter quarters are headwind the year, foreign results, to our which in revenue due to incremental fourth raising prior reflecting and guidance, headwinds that primarily per a the are our by

lot we results just sales delivered. reported the about think And XX% the in November adjusted adjusted organically, midpoint, quarterly the X% of made versus guide progress that about. is up per growth For gave which earnings per of perspective, I with when organic like we year, beginning be and growth full just and earnings of and we back to X% we was back expect at of $X.XX up X% organic share year year share I that basis EPS the a three which looks this XX% $X.XX, on a and talked the XX% growth the in the

cover and I'll to let's So trends slide order in X turn detail.

organically. see segments, look growth X% and XX% year-over-year broad-based when reported Orders SubCom the slide, we excluding X.XX. orders our you growth our to orders billion can continue you at our Total As outlook. a were book-to-bill reinforce see and were three $X.XX in across was on basis which up

in in the and increases growth order Asian; had to X% in growth region, Europe. globally Americas; continue all orders we see And X% We XX% in by organic with regions.

to aerospace, increases and And our marine Transportation, in our double-digit strong all across growth and XX% with both and and year-over-year regions organically, grew our business. Turning Communications in excluding Asia led momentum businesses. in the growth year-over-year, orders in the Industrial, business medical in with we SubCom, by segment, by saw Americas. segment increased X% growth defense orders In our both strong organically order in orders growth orders of all organic X% with regions in of

each you businesses. Transportation. XX% growth grew Transportation turn So our let start me please with and slide organically of X, we'll three if into sales with strong could in results to segment get year-over-year,

were global the production XX% X% on up sales growth auto organically Our in auto quarter.

along the titles Our and continues in as global growth gains. benefits to illustrate in our strong the in well We share continue impact project as XX% from of (XX:XX) Europe, X% with our growth position. to leadership growth above had positive growth Americas, organic as benefit China, auto market we business growth XX% the our content long in of new

vehicles. Our for and and from benefit trends both the reflect content growth performance increases market, continues to electric connected secular we adoption to in as expect this

growth In emerging leading design regions within growth year-over-year, our to We continue and growth across organic our and business, outperform investment well-positioned pipeline across an edge of submarket. our support with and to XX% with commercial And each all momentum applications. extremely transportation OEMs. these wins in TE's we to we're strong growth increasing continue increase the global balanced revenue market with solutions

talked auto and in business the to we will of sensors, certainly the We construction our applications. about. the design XXXX, wins the sensor to generated In strong industrial heavy you And $X.X see in of well markets. continue year-to-date, as across continue technologies momentum in our is to transportation applications, and design applications. in design particularly across of which agriculture, auto mining two growth set to broad growth discussing And year-over-year over past brings strong value areas, $XXX growth organically as we billion auto driven we've XXXX we've as momentum since win and grew been see wins truck with growth business beginning in applications. new sensor spectrum the commercial This design the auto, for years. total by X% the fiscal a up million This win

the margin and margins segment, our XX at sensors. design win strong year-over-year operating in points they and and basis were in for XX.X%, were reflect line momentum capitalize connectors on with expectations both up to Turning to investments

we please were expected. operating a So Adjusted basis turn X% and as margins Solutions discuss and points our revenue. Industrial to we'll slide from grew segment. operating X expanded organically on reported year-over-year leverage X% higher XXX and XX.X% basis sales Segment on

the quarter journey. expenses operating segment. factory this to in results about, we a multi-year you margins show journey the high-teens I the into in we're to in and you progress this As feel to footprint on really making are adjusted that see expand lower the talked And optimize our we

the United me both medical the move to let We automation by on as offset defense by and targeted X%, commercial growth saw across organic In was in by in energy, Americas So our highlight industrial in line driven we growth regions to States. factory aerospace is segment. business, all an we and In strength continues business basis to with the long-term grew defense, which growth, these organic weakness organic applications. see in growth X% the rate. saw equipment, outside was X% AD&M business both continue mid-single-digit and and our driven markets, of by in improve. performance this In growth and our strength

I'll Solutions So and to please slide turn segment. discuss Communications X our

with earlier, our declines said the As driven our SubCom by I declined and X%, year-over-year line was which expectations in segment the business. in

(sic) with share a from our In remain and applications by providing and growth continued they our grew regions our basis. organic appliances applications high growth performance across devices, have and we gains. of businesses And in growth integrated and we XX% with solutions. growth, is and where company XX% data organically, data center and in content both momentum growth with on strong business, connectivity X% all In organic (XX:XX) continued all driven trends, speed TE electronification devices Our regions, data strong. combined [appliances]

had we tough about revenue include We the the The leveraging in continue secular trends the our that primary healthy which miniaturization $X quarter. last well SubCom, contributor million. as the $XXX billion. cycle our revenue to SubCom our remains efficiency the in global Overall, safety, and market, quarter market to declined been of to and comparison decline appliance at was a year, remains as we've from this And in in year-over-year elongated backlog position. million the $XXX in leading third talking versus benefit

of past this quarters, operating I'll mid-teen targeted nature ramp segment to SubCom into margins margins For due the the over segment, couple were the adjusted we below program Heath, business. the margins as XX.X%, our the and discussed to running and delayed that, operating of it With get project over and turn are accounting financials.

Heath Mitts

income you, million on and provide million turn morning, will included details of where income financials. Please operating X%. of million, $XXX and margin of acquisition the slide good $XXX the of strong was with restructuring operating and QX adjusted everyone. to an $X million leveraging growth XX.X%, Adjusted Thank was other charges. operating Terrence, X, GAAP $XX I more and charges

in of consistent For charges $XXX our the Solutions restructuring is well driven our about is the XX.X%. footprint as we $X.XX. was as $X.XX full company. a year, The other activity Industrial in related charges by SG&A GAAP up of driven structural Adjusted year-over-year, the $X.XX, restructuring across acquisition This I past. make XX% as EPS by the what adjusted segment, quarter talked continue and as included benefit QX for and of improvements million, translation. effective sales primarily EPS in as in we've from of to charges optimize strong well $X.XX the expect growth was rate currency with the tax very approximately

resulting at in QX, should ahead, we in our tax approximately adjusted year continue rate full in to sequential range. term, the our expect XX% increase Longer tax XX%. do Looking a XX% rates rate you to view in

Terrence driven primarily turn in earlier. quarter to XX.X%, adjusted X, SubCom with gross where the year-over-year if you moving pieces outlined by to get decline was margin Now, I slide the

operating rest from of portfolio, XX.X%. that adjusted strength cash operations pressure offset our the from able were quarter, and margins margin of pleased from relative overall the we maintain to X% SubCom was In the driven Given year-to-date up I'm our year, On free reflects $XXX a cash cash cash operations basis, was million. is million and flow investments. $XXX free and capital from impact a the flow year-to-date versus last strong increased

is And we of As on company. this given the for sales. I year rich last growth pipeline as highest mentioned capital organic X% approximately for our investment quarter, the to and of be return are know, opportunities, investment you this investment the increasing is

and results. seen target pleased nice adjusted ROIC continue those in ROIC have and with I'm improvement year-over-year mid-teens We to

We the And sheet shareholders repurchases. additional to flow balance also cash and appendix included share returned through and details. for a $XXX million we've dividends summary in

turn tariffs, questions. as just I to share Terrence, perspective there and trading let before our policy back obviously on So this many me the are

of our products are very are some affected tariffs, While recently by of U.S. a TE small percentage products implemented directly actually impacted. only

been with our our to has close always aligned to strategy manufacture to chain Our customers' customers supply be strategies.

global position mitigate and footprint TE Our impacts. tariffs helps from

continuing with a including impacted, optimizing However, company, would customers. a of to our open combination create tariffs are impact those trade, friction, our is surcharges leverage are we're like cost footprint and TE closely for in chains, customers to the products at for restricted and to to and minimize supply to global manufacturing that uncertainty we actions added global proactively committed free working engaged current and markets. looking of some reiterate businesses in that, trade global as implementing and policies cases, proponent a I further

provide Mr. that year they it guidance going this later So year Curtin. future and turn any have in to that, for future update fiscal impact issue we an over a I'm you would our impacts sense terms on any to XXXX back when give of guidance. With we'll

Terrence R. Curtin

revenue been Thanks, And fourth $X.XX of fourth $X.XX the let When look dollar, guidance get with expect $X.XX growth fourth tax and recent quarter look year-over-year U.S. quarter, third for our currency When X%. the the in currency fourth $X.XX of sales our slide the flip. billion about has strengthening do and share this of to quarters on that a quarter the you Currency the expect going of a the exchange headwind earnings organic we XX. billion into per you first adjusted At and quarter. is approximately $X.XX. start midpoint, million the of exception X% with $XX Heath. the impacts. think earnings like reported three we to so and represents quarter adjusted at year, lot to of expect me the quarter, we'll tailwind per and growth of and of now like share We

four prior expected addition, has tax so similar operationally, our looks quarter In $X.XX pretty the rate year, a to of headwind three. quarter versus

in to on businesses organic we mid-single-digits basis, segment, grow single-digits and both expect expect organically, all long-term and and with by by a we line move market you single-digits, If businesses. all revenue reported similar across model. expect quarter. revenue Transportation Industrial growth and as Communications, above we just three driven Solutions with our And high low in with continued In down at in both devices levels in grow Solutions, we expect growth SubCom we third to appliances being data had the to be

So XX, please. to let move can if and full slide me to year turn you the

$XX.XX midpoint, revenue year represents full expect now of growth. this we billion our of X% billion, reported year, year-over-year. $XX.XX increased $X.X organic revenue and full At the representing For XX% billion to

the by driven earnings the up flow guidance, $X.XX. XX% of If our Versus our to $XXX slightly well it midpoint From due midpoint, break from about share you take $X.XX is adjusted of sales organic revenue increased share, $X.X the prior adjusted revenue from per at about $XXX to earnings million down, We're mergers and translation. up and we're growth. million to billion growth translation. our the and million currency benefit per expected this is increasing acquisitions, benefiting an the also at benefit $XXX from growth, as be as of and currency is through

had by partially that in we SubCom. offset performance strong weaker the be a dollar our to stronger three, quarter and outlook expect for slightly We

So let our color year me full get segments guidance. into by and our

in in We Transportation XXXX. be approximately growth reported expect low our on production up Solutions a organically high-teens assumption double-digits segment up X% auto basis to and global on the of

The upon the be growth growth with in unchanged talked outperform data reflect a Communications wins with single-digits be being share our and you and we the reported expected it's up In about in growth based commercial basis, end as mid-single-digits. and drivers organic outperformance low and that equipment, expect defense. commercial content reported sensors we Our Solutions, appliances growth pipeline SubCom. gains continued to growth expect transportation, single-digits the devices In to from highlighted continue to essentially you that down more the on have. offset expect up in guidance, of I high primary both that growth organic than continue market to Industrial continues our momentum And by and earlier. to to and for we clients we an Communications, remain and in industrial as well air we prior

and We the in and data strong appliances combined continue expect growth year. organic for to devices

into to takeaways So I as go want about cold think (XX:XX). highlight before we the questions, I just some key

I and continue and think our in to for and full our EPS XX% deliver strategy expect against the X% very we business growth adjusted which with to model organic business well line execute is model. growth year,

benefit broad that today. secular you driving we I in And businesses that to from we the trends the business the global highlighted markets have broadly and ahead and serve. continue We consistently of the growth through see growth

growing the going to our organic We increase and organic talked growth, to as future auto, make to X% support in that's best continue and look growth and key that attractive design investments to to in to at pipeline our investment. Heath up wins, increasing capital continue the particularly and continue support we be about indicator, of our is

point delay and I margin strong margin we're to improving approximately we SubCom. think going I flow with XX% review think of it's our demonstrated year. And year, at to maintaining For XXXX, year-over-year that that and in target value about margins will TE in in our earnings continued strategy expect this continually the step double-digit program is intact talked Transportation ROIC we the in segment. capital And a segment, levers of we're we're drive and be further Also, to creation generating Industrial we strong the on cash where that Communications growth remain be for level about multiple that earnings. to margin really a we're expansion that our it's good with you full a drag at drive key you that X to we the the due balanced going the

one as continued I do do So customers I and we connected. for around create employees the their to close, want the quarter, is their world a commitment our to safer, our sure last future productive and as as well that's thing making thank to the execution third in sustainable, want we

So for Q&A. let's with it open up Sujal, that,

Sujal Shah

Allan, give can for the Q&A you session? instructions the

Operator

Absolutely.

Go Our line Hettenbach of first please. ahead, question come Stanley. with will the from Morgan Craig

Craig M. Hettenbach

on increase Yes, terms thank of activities year-over-year some question yet A of in of the and probably margins, mostly forward the you're business, restructuring a looks you. operating the about for footprint. talking XXX-basis-point more like look in Heath the Industrial leverage

talk just what about margins seeing you Industrial you're could So you then today forward? and going envision how

Heath Mitts

that as growing got a that restructuring that units through. all know, our is outlook today the we're the about belt for not tell would thanks businesses, that seeing payback. we to there as the you've but Honestly, flow have in some full the for we're margins, And I Industrial business you year benefit just quarter, two-year improvement in generally in largely, charges you incurring the for this of for the relative but tightening growth question. there, XXXX organic Craig, the seen segment.

payback which the as you outside of Some period are these U.S., to know. lengthen the tends

pretty benefit to these of all So really in XXXX from of to facility pointedly are as restructuring much in starts the you, and the and which talked about more kick in we've those, more moves XXXX, extensively activity big completed. some

and talked So two-thirds third of Certainly, that operating about we're on keep the growth we a there. a restructuring about there, what there's pleased towards footprint XXX-basis-point externally about expansion side real side. of piece journey with is that in the optimization we've it and to focus. attributed is the progress of We're yet now mind flow a come. team's been margin that But through on about through the heightened the growth seeing

Sujal Shah

Craig. you, thank Okay,

Operator

next, the Giordano we'll of And ahead. Joe go Cowen. Go with to line

Tristan Margot

This is for Hey, guys. Tristan morning. Good in Joe.

by result you to had was operational looking It very maybe on You strong SubCom potential more I there? a (XX:XX). the a expected business. bit that but masked divestment be somewhat, a was guess, Are proactive

Terrence R. Curtin

you as it's it's Thank all while question, question. a you for your question. a that, good not And new know

I've business Our a told about. that SubCom you is asset always unique

a is that business is unique. it's While a it business, good

at as So it go in the up in is We disappointment business we than that that And that is it But billion. on business We like million. is long we're to in of been. this we that when down to the feel, our that overall, clearly, you it's But expect to impacting has it it. have early in. in it's feel, run. that a this margin. $XXX program we more will you And It's mean, if slowed at be things teed it. at be a it, year, forward, the program But we see it that be delay I down. the it operate XXXX. feel cycle, as year in were backlog. you do we performing we is to this for a $XXX healthy very about our also year there range. of the we've time, performed And cycle past healthy and the up year. something end long we it wrap as good we as million the we look look business always level own told we it, Clearly, this own is Certainly to needs there expected said low hasn't a from $X going earlier offers

that of technology for, and this is I'm business feel where around the we've the as to we've headwind about Transportation in cycle. new up So both to Certainly, has that Heath the rest a talked good in business had very question. program where delay created expansion able had margin positioned the has step it a proud is prior to been about make the strong that that

So CFO continue that I've here XX been saying for I've it. always for alternatives through work We since years. we'll to at SubCom, look but been

So thanks for the question.

Sujal Shah

have Thank next question, the please? you, we Could Tristan.

Operator

to David next Leiker of line Baird. the We'll ahead. with Go go

Joe D. Vruwink

Good Hi. morning. is David. Joe This for Vruwink

Terrence R. Curtin

Good morning.

Joe D. Vruwink

we look it X% growth what to When above that at and Transportation relative be is going this year. end try like production, organic market to is around X% to market growth looks reconcile your was last year. It

relative out-growth, just can better TE So high X% It it of seems to X% this has target? better growth, level it that. Why than content sustain to be X% single-digit the beyond to X% guidance certainly like of than been above a that. and sustainably can't

Terrence R. Curtin

when look it, in as think right XXX you back this quarter. long-term about look just our bit Thank that grew at stronger And you your little Day, shared above quarter, you was Investor question. quarter, to we was for this we X% automotive. about we with we points in It production X% in up When a production. basis and XX% at the is

key in continue that we invest design to I have. think we the wins is the

we about production You're think like a about have view still and next going to we if going is world continue the even see to to year, X% environment.

investing of environment that design production momentum production think year, and have be upon that would high the environment based the that sit there and we're type wins about X% behind. similar you I single-digits when this think in you you in in to we So the

the we our So businesses, production. breadth. moves about look from but when for any where on our do little have, global it, customer the happen and wins of globally the to and we It's what at feel capitalize not also our we have, momentum that things we're we deployment global only we one great positioned

Sujal Shah

Okay. Thank the you, have Joe. please? next Could we question,

Operator

ahead. That the Christopher will line Oppenheimer. from Go with of Glynn come

Christopher Glynn

Yeah, morning. thanks. Good

to to the process So that production approval and resolved has think project. back I relative SubCom, been

neutral lift on shaping around for view just magnitude, year, how into a some degree, converting And visibility for then to tailwind next So segment that separately, wondering maybe margin rev and the basis? to revenue is up backlog there. certainty

Terrence R. Curtin

of couple The strong $X as mentioned, billion. I've So around things. is a backlog

year, we program you XXXX, to that line. I program works And is looks you'll this year off, like at is in that will to assumption, I next expect fair your So when top at will it you see it's it look work say think a you what in think get as you'll a the And off this see margin that need lot back think And what for up from you'll about now you the segment. to segment. it next mid-teens right as lift. Communications I to segment the And the we've to sub-XX% think see are up year. talked the the into about margin move that

Sujal Shah

Okay. we Chris. Could the have next you, Thank question, please?

Operator

of come from Mohan America. that with And will of Bank Wamsi the line

Wamsi Mohan

of was of take growth. any Thanks. down more those bit quarter? morning. those as if can the Good color margins? investments possibility you. on of it thank future drive be Yes, you to a segment higher a some Transportation the are? little it pertains And specific investments. on wondering in out I what of the ongoing magnitude help address to and you Terrence, what base Did and can some You investments the of the puts called takes were in

Terrence R. Curtin

guess, all, of Yeah, thanks, first clear. I Wamsi. to want I be

came where Our margin expected. in Transportation in we

So I always we at do be at. us would plus don't that surprise believe where was where point minus came it'll in it it be. a margin year which XX%, for you the told the or expect X to And we've

that the clearly, earlier. we've we just very back a margin question we've this in frame business grew by increase to go a year. talked X%, million million in little $XXX But that's the increasing We're you goes of really we organically over to and, up when automotive spend for business investments business if in we in And There sure and that having that to to business. Heath to go talk gross have. that's we And in maybe it by The the with also want had type really pipelines are percentages, two up years, about So of about. the the capital, it I make back. our one to you good actually it that the year. CapEx demand last about north keep in Transportation talked capacity feel but profiles, Certainly, significant. primarily in doing was $XXX we bit, organic we margin. past to our engine I about those Transportation are, putting asked that XX% is

but going committed you'll or are completely So up investments is you best see we CapEx, to and organic quarters, to plus you'll But have increased thank for continue for the we've continue have bit, you. to XX% going now, for make and, is what we that minus, we're question. have growth, we're in the up that to that we to the increased timing which R&D and little doing and a been return off highlight the

Sujal Shah

Thank, please? question, next the you, Wamsi. Could we have

Operator

please. will And line the Harrison Research. from that of with Shawn ahead, come Go Longbow

Shawn M. Harrison

morning Hi, everybody.

Terrence R. Curtin

Shawn. Hey,

Shawn M. Harrison

to if we seasonality the kind reason into I is that of maybe coming any third forward Transportation, maybe business XX maybe that any it as the on the back feel of of is fourth was ask seen other but over do quarter demand? businesses, past you haven't XX Just And feels the months. like pull there quarter in the in versus dynamics, particularly

Heath Mitts

that terms those is little and quarter the bit in look this Terrence of FX we're a as tax two of when earnings similar similar look auto businesses, that of it, our Otherwise, is tailwind together versus the we in around look sequentially the some is lower SubCom just other at non-operational and, a is in and and fourth our goes on obviously, of the side pretty is highlighted. But so being generally, you seasonality about Shawn, typical than Heath. in of they terms of the fourth some turns our The the say, worth quarter in kind pretty third pieces I'll look of QX. quarter has headwind, QX quarter. and from higher quarter, things already battling $X.XX then, significantly the, some us that to There specifically a challenge third the makes generally from outlook. fourth terms

Sujal Shah

you, Shawn. Thank Okay.

next have please. We question, the

Operator

will Capital Daryanani Yeah, from sure, with the that RBC Markets. of come line Amit

Amit Daryanani

lot. a guys. guess... morning, Good Thanks Yes. I

Terrence R. Curtin

Hi Amit.

Amit Daryanani

really design about have there you're year And X% a talked had the stepping realized on cadence of the quarters, up given sensors over a good design you you revenues you've What's think and wins maybe had double-digits specifically. you wins I commentary few but next under do that sitting and the at? $X.X X%, think for go been think I I ramp billion as you do sensors growth, you've Terrence, see Hi. total time? backlog that of was to

Terrence R. Curtin

at look and the telling What's it, very been similar talking to for you is amount it's thanks Yeah. what about online. think you. question, is an Amit, automotive I When I'm we've the great

on – in also well. know you But you saw programs strong automotive growth automotive, of sensors the outside how as these very So in. we and was come

going layer to we it to get start expect do in we're we sensor about. Investor three from north will in And, as how in. ramp, them, ways, automotive supports over take vehicle You back seeing so, content layer in winning time. programs they Certainly, is you at two, as and going of to talked growth $X that production over ramp to you're told in time. these our start Day they years many and per start double-digit actually we you They

you're very and feel had as to think we really make continue customers. these built good that's the our built, in growth and our value we and able in be to about of I nice continues that to into with that momentum get acquired teams things just come the automotive, the creating really make to sure we're layering production to see So technologies to and get are sensors to I we're commercial momentum pipeline going MEAS that that that sure we've the

Sujal Shah

Thank Okay. we have question, the you, Amit. please? Could next

Operator

Jim We'll go the of with Suva ahead. Go now to line Citi.

Jim Suva

Thank you very much.

Terrence R. Curtin

Jim. Hi,

Jim Suva

about of wanted know nice tariff manufacturing, comments Thank gave like by to front? and tariffs. the location goods with M&A, your higher sold some global or on of companies some you on if but Are cost and there's the had in customers. on some Industrial actually I see I or some that know you going been steel supply actually anything discussions actively segment, they about industrial you. the news relationships any recent of I talking aluminum of you to actions changing any talking

Terrence R. Curtin

some one, the so not example, number are Jim, to steel question. give And we Yeah, a for user. thanks

you particularly As certainly, blocks. use resins we base our our of engineers that and what that's metals, basic from start all gold, we a know, and copper and certainly, use building as lot

have not and tariffs, while input our it's the the costs a we big. model. that our on discussions have bit customers we you Really, little with of know So

then, our to chain. is to to close design model their and Our be aligned supply customers,

as to just to there there at I as to Do certain around to need way be whole the their parts that is our moving lots where logistics So because the people a supply we flow, well understand think serve in there of discussions are supply are production flows as look that logistic some trying they chain. to work customer away. tariffs chain, of regard is directly, to we

So they are real live discussion.

would unavoidable, it's where is or if have partners, be moves. surcharges In we that cannot channel tariffs chain do or be you our it's will unavoidable. for we things we go out And tariffs there mitigate that very manufacturing or a As areas through then surcharge, fluid. supply will know, we moves that through it

now. that's So is right where it

they I As work we competitive very very our for that will. XXX,XXX with with than model to is around stay some the you lot can and We're to things customers, feel customers. engagement closed somebody our a that if with with tactical much move with to we long-term, which It's very them make our can more SKUs, business sells sure discrete it right have now. going fortunate imagine, of

Jim. thanks, So,

Sujal Shah

we please? the Could Jim. you, next Thank question, have

Operator

of with We'll Matt the go to Go line Stifel. ahead. Sheerin

Matthew John Sheerin

morning. and thanks, Yes, good

chain question rescheduling be to regarding your may some parts customers companies. issues any business? shortages be affecting EMS hitting of the that some or the supply to you seem about shortages, seeing of Are of capacitor So component that any on mismatch we're hearing whether specifically

Terrence R. Curtin

No, Matt.

we know, don't you as So, do those passive.

Matthew John Sheerin

Yeah.

Terrence R. Curtin

So seen and seen shortages certain in can not we've out. our see orders, not is in any sold seen any rescheduling. We've impact impacts. you we've Capacity Clearly, that is areas. demand not there

before, lead due has of a another can't minor product stop not instead any part to has or or but to some told extended seen our have have overall our want that of we because business, that they But increased. stable, shipping type but a time demand us of they say passive demand would get remained changes slowdown. categories do that's customers where told pockets us, our just how capacitor As relatively we the you I we we are

We any not have way. material seen that in

Sujal Shah

Okay. the Thank please? you, we Could Matt. have next question,

Operator

go Delaney to ahead, line with Go Mark the We'll of please. Goldman Sachs.

Mark Delaney

taking Thanks subsea. question. morning. the on good for Question Yes,

you think heard I quarter bps Terrence, a last been it drag XX corporate and it's quarter. this I past about bps XX margin to correctly, the if had said

and stay is goes of level, the it's XXXX it we So through basis, maybe Should of bit to we magnitude on of then the an if I not the XXXX now a and should this how somewhat improving. done fiscal that clarify impact of a about the as think about better think we kind the understand, larger move program does until the that at just is away? linear reason on a impact magnitude or

Terrence R. Curtin

between business color had is and me of $XXX basis so SubCom No, a question. XX and had really quarter. difference Mark. Mark, add XX – It quarter million points let thanks our points third great The your for basis some revenue. the last

referenced I was of what in points TE's margin it really basis did reference year-over-year. XX that a So year-over-year

basis been. basis So delay company impact XX the that points we've the you're program has right, been that's XX seeing that what level that's impact at is. the The points, what total

and normalized, points you is last I be on program program be, And more will the to think correct to be we up good delay. increase year, volume look at as linearity, up. see its way as program that when So and have through the basis volume the up, it, just what the points basis but it, very going margin is XXXX. is you'll certainly, that that and you'll expect XX getting up, through back to where segment flow program high wrap On wraps wraps on it's the that'll XX work

Mark Delaney

Okay. Thank you.

Terrence R. Curtin

Mark. Thanks,

Sujal Shah

please? the question, Thanks, next Mark. have Could we

Operator

the with to go Stein SunTrust. of William Pardon me. We'll line

Your line open. is

William Stein

Great. Thanks ones. questions. for taking my Two quick

resins moment First, a ago. I think mentioned you

have contacts costs materials have and been Our for indicated these some other that rising. maybe input

you're sort response prices wondering all Thank adjusting is I'm of related through supply would talking in margins So you. that about caps that's related impacting to and of your to your channel. if not a whether to I'm chain, shortages the not chain be supply at that and

Heath Mitts

of And as into it inflation. talked up so guidance based cost about is pressure or the our way what everything, and our Heath. some our we down a When earnings hedging smooths William, out embedded went you this you programs we of $X.XX on was have guidance commodity original place don't share to in and year, know, kind our was we in on of ton that see about with relative volatility for the a structure.

and being where pressures. geared customers are proactively either those certainly, distribution have the team context in well point we we're $X.XX that Certainly, pretty pressures pinch our some of of it it's raise terms that lost be we more the I to have and – the get additional sharing on say price we pressure to to this the have dialogues, grown going using to quantify a you in But done, as after fluid opportunities And of you commodities your increases. to we'll to to closer place realize, not programs XXXX, is relationships. it, types there some after especially a commercial certainly, seem it pieces. but But our resins, focused. sync valid. chain through supply on out we've closer William, pretty are but you and major expect of that. points, challenging got well But commodities, of results of exit And us to a have is I those ramping got our types relative teams on expect again. metals And and/or up is going how but some we – offset recover those the programs but year question. side. appreciate shouldn't our we're of direct and these of is handle Those However, probably its productivity We've be because There are $X.XX there impact in do headwinds, And sourcing is to in we're stay to types we our the input little inflation, some price as up on as as would excuse, some that as onboard, see those similar, we would we're channel especially things. of where then, in material some is to organization of of reflect price, world-class things. there's that's going and bit what we the those of

Sujal Shah

Thank you, Will.

question? Next

Operator

to next go of with ahead. Raghavan line the Fargo. We'll Deepa Wells Go

Deepa B. N. Raghavan

Good morning.

Terrence R. Curtin

Deepa. Hey,

Deepa B. N. Raghavan

the line. Hey. controls SG&A cost on Good

if those was targeting? cetera? curious tightening structural changes temporary you were Or of forex are this et belt quarter, Just just there some from example, headwinds, the something given

Heath Mitts

the I appreciate Heath. Deepa, question. is This

forward at expense Certainly, full where basis, but of that's look normal little our and operating year on that that, structure. say a or in expenses we're that's of to I lot that. we're in of we're total, that continue component operating that you're about done normalized SG&A, points at we've year taking tightening a there's said activity basis is high Having If on a the a thought. of still that looking a relative still came and journey. XXX-and-change part the That different general, that full when out quarter, SG&A. would reduce whether more it than And ahead full more the targeting. that, bit at as at looking you certainly, talked the basis focus quarter of I talked I in – the of the what place improvement in our we're a belt. lighter I'd think our and some a opportunities look in structurally about will we've We've

Sujal Shah

we Okay. Thank question, have please? you, Deepa. the Could next

Operator

Sherri We'll to Deutsche Bank. Scribner of with ahead. line go Go

Sherri A. Scribner

Hi, good morning.

Terrence R. Curtin

Hi, Sherri.

Sherri A. Scribner

think that bit Is segments. related you some growth deceleration? you're seen demand commentary of slight business and a trends TE what about to relatively some deceleration Transportation benefits organic on and Maybe what's the the seeing expectation. what's the environment. in if on at we've environment, the Can talk And in you we've when it a business there's we Industrial Thanks. fourth guidance, that. look driving strong a environment? to Terrence, in driving I for maybe guess been business quarter

Terrence R. Curtin

Sherri, deceleration. No, for I question. seeing see thanks Honestly, actually, the don't that we're

year while as – strong has one of I a I well also think think things quarter fourth the our organic last very changed, one the [quarter]. growth things had is SubCom as of third

X% You of really and X% have versus growth take quarter without organic told X% you our would instead this we quarter in X%. SubCom, the fourth

a SubCom fourth strong we still having have will quarter last So year.

would So during our content and as we activity, what have clearly certainly, continue. continuing the like is wins that we the we medical, see devices, aerospace, in markets. to that at. goes X%, strong we order are Markets it been we around where we bouncing see very see the we that in momentum, look when staying talked we addition are expect to across and affected Sensors to auto we those momentum has back strong to my call, continue defense, cloud, see well in see while they're where to And data really commercial as by strength and about auto. production

to business get business factory growth. continually we where they business, a markets the like the our we there appliance you and to getting lead, transportation normalized looks our it's about, think to are. industrial talk sort I industrial of that automation say would our we Certainly, have more

it's good. this growth the quarter, saw You

normalize. growth constructive That, book-to-bill, the they're get a supply for think chain nature it are growth, years. the the it's for but it. benefiting more being going at we very in would year you a It you and they'll we saw broad based net-net, in to of pattern. we look it's businesses, in we're we're order three four waiting bump-ups. as And look to that rates you we still has say, more only our some get our not XX% economic I very environment, to a to saw because when normalized of healthy, double-digit, I saw to it them grow say from forward, we going expect normalized some So But

Sujal Shah

Thank the you, next Sherri. question, have please? we Could

Operator

And that Goldman please. will come Mark Sachs. from Go the ahead, of Delaney line with

Mark Delaney

automotive question. a for results end quarter. market. had TE follow-up the taking was Thanks question on in Realize good very Follow-up the

Some of like chain Dimewar the OSRAM their and lowered guidance. supply (XX:XX) have

all? impact not did overcome So able TE at any you impact I'm and to see it? see just did curious, Or was an

Terrence R. Curtin

certain that the we impact of we talked they our some our different X% have didn't auto customers XX we both throughout has year, you about, steady. see you No, look days no And really things to an you than revenue may is told staying top pretty And if at going while our even so global similar production. ago. had Transportation ago, because been position, told for XXXX line us pretty operationally, days XX be versus

and So it's it's broad-based, broad-based regions. across

where about Certainly, car where So connected content supply base good trends, we in everybody unique I vehicle feel has the into we the ourselves. very we position the have and the not something play opportunity. that's with both that and electric

small those our always of an isolated maybe well events. be us So content had I gives as from the impacts. as global one-off some we've had they position feel opportunity momentum to But

Mark Delaney

Thank it. Got you.

Sujal Shah

Thank you, have the next we Mark. please? Could question,

Operator

question. We'll for Raghavan's go Fargo to follow-up Deepa line a Wells from

Deepa B. N. Raghavan

just And Terrence, could possible inflection should up for slice Heath, we thinking point XXXX? for is right-size our sensitivity some Thank about, into you Thanks so you. be given fiscal there follow-up the too. could of the headwinds the here? forex me a models we

Heath Mitts

We're it's question. real Deepa. it a Thanks, And obviously time. working fair

the to currencies kicked dollar at basket against at those when basket. weakening what we quarter. economists, you you And kind today, is of the predict and we're look it our it starts that of point, of terms of as second would look at not Certainly, rates do. Again, strengthening XXXX. the have, that tell If the this the you've in it part the got be going as sitting into year our a fiscal of for XXXX. impact quantify into as part early in But of bit as dollar is get more guidance. rates quarter, in we'll in full not I quarter part the a will then little to we're fourth in net turns it year, a to at headwind though of that which to trying much our we get today. year-over-year And kick less then, a next today's and that headwind in a pointed pointed headwind we're has the third latter in

but we'll at yet not are though, to an keep We quantify on externally and what the that dollar – point eye the does.

Sujal Shah

Deepa. you, Thank have next Okay. we Could please? question, the

Operator

Capital RBC from line And another follow-up Markets. Amit Daryanani Go question of the with ahead.

Amit Daryanani

margins Heath, model? look million that $XXX initiative, how out you payback when I number say tailwind you've much talked figure go Industrial I in total model think and specifically, at is the the let's could Industrial Thanks. initiatives. And you up savings of the you flat I'm do are revenues to do about do about. cost guys think How specifically your side, restructuring I the get in out the you if much I from margins? how to the think guess, the from don't have into XXXX, very revenue reduction on taken trying have even costs when

Heath Mitts

more for see part couple would question. there's Amit, terms dollars that incurring of and to of facility results announced in relative things you consolidations largely in into us restructuring of the you see come Well, of early those that fourth The and to XXXX. now good a have expect that quarter still to our are been

we and those the operational else be Those out more to an to come because that instantaneously. doesn't mean However, and support continues in reported just those charge are timeline announced that tend transitions. customers everything the of types our costs on

So restructuring I it's talked real facilities we And are. our still to a the margin tell we're year being high of consolidations programs couple years quite Analyst years Day, couple these Industrial the teens for there. to as and are that for us get to would about upon where can time. take targeting segment our what but is big going be a to site you announced similar some a worked at the XXXX the segment, depending of it mid operationally of actually

asset XXXX parallel is results in that Some the is forth, types there of that that though any production and largely these in And around then, and charge move real costs severance in then to things our impairments. captured are terms of we operational are rolled took, so relative of costs that's there through costs.

XXXX to And going want but So then, of oversell XXX-basis-point see think when improvement continue do I you a impact. officially forward these the into we'll that to in XXXX you're go if push another wouldn't you'll offline, on Industrial, sites certainly I some that. see peanut get to more in pointed

Sujal Shah

Thank Amit. Okay. you,

think question. I one last have we

Operator

come will with please. from Go of Longbow Harrison line that And ahead, the Shawn Research.

Shawn M. Harrison

taking the sales ago, Wanted weeks I think, a is quasi a and on Hi company. connector and follow-up. multiple, thanks paid, basis, M&A environment thoughts your for competitors least ask one reason to on the for get at maybe just pretty industrial two healthy I an your of the

you M&A just there in and transaction? tuck-in one-off this think market seeing you a are is of the so, maybe And valuations out kind higher

Terrence R. Curtin

Shawn. No, Thanks the for question.

is and in hasn't don't It I to changed. (XX:XX) where what it's an we've environment from shared think I expensive an back you we environment. been Jeanie like talked fall, that's been. expensive the with you, decreased it think

they think of add strategy think well strategic our key where value. we've we think about sure over get I the you we is do And and is return how for stayed ROIC where I as talked owners bolt-ons about TE our very from has make in time. we play kind as – consistent you – that to when how

that we're in would the is growth I special think have during I staying say we we pretty So because environment, opportunities have. environment disciplined organic is still net-net, something think I And frothy. the

something we do So create how need our the strengthen on we long-term for as Investor to told investors. I portfolio feel compelled be like continue and value we to you to to don't do Day

get flow. free it. think be I've first, is and And dollars like Heath really looking been invest the return. to it which a it to opportunities best supporting on And we is cash incremental side have with up organic I we our organic the talking how the organic here So year we're taken or we going about, make this balance inorganic at sure

Sujal Shah

joining for And thank have at morning. this a you Thank call have All right. Relations further Well, great the contact I Investor and us if want please questions, you everybody to on TE. day.

Operator

one Those participants X, with and XXXXXX. enter that XXXX, XXXXXX. Executive Ladies Teleconference That gentlemen, may your July dial at today. time, area conference conclude August AM your available Time made XX:XX AT&T at you playback To access please PM. XX:XX area Thank using participation code XXX-XXX-XXXX XXX-XXX-XXXX will service Executive XXXX code for your X-XXX-XXX-XXXX until and Eastern Service. for will the for code week today, dial replay the access X-XXX-XXX-XXXX. beginning XX, again the be International conference are numbers for and AT&T's access code and for during

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TE Connectivity (TEL) 25 Jul 182018 Q3 Earnings call transcript