TEL - Earnings call transcript Q1 2021

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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. to of conference Investor like host, to now President Vice Relations, would turn over the our I Sujal Shah. ahead. go Please

Sujal Shah

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

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

Investor morning measures addition, Due release ask to portion we with and at press will along call, participants presentation ask the tables this allotted certain time. Relations everyone number use of we're our website In our themselves The sections during an to and the press question these and opportunity make limit the the to large of to the Q&A slide we non-GAAP to of our in slide te.com. the on we accompanying of one review that asking presentation sure you found address portion related be today's release items. give questions discussion the on use can of to the can everyone

if but question. willing follow-up are take the a that have questions to rejoin you queue We you second ask

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

Terrence R. Curtin

fiscal XXXX. Thanks first of also and quarter our everyone our joining for fiscal thank expectations quarter results Sujal, our you and for us today our second cover for to

our slides, the quarter. into get like share perspective I would first Before to some I on

margin we As on are from to our plans. you benefiting diverse are our and results, continuing will in portfolio execute the see expansion

the generation our business also operating whilst line is expanding and ability free drive we of ahead markets to our of model. organic seeing margins over our not the the are them. resiliency improving very the demonstrating Against been conditions year, past cash that growth have backdrop, strong dynamic in we markets operations, only of demonstrating flow content this are majority across but While with

well plans positioned highlighted while are you, benefit in of you'll to trends and growing that our for efforts second we've as messages the let to secular and frame our as benefit markets me out results, of first quarter. from quarter expansion of some now to these With the backdrop quick continue We today's key as the a margin the call. driving that guidance see

strength of the in First, I XX% quarter execution per believe our of I portfolio results. very of teams adjusted growth the earnings strong our the the delivered growth diversity am and benefits improvements. and with XX% pleased share our and We delivered first from and demonstrating year-over-year, sales operational

in in to sales increased from electrification with ahead vehicle. data the where Our generate the of but as continue expectations greatest well were of strong content outperformance transportation, in segment, powertrain our as growth each the we

to points Our mid-teens decline. segment a growth margins adjusted in year-over-year maintain margin expanded performance sales slight we operating both our communications basis in XX.X%, with our and XXX segment transportation a where industrial despite margin decline and

a first We model cash approximately record flow one at quarter quarter cash generation to our continue free strong being of our million. $XXX with demonstrate

cash second our expect to look we our strong quarter, as we adjusted net expecting this approximately performance flow year. free And for continue to We income XXX% to conversion are fiscal to continue.

year-over-year. and sales in And approximately a at share, and double-digit first expect share. quarter, earnings adjusted billion growth again expect like in first per $X.X We share adjusted quarter per and sales the per to the earnings similar earnings we $X.XX revenue of

provide in by do the fiscal being levels, this to XXXX. markets above despite take And Data below & hope as performance example, a discuss Now, our company appliances, In segment, helped some segments. this seen of XXXX will In like our back a benefiting home our in it and build our you where enable data markets as we're level, give overall center to continued for our three revenue I'd our performance to majority to and the very to levels the moment investments different is different recover pre-COVID and At strong color Devices timeframe approximately to relative has and environment. and progress markets evaluating levels in like well pre-COVID pre-COVID we for respectively. baseline of industrial this year. in segment, I'd improvement our sales outs a the from is were communications we our end our have

as sales are remain that commercial pre-COVID markets have impacts, levels. below well air, We weak to and markets medical still a COVID of result our continue and

are levels. Content every it's segment reflecting However, year. the The does touching was to the COVID patterns indicating our transportation it TE our generation be XXXX, in of levels that in production bottom these vehicles XXs revenue and sustainable truck range. auto in XXs content traction global designed in and look see later what our our in proof and and markets. we are along is we we saw low forecasted OEM into is are be some could auto the could we trending outperformance, progression. per prior are products to of and fiscal of content In per the in growth is the businesses leadership vehicle though now and XXXX even leading next order the below position these low And businesses at above the vehicle in improvements driven like both real the still seeing now share our technology commercial gains have worldwide. fiscal auto transportation generating

sensing technology solutions. and continue for connector XXs vehicles expect green, preference more vehicles to customers, bring our expand and to increases and drive will per electric into continue more content consumer As innovation more we become features to as to and our we to the the hybrid over is driving consumer benefit continue surprises we What's and and for adoption safe, vehicle time. content connected, the

we our we've us. pleased growth about with progress the excited that ahead of am that opportunities margin still sales have I operationally, and results even made expansion I'm more While and the

We continue in the started seeing the communications, during plans to that due the prior in has industrial of I'm and to the accelerated proud volume in transportation execute margin to our progression we offset also industrial pressure of as we're which margin pandemic. COVID very result market impacts expansion a and that COVID. related on

segments. to than were expectations, turn our we quarter. of sales a the about. turn We and segment in down XX% growth and in the year-over-year. Quarter if organically XX% now in basis due and organic reported first ask second X% businesses with provide organically could on Slide expectation X% growth to were already quarter those So COVID two communications additional to I'd details for had you all some our sales one, up talked slides related the to X I and the to better both Industrial $X.X across impacts billion for transportation

adjusted income is our $X.XX. This a earnings adjusted an orders and the orders of a showed reflecting operating of $X up year-over-year, a the earnings billion During up It share XX% being was XX% of an couple where to was we I'll majority we in in saw up quarter, come From the year-over-year. improvement this served markets approximately was strong XX% perspective per operational back year-over-year. performance per we and slides. end share

into second per forward, first with levels, adjusted on look to share expect we we lower our strong being performance our quarter quarter sales continue despite auto production. similar As earnings to sequential

offset on growth XX% and quarter quarter, For approximately and year-over-year XX% $X.XX driven earnings share is is year-over-year $X.X year-over-year this by the approximately adjusted margin by earnings the a second reported performance. Similar expect organically. included be decline industrial. in first mid-single-digits will billion sales partially per we in up will organic transportation be an this to to in with second operating communications, quarter, approximately to and basis and expected be the expansion a be our Adjusted up

So trends if we're and X turn seeing. let that Slide could get you order me into I'll to

quarter, level our reflects of of a supply would were highlight markets For orders in billion orders I to book-to-bill improvements a our approximately that some the as well $X like chain this of first as X.XX. end with number replenishment.

markets is occurred in being the the replenished that that third the in Europe the see year. quarter of of reflect improving, shutdowns not supply surprising after it and chains we U.S. impact orders our As last

in orders we dynamics. each of we these cases looking to at orders We some broader customers growth due declined a segment, semiconductors sequential advanced grew placing both orders like factor in year-over-year grow XX% all did the And the certain constraints communication Industrial and with and orders orders basis, businesses. guidance on in slightly the basis, are on electronic passive components. businesses chain but based and all also impacts give a see in does broad supply seeing product component categories year-over-year And across transportation segment. by that

some orders China orders we're transportation growth geographic perspective an basis. color what communications. driven organic and were this In So on provide seeing XX% quarter, let on by with me up also the our in from add first in and I'll a

in strong in We improvement China. across markets continue are appliances position auto, those commercial benefiting from and and to our strong transportation, see

flat XX% large all North orders of back of with the year-over-year some in year. communications middle with in and drops growth saw and industrial. represents improving COVID And growth following segments. in a Europe our from with in growth by growth were being the orders in quarter second We declines markets consecutive also America, Europe, in This transportation offset last

X, touch transportation like organically organically cover with is to sales continued X growth the one through low some by auto in in chain those upon growth issue. of digits. our were production In single with and those on sales and our content were Now, The briefly results is benefit businesses. slides global to from versus up supply the Slide outperformance what growth XX% I'll replenishing. Starting do XX% auto strong up year-over-year our I'd segment driven each

technology from are position in and bring gains We next our leadership generation and to products value the that customers. we our seeing

strong as commercial earlier, share increased which ongoing of to transportation well outperformance the electric helping mentioned powertrain electrification As driven an XX% business, as we and saw electronification well gains. the content by growth as connectivity, as I seeing In organic from are content the continued growth move trends our are vehicle. we data

new saw Euro transportation in well as our also in as emission and and emission are market serve new and increased in our X standards continue of that India. higher commercial X China from regions, in growth in verticals all from business operator and position all We benefit China. we We to benefiting adoption standards strong

increased in that we which acquisition. X%, in the by growth included operational driven We And auto program design and revenue an our XX% will power continue sales operating to expect sensing electric in provide also From perspective, basis to by growth and growth Sensor First by in applications. segment we win increased content reported auto from sensors, wins contribution driven growth. future train platforms basis, an pipeline to the continue the margin saw expanded seeing XXX In strong commercial a are transportation volume. margins increase these organic expand performance. on On basis, the points XX.X%, of

years. move margins our me of maintain operating I we sales able let adjusted down actions very organically declined segment adjusted X% to XX.X%, to to operating mentioned, as past over were Now, over am the mid-teens we initiated the the to sales cost our decline. slightly our industrial X% that where, organic the I margins and despite due were proud couple year-over-year

impacted aerospace XX% organically. During the our the the commercial business declining AD&M decline quarter, be to with continued in segment market, by the

we later As Air Comm I the touching we're in could this business in do bottom improvement see mentioned year. earlier, and along in believe this

applications. organically in by have caused growth consistent X% applications. saw strength decline as and renewable interventional to increase our be spending and our driven a all the a regions COVID. later this procedures did X% short-term with anticipate see that Our utility we medical start industrial up what our impact procedures energy customers growth we medical with equipment COVID with year. in are ongoing that but growth And market And to automation in on in We to return applications in organic elective weakness was to the wind business expect in these dynamic energy to and factory solar saying business delays lastly, is continue see this been and by we and business, in

in Devices Devices to and the communications continue in turn XX% We which sales our due Data year-over-year benefit organically the me China broadly, improved & built with represents organically growth all very and to cloud let regions basis XX% operating the the in & as sales year-over-year grew to from our X% prior segment our margins, Data solution appliances. year-over-year speed team In from Asia to communication market. well growth with adjusted half Now, an delivering and our well the segment. strong versus more where sales over home recovery both which applications I as high organically of in do appliances, in benefits year. for say grew to have points continues investments housing we we is position grew across and XXX up would perform XX.X%

Now, with on expectations that the me Heath overview, into get more who to let going it over forward. turn details our financials segment and will

Heath Mitts

for XXX margin the the XXX of for and of charges to and a related continue $X.XX Thank Slide restructuring and to the a Adjusted charges everyone. fixed and of million the end related and was $X.XX. details charges. morning total Terrence good restructuring operating optimize ballpark and million of million million and operating benefit XX% structure our with as income will more GAAP to in was XX.X%. was financials. X, quarter organization. footprint to income turn loaded approximately year-over-year, you, XXX XXXX tax this provide included EPS acquisition operating the manufacturing cost be I an for expect year was on Please fiscal X plan we $X.XX EPS other front of where and XXX continue improve million GAAP We restructuring adjusted included QX Adjusted of the

provided. of The We also tax effective $X.XX, has reconciliation and acquisition other in approximately charges XX%. adjusted rate had that was QX restructuring,

to second quarter, tax expect rate to the the XXXX. our and rate For continue tax effective in expect of around high be we for teens an XX% fiscal

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

organic XXX on million up if XX% of XX% and X. X% versus year-over-year. Slide positively reported the impacted up year. basis prior rates So -- an Currency were X.X you'll turn by basis exchange billion were Sales to a on sales

mentioned in execution very target We Industrial $X.XX, with cost XX% with you strong with are were volume operational have and despite benefits the and also we communications that driving adjusted we've demonstrates year. I'm strong significant prior our model I operating mid-teens the business quarter now pleased quarter strong as the Adjusted operating cost And and that progress am our first both approximately we is over have we record in very heavy and In operating industrial. And returned of dividends XXX XX%. I that of in And operational actions margins to in million, a XXX through few million our are was earlier, consolidation basis demonstrating versus to margins execution continuing mentioned. our of margin we which adjusted XXX was improvements flow up adjusted are operating is shareholders reduction from structure EPS with business years. the cash of quarter, and our remained making share the mentioned continue I expansion XXX execute on million, our as represents the and year-over-year. repurchases. which an points pleased cash XX.X% discussing reflects of from our adjusted XX.X% which segment. earlier. in benefiting Terrence operations which performance. completed transportation been past margin we XX.X%, cost we drops, the lifting for communication, nearing the footprint Transportation our plans already model to

flow shareholders to we our discussed to the We growth we how approximate cash this and the excited remain continue the used to we for go we committed free and Our on To time we year reiterate strength conversion before about use free cash across performance of third to to trends positioned cash leadership full about us. portfolio. a XXX% model in opportunities markets year generation expansion have I expect disciplined ahead acquisitions. of our flow for serve, of last with margin to we and returned remain over of cash first summarize, our two be positions benefits and to of strong with year. cash to along the expect questions, the secular quarter our into And we flow demonstrates that organic and of thirds our be portfolio want

of efforts. expansion our content margin impacted result You above stabilization. by some initiated sales benefits are growth in COVID and our now we're and cost performance that downturn that Data ahead strong a the are enabling and markets seeing seeing transportation, well & signs in of showing the commercial as been of segment market Devices recovery have and markets COVID auto We from appliances and actions industrial

cash going We value generate capital maintain our expect creation drive forward. strong to performance, business for on strategy and balanced flow, continue model focus and our to a to disciplined stakeholders

this Sherryl give So instructions the open Sujal, the session. for could now let's Q&A up for questions. you please

Operator

[Operator Instructions].

from comes question of the Craig first Your Hettenbach. line

may ask You your now question.

Craig Hettenbach

thank color Terrence, current thanks on supply the chain you dynamic. for the Yes, and

expand kind just just the business your of you replenishment on a out know around semiconductors, of and bottlenecks you're we there's of mentioned I where kind that, of phase? would can demand gauge kind how are in you there, you news If in versus this frame plenty seeing what there out of

Terrence R. Curtin

recovery Craig. think of I first would many COVID, like it's uneven And businesses all, differently. thanks is and say, the impacting Hey, I very things different

very And and in burned. much would the comments still transportation. tell markets I medical we being like So, I places you soft still industrial, are have that were around made like inventory aerospace

chain the very [ph] to the three we of picture painted impacting supply factors think overall do similar I how So segments. are the

think chain, supply in production though, chain. went how keep supply the ought you when and to I in is to to perspective think auto time look automotive adjusting go at I we where you transportation

thought units was. made recovery quarter, million of in the there And, is some have are So is, will though that's there consumer quicker that supply certainly healthy. on be be recovers. and was all the adjusted we our as you units XX will made even that some everybody inventory chain customers And and third were XX back bottlenecks our But top due have than talking I very about we're that, reflected production to nice million planet, we heard would think on where areas of that levels their where guidance. in the what's

about probably what or think I nice When when look planet, see being the being around for surprising So low the due to and markets try are that more the normal middle. middle lots. probably to on little supply levels you is improving towards the it's being bought to many end China, not And, seeing. long-term cars track ranges, chain how we of the a America to it's stretched at we're Europe’s inventory North bit on right

our our And have some and guidance. their in customers of that's production, adjusted

Craig Hettenbach

you. thank Okay,

Sujal Shah

Thank the please. you. we Can have question, next

Operator

next Your Amit from question Daryanani. comes of line the

Daryanani, open. now Your line is is line Amit your open.

Amit Daryanani

ends level the than first have more a about guide, folks congrats have strong start the of back a as half, need. half from are just stick seeing six a Hi, there's print first building are confidence versus they guess talk the year, gives demand softer of in quarter inventory year and the be quarter overbuilding and you over and fiscal March one be for OEMs strong better really unit your Could and is And, especially lot that to the to isn't I what that end half execution has question the production, half good will and end eventually think in way inventory the being inventory. a that, half than could this to up worry really shipping sorry, I folks we correction risk December the fiscal demand would I OEM back normalize will back look the last lot some is you that that you perhaps just you about? up I OEMs transportation recovered. fewer when I on the with the months say to in question want at I have

Terrence R. Curtin

orders the Supply improving at does market. think thing level need is that have to production that to you the are normalized look a to certainly is. accelerating I get we chain where

to million first we be from you I quarter. at in quarter production think do XX second to about going look two, in units one auto expect down quarter quarter our versus it the to when XX

growth since supply should also normalize due that is when to production the will to at more is the bit and than a to it what's production. allow replenishment. chain be chain less And we it, nice really So, help little supply our look content doing there is

is quarter, one the vehicle, movement that an told we've think half can But of core about about past said is about so the in driven car get years, I of of due or we've individual as really traditional more over always the on being driven $XX by have you sorry, in or the well supply the and our way per half I really the mobility, on EMs I'm As content electric more data. in well the you, as what and wins other. gained contents electronics chain being increased to as, when we as as couple having think that of the benefit call electronification content the other

in year what's growth be but little look driver back pre-COVID. is the based levels. segment a get at really supply-chain that's will pre-COVID growth. transportation may allowed know content content that's real as our be of we upon the Certainly goes, bit less to So this that, be to and there our than that external will when And the production quarter all we estimates what bigger movement of

Sujal Shah

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

Operator

from David next the of Your question comes Kelly. line

Your is open. line

David Kelly

as seen taking appreciate and and that per ramp, Heath that point in just that go shift the just when forward be mix my drivers Maybe specifically? Hi, about shift a following the what low content you or to the to as vehicle expect that low drivers that about on target, curious, up, percentage the trends the clear, thinking to was of to of morning regard just the $XX good follow and driver low buckets you've and the talking start up question. and just electrification from you And XXs EB we the Terrence XXs? you're

Terrence R. Curtin

No, to as nice have of year up up the things XXs seen we stand balance you're past is the similarly, the about think -- versus the going last about are year I into important vehicle we electric what XX% that's test what seems think to This year. what's we've about seen the last is of you talked over going I go because see year We electric had year. one growth the planet be COVID. vehicle about it last believe, electric vehicles on to is

Europe, it's had adoption that already certainly adoption XX% the strong Continued to break of Asia production. through has global going in and

So by realize position there go opportunity vehicles. products vehicle. we in and is electric traditional content benefited to have But also to our electric be too. still will content into And continue also architecture, those

we forward about talked electric, how going going XX to about strong where legacy we position. be a every picture our architectures just in we go we the it's also it's XX, on are vehicle. with globally that as not It's to So what because to similar nice what's position and play

about get it components as, as excited reality it of what be get we all features whether of to powertrain we in we think about well it's as get of data to I electric any you we as as the are drivers look it look vehicle our few content. you forward and the So vehicle see those movement, that's And be forward all whether what more growth. and just and can in excited past years electronification

Sujal Shah

thank David. question, Okay, have you please. next Could the we

Operator

the Your Matt from line Sheerin. comes of next question

is open. Your line

Matt Sheerin

of industrial, particularly amount versus inventory inventory there. I sell through or true of the How morning. commentary there? Are on demand seeing signs I relative that good outside wanted and ask Yes, supply any thanks of and is strength. a exposure the to areas chain decent much Terrence seeing there's build and you're transportation, you that POS good to of distribution know adjustments

Terrence R. Curtin

and things thanks And, touches of think a couple So for about segments, than your IS you CS communications more distribution, question. Matt, both when transportation. segments, industrial and our distribution

quarter into par our growth. the we're in with sales Our company on channel sales the total

our supply much sales out has role a Sell That's out were. pretty to how dynamics. sell hold their with chain -- they into X%, that's is some inventory. are play. of So channel the accelerated our why They have partners

but our of some would over levels normal. into I Actually, sort shipping their distributors. say We not the we're have increase, are seen on turn actually orders of inventory than their lower

that's balancing net-net I will some is while as you, in So, occurring equipment hopefully, our normalizes inventory go the what some areas have our some here may showed medical I'll to be that aerospace would so we and like and customers industrial still of the tell in back and defense. world industrial that are strength, burning

So net-net, in I would not from. say there is supply chain replenishment industrial benefiting that we're

Sujal Shah

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

Operator

Christopher of question comes the next line Glynn. from Your

open. line Your is

Christopher Glynn

saw morning. years, maybe I but or know there your rounding, -- be above range, of last some you. Good it long-term trending CPV guys, may you're a range are or your little the just for like buying? since in commercial or mix to is Hey, anything a that of bit I Is it we Thank couple looks consumers couple think too. wins that better period team XXXX executing is that XXXX hedged years in fleet

Terrence R. Curtin

Well we not certainly said term. limit range electric long to is I range something are still vehicle does Where X%. that appropriate there. CPV, is the adoption There X% we've believe certainly And on always our that and is But that range and -- range. go, commercial do forth. feel not that range about we good sets to so very teams in feature

It very features to picking from going good been up and consumer always come consumer is to feel So, X% the the has nice about preference back that range X% it above we're does auto production there. that preference benefiting there's that forward. we

a stay hopefully of it. don't we think towards I And range high So, that changes. end

Sujal Shah

have we question. the Could next Chris. you thank Okay,

Operator

Your next line Davis. from question Scott of the comes

Your line is open.

Scott Davis

Great. Good morning, guys.

Terrence R. Curtin

Hey, Scott.

Scott Davis

of your what would of -- you hear on great? update to Sensor, a you're it, an I little ask to provide there any out getting wanted Nice voices, hope of of you well. can details kind readout your First bit you're be what just early for Anyways,

Heath Mitts

as Heath German Scott expect owners. and It's both company Sensor market tail First the pretty within of overlap, But that, applications. Thanks, First business of have us whether given question. and is where XX as terms the -- our to appreciate public in of the a connected that's little to, would XX% Sure. Sure, trending other still auto, XX general, There's the see parts takeover bit we there's business. a we behaving it which over a still. points remaining is acquiring of with industrial, considerable, of right expect this percentage in it own in we would sensor medical, Sensor we our is as we dynamics,

we It's revenue. So there the things is do of into that about of on quarter their XX to facilities work million to business -- given track million a will things sensors consolidation not need still their so just some million move a our quarter end, XX the that eventually And ongoing. would us of XX everything's to existing or footprint of operational that from now. synergies, I relative some say on but

good line forward. bottom not still trajectory lot we're as particular this a move of looks year. So But support expecting we

Sujal Shah

we have Could Scott. you please. next the question, thank Alright,

Operator

Your comes from Wamsi of the Mohan. question next line

open. now is line Your

Unidentified Analyst

Danielle about and of is in talk behalf differentiators the Wamsi. this your key Hey, of for asking just broader electric kind position vehicle market of on you key? Can kind

Terrence R. Curtin

special. and that the with think differentiator the is in vehicles bring there. we've current position everywhere, starts it our is those global we generation are where centers first have do leveraged next position for we off I that's traditional where innovation. And first are our And pretty thanks designed and that's vehicles So design

get into you our over go knowledge electric when traditional the parts architecture is into car, is architecture do of thing that that a vehicle. all other an of The

So infotainment discussion the certainly of into you does voltage certainly lot and the come powertrain, a element autonomy. and into there's that together and of it that the low around but batteries go that realize how architecture together high as also does voltage come involve could bring data

elements. So across those we all play

opportunity. a it's position that has comes I that content unique into think TE very also the

vehicle started be big we these this will make things like technology. X the to is more come two big car is do that there's the about to those is years that you in, as adoption, And well only I -- not come There's Europe to we stronger. to said technologies you on only developments not certainly adoption, in going, as consumer outside battery make when only X the support electric two we be get XX and just the infrastructure The EVs battery that see space continues get important the to well think vehicle can relate of as factors other and but into that infrastructure one and vehicle, as will but are not of see we momentum that with technology, million happening earlier, it Asia. made create look excited thing EV electric that that's penetration at so going we of continued are million think accelerate about and where investments coming you support globally. the year. that to continue that to where probably ago are in things sure

Europe but were momentum continue at that bullish that TE it's comes certainly where we're benefit very architecture Asia, much in our really the architecture, on trends and going electric, our lesser their you where how of see on we certainly these on some content together, from to a comes great how the saw the in with and specialty. that data, signal you it numbers. is And pace here regulations, early So, to

Sujal Shah

Could Okay, have we Danielle. thank you please. next question, the

Operator

comes Chatterjee. line the Your Samik next question from of

open. line Your is

Samik Chatterjee

Thanks sensor business the of to more on just go content side there. morning. growth taking and back in autos a the focus did my want to bit story question. Hi, the again good I for

you outlined today vehicle of deminimus of and sensors look on the moving looking that if of kind $XX portfolio for have over content at You in aspirations vehicle increase what this point the that had like? of a and or clarify includes what $XX that can is can at sensors per range, the address kind terms kind we forward content the of low XXs. should how all just I Can think opportunity for are more you it about to sensors

Terrence R. Curtin

think figures that's you talking in $X That going our about actually earlier traditional there. I in include provide content said about about sensors. you're you thank not Now did up content. and and was that and you when that about Samik solutions $X we sensors We interconnect XXXX, about to back those of see sensors think

So that the -- would be the We're actually you. getting actually gave additive to is launch drove those figures That's I the organic benefits of auto growth. launch.

But, big figures that a sensors be said a to piece impacted would those figures. has still additive it earlier. I industrial part is to those business that sensor Our

Sujal Shah

you thank please. have Samik. next Okay, we the question, Could

Operator

of from line comes Mark next Your Delaney. question the

open. Your line is

Mark Delaney

Yes, thanks question. morning. taking very the Good for and morning good much

the You talked sort some and dynamics about near-term the seeing. recovery year and you're of of the a strength first half lot in of nice the

can capture term doing not of sensors where what in content investing company, like some but the deploying interesting your better that in to just to you're for the thinking are EVs, terms you I capital, what of or in the what's business thinking seeing you're acquisitions forward? second half longer So going outlook, in these about you're terms understand of really you're about R&D most most excited growth the

Terrence R. Curtin

So, do Mark. it appreciate that And question. thanks I for

are talk challenges portfolio, we And when and one how portfolio see and we forward, same there's questions dynamics that do show about like you do our look like portfolio portfolio. it, that to had I one portfolio. then I our this and past lot And we of year about actually the getting over when all and we're through, diversity think of there's period we've wasn't act the think that longer-term. a think and here. I short-term that people you of why the think important it our because gone I'll I this the would think the

in and we we've to are look just to for think forward ways going see stages say early they're transportation, and I when in early think kickers that about and I autonomies it's in while. about limited content would talking not be a it is many transportation. But as content numbers stage, would the elements stage around thing auto other the been you vehicle the to we're opportunities you is early starting content talking about and to and are talked you're we've the electric still about

our our in cloud investments how cloud medical and will performer. made communication about seen are Air will You've gained positions segment has certainly how that we've And back, the share come segment that our has very industrial, and around come back changed, strong. when think Comm you

factory things content things to productive I whether it's but will around sustainability going being market. that now, drive data longer have us drive be are to certainly we in where things future. more they're And still and get like be are things think that's hurting going opportunity there the the as connected, automation, are that are So those growth things where above content more power

say, execution. The the other thing I I'm well, with would pleased just

Our margin improvement is story not over.

our we've be think lastly transportation your Our trends the like should margin we It can segment through of question transportation peak like the going that think to has alluded to doing return do point see as to that to volume our secular generating at. we segments have on some businesses it go capital or goes Sensor is, to First get what's we and we're heavy model. to and into. believe entitled. I are you where than room our lower to close go cash organic whether bolt-ons we and, industrial being we question industrial it. been choices business you lifting we bolt-ons nice these It's do it and around Heath And that maintain Scott's to But provides our do to discipline the sort is nice segment

that cycling the way with proud portfolio have on on cash we growth pretty to the look to But some run or a I showing as and we're side, for more into nice going forward, We're diversity. of, the think generation which other with see there's it's and creation. margin the the So always do turns probably we think to up power improvement. one room earnings market value that's

Sujal Shah

Mark. Alright, next please. we the thank have question, you, Could

Operator

next comes the from Giordano. Your line, Joe question

Your open. line is

Joseph Giordano

to you I just -- two it's great good like always wanted the you longer content XXs Yeah, like guys regular extra to like generally EVs the see to mentioned Hey, am from car. maybe I know mentioned XXs. total -- term. talk morning. always we I the scaling

how scale, spread the is spread the significantly much volumes EV like that these start points we because volumes exponentially, higher actually hitting like? those much the like because is As that production look scales s How inflection what like price and more are ICE substantially, did like we the products volume that significantly does where go how EV? the of physical on of cars very, kind deployment the time, lower like, and compresses, and we when it's about so how between that of change EV of but down does over dollars get price think positive, gross significant spread but to very

Terrence R. Curtin

keep reality, of and vehicle. a think assume, I to things, Well, couple our an we have always ICE assumption in content do

million this take year is million XX vehicles there alone, million you XXXX some think of electric vehicles of in mid versus people made made. where will If XX ICE X be vehicles made

that in do a as price advantage. scale be there we and EV So compression our customers content expect our expect there is Certainly will scale.

make to make these have to are sure scale bring affordable. sure our we and also our We technology vehicles

included. always that's And been so

You will still have increased content.

getting volume an I you there the up So move engine and curve be platforms it as think and ICE to on see said but scales content, to as always industry don't that will we've some you you. the

we've how are consumers see traditional that changing with so engine that's industry for on then that's what par that the So, very want. choose vehicles and sure to said and it's can we make it they something always important don't electric

Sujal Shah

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

Operator

from of the comes question next Our Chris Snyder. line

open. is line Your

Chris Snyder

for you the time. Thank

Just CPV in is another said you XXXX. vehicle particularly believe and the XXs, low comments today then I one the the in per versus on that XXs content low

high there growth. annual So implies single some envelope of quick digit back math the

that there So the seems sensor next the I would any reason understand pricing can inflecting but maybe could slow EV longer-term there well? I reason a think it as next number few over guess that into I guess rate there the over be slow, competition higher some unit like also is years, production two off builds growth and is it years, be more any this as tail to is base, why building there would but obviously

Terrence R. Curtin

it's look above to and you on here. I grows that X% what it to global X% what we from before, think production goes we way The at back it, production said depending assume

add the take content and would to it. You

how So slow. I'm would not into sure I excited consumer will come mean, get about it's it are, what on but we it content. preferences

actually we're and see we So it we've we'll that engine that's our I coming challenges. and around it through with customers we'd been slowing. certainly it see solving being I a hardest like their know and for revenue don't investing on it see us real partner to the

Sujal Shah

thank next Chris. have we the question Can please. Alright, you

Operator

of next Spak. question the comes line Joseph Your from

Your line is now open.

Joseph Spak

a Thank this brought the times a of you. progression If XXXX Terrence, close basis you laid all XX go you would mentioned we you excited you're out back opportunities. way couple XX%. have XX that the points about to year, margin to to which,

taken some factors outside since actions. you've of Now then, I have occurred know a also lot but other

have view to still looking go? to range curious, XX% do a So years, XX% out is of I'm the of just you potential business this few a margin

Heath Mitts

different I'll progression that and we're the is than had we in like still there. deal good to time of out other But, question. and operating our the go a take unexpected Yeah, with any market over no how conditions, that we certainly feel think part forward. model pretty were we've some Yeah, to still Jim place. Certainly, things about this company is Heath relative

low are point to XX% segments time, and reinvestment return is into investment in a kind the today, model. here targeted the to is overall acquisitions roughly The well. being forward. business side, income teens. business, feel head. talked Industrial, provides we've about it, of about up and an the still as a well the commercial you've sit its which into in dilutive coming overcome as good future of would opportunity pretty you Now, off very got I teens have high aerospace some from to a that to as but is impact particularly enable, moving side that's well expect as a But the feather we significant segments, initially, return growth. we over break but always in And good operating both, I be upon a again, you then medical as which build that still holding that of But a where, to going automotive down think into of avails of downturn, for as the it good kind

fair of when And both the we're reduction heavy there's years sorry, we seeing and We've pretty good amount I'm So or the in a get in back types the and lot results there volume that place. of a done you're now of leverage there Devices. there. increases a in volume then communications, lifting types seen we've several going of Data appliances &

within an through that factory environment footprint today can we in our see is what with the You enjoyed flow optimized communications.

to in operating to still is as in us we're leverage transportation and continue that the both line the some will percentage case. to addition coming been of industrial. that And expect in ratably you down would particularly sales that's in and be and of expense the costs there still that, tackling So,

time So continue our now. ability to about for some feel expand to margins good

Sujal Shah

we Could question, Joe. next have the please. you, thank Alright,

Operator

question next from Junk. comes of line Your Luke the

open. is line Your

Luke Junk

Good margin specifically. morning. for mid-term could Heath, maybe this another question context XX% solutions you, if of margin quarter's you target the performance wondering in put for transportation

what that LEB terms target what to forward, maybe needed going quarter’s relative thought XX% how says the wondering maybe it specifically pre-COVID? trajectory would this Just that you profitability have impacts thinking margin production about in

Heath Mitts

number at well Well, years global level, ago production. it's terms in total we segment you to that that remember we mean, solid trending still we where just a a a were XX.X% have of below but good I is are auto -- couple of question, right.

north So we did of XX. a little

of So, is north global little the production units. in quarter a auto XX million

were -- quarterly we where pretty in still about we're below think quarter -- numbers. you trending still If those those XXXX, and XXXX

that have announced have but pretty restructuring after, what on some we the those going we is the particularly about fixed those tackled some footprint you prior transportation benefit So we're volume are of we see of some relative doing shows needed it are from XXXX XXXX. yes, working do pressured and but as more the we they're and what those can with our moves of get through through restructuring some In some segment. of into underway. those within lower public we'll the cases, at we because some out facilities, time you in plans been And, we European same being production hurdles because auto what cost, we've and been are

in recovery when I types units units million you December a quarter, the XX June of say going mentioned very The in to the our ability part the And inefficiencies ramp you in that is and some million Terrence the terms that is with would with is would expect pleased steep other and quarter from that, XX in so, although there's thing up. margins, go that. that room of ramp as embedded see we're to still of are to there

Sujal Shah

have Alright, please. thank the you, question, Luke. Could we next

Operator

question from next Jim of Your comes line Suva. the

Your open. is line

Jim Suva

the decline the industry newer because is longer that wondering more these I are that pricing of they're faster of annual and formula could they average is looking X% features there's know, X% going automotive of one of and percent I the cars like similar or declines you look in My is transportation a In you. battery to ask ahead to X% that or seeing longer you have declines lot that math Thank are percent that you actually HV more of cars kind actually similar segment reason decline, newer connected better term actually worse be say or in should the I segment. or Is shortages intact were as at term was decline X%. still under to semiconductor past question but know as better? believe of the kind technologies or and up better contracts, declines on prices, kind the price conventional price selling because they the hold average autos, I technologies,

Terrence R. Curtin

a the again, I'll to question. question So tie of got couple things, thanks earlier. And for the back I

and longer make sort the so semiconductors we shortages that are that to look assume expect Certainly, in don't our do electric X% the normalizes, in stable. just it as supply we've we view you chain happening vehicle to X%. when due of a we included right higher volume. do. off, And look When we that's to we said our curve something that price that's portfolio product at have space some First always now, term pricing of

go down depending with we also when EVs. volumes And Heath the that our price that with a have targets that's so include those sit how customers that would and expect ago. And we on you we that that upon and about content, those about and discussion typically margin volume do few content give have our typically tell talked arrangements be minutes we I also are with customer. think also XX the has about to we you

a higher But it reviewed little So as scales product will bit model you. content net-net and margin always overall be we've model, of those it as sets. in part our with

Sujal Shah

please. question, the have thank Alright, Could next you Jim. we

Operator

at from William comes question the line next Stein. Your

Your open. line is

William Stein

your tier than pricing technology influence providers see taking curious I'm consolidation or things talk from how of thanks some with for well zonal Great, my current architectures, this or as you question. domain architectures. also, of real chorus of aspect louder ones you. expect a you this I'm ECU more by about and is customers? of position Do Thank voices it networking will an hearing some evolution architecture the as sort units, OEs, and talking connector action the happening and automotive like

Terrence R. Curtin

trend. this a well, not So is new

The there's a of do and ECU but So the you do of here. I an think a how ECU, and has certainly how big lot trend thing bring a out instead sure integration -- feature add you the help a feature adding architecture to an to doesn't you're the box when make ECU, into a adding which control. does of of get want architecture, car, to car

will new people is out been or this there some mega will be two. go one it's trend. not and only say, a a So, ECU trend, always Certainly

those it, of but the more going interconnects And help further Net-net complicated, interface in that in more I that's is on where the us. which connections. are the think hope due the due much think of voltage be around amount sense, content, need from. half where more it then a no not to electric to to has electric get it. I to content I the is connections also powertrain you out. car data. the a going the have box. become different content, in wherever what you has earlier that what's more But around is ECU to half painted coming is connection happens other That feature continues that's is certainly as back idea, to content creates need the to $XX is car And to And low a do still some picture I features than architecture the new

is So different certainly no do the what onto than time more trip. ECU, integrates it a semiconductors which all

more good and creates innovation which perspective. customers complex it box see an us. our this that's complexity, to applications connecting to need in connections more actually other in the the more creates that going connect car. it car. adds We that You're into That as And for has actually solutions from think

I So bit, you with that little hope frames helps that question. and it a um,

Sujal Shah

please. we next Could Will. thanks have Alright, the question

Operator

of David the Williams question [ph]. line next comes Your from

is open. line Your

Unidentified Analyst

morning the letting and good thanks ask me Hey, for question.

trends terms those Just if could you wanted of your the that read see the to the for you're is of strength maybe and what view data center, into within seeing in -- there, trends? year kind the some of

Terrence R. Curtin

-- center from the those Well, COVID the what's cycle was would impacted continued. just and of not one you markets that's data I it's tell

that's where over of also when see just our as that & So cloud when think And the that's we in story you it. year. supporter center talked semiconductors Heath we're really certainly double-digit are at we data margin growing, units about another our Devices look increase I Data we're this a cloud spending looking in what's team, getting unit, the look nice the spending, And, and continuing. there at progression. at the And,

gain our they've not were things the engineers work across congratulated is and the that the with position at. also bring our do earned we margin only we how going share should we those pleased providers. what the of we're very One margin what as side, be innovation to is done to cloud cloud and providers. the on all point And to also where And team also we've

Sujal Shah

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

Operator

comes Your Nik from Todorov. next the question of line

is Your line open.

Nikolay Todorov

heard more little on us about commercial the a is my Terrence, and and design what in morning. Thanks can is you or good increased electrification at vehicle that a everyone. was compare that give you in ago? maybe where EV color EV I where think talk years bit wins I wonder do relative Yeah, and if think I the today, transportation. commercial or year stage two transportation to you light vehicle EV maybe the

Terrence R. Curtin

our truck significant mile in question, we automotive of working And when there to auto are and vehicles lot look think we and projects. is activity when on, we've happening more an And position. commercial OEMs. when increase is, nice It's being our things very look in a lot I a sit increased we similar past it's two. our what global, around dabbling have seen to transportation. that and this major the look fleet. by acceleration. What around to very why position we're you agnostic the be trucks the teams to the at you seeing And you many that's ways, in architecture, last activity, And like for about we seems platform electric said tier had really what all at you more the serious than is It's commercial thanks it over year, work at a we've Nick. talked -- Yeah, the it, and when we've before discussions a about

to in trucks do and but this can we're like truly ICT. were in that forth, to broad, get we feel content as are it's feel are And that, where certainly to there, leverage A of from be So, activity so the transportation it's at a we we the our where that probably nice vehicles it's we breadth And where a did you today excited on pretty of starting we well. position Class commercial is opportunity whether a content four in just three gut accelerate. look And does And about years mining, automotive. program automotive momentum is going when whether it's that ago. lever giving it there

Sujal Shah

no Okay, thank looks further you, Nik. there's It questions. like

have us you day. TE. relations if So contact you Thank investor at any for have please joining a and nice questions,

Operator

Ladies for and replay gentlemen, your of today, your conference Time conclude Connectivity’s XX, conference will beginning That will be TE the made for investor available at XX.XX January XXXX website. relations Eastern AM portion today. on

Sujal Shah	VP of IR
Terrence R. Curtin	CEO
Heath Mitts	EVP and CFO
Craig Hettenbach	Morgan Stanley
Amit Daryanani	Evercore ISI
David Kelly	Jefferies
Matt Sheerin	Stifel, Nicolaus & Company
Christopher Glynn	Oppenheimer & Company
Scott Davis	Melius Research
Unidentified Analyst	Bank of America Merrill Lynch
Samik Chatterjee	J.P. Morgan
Mark Delaney	Goldman Sachs
Joseph Giordano	Cowen and Company
Chris Snyder	UBS
Joseph Spak	RBC Capital Markets
Luke Junk	Robert W. Baird
Jim Suva	Citigroup
William Stein	Truist Securities
Unidentified Analyst -
Nikolay Todorov	Longbow Research

TE Connectivity (TEL) 27 Jan 212021 Q1 Earnings call transcript