Q3 2019 Earnings Call

Hello and welcome.

Earnings Conference call for Amphenol Corporation. Following today's presentation, there will be a formal question and answer session until that all lines will remain in listen only mode.

Reclassified the company today's conference is being recorded if anyone has any objections you may disconnect at this time I.

I would now like to introduce today's conference host Mr. Guard Glencoe, Sir you may begin.

Thank you. Good afternoon, everyone is Craig Lampo, Amphenols, CFO and I'm here together with Adam Norwitt our CEO .

I would like to welcome you to our third quarter 2019 conference call.

Our third quarter results were released this morning, I will provide some financial commentary on the quarter and that Adam will give you an overview of the business as well as current trends and then we will take questions.

As a reminder, we may refer in this call to certain non-GAAP financial measures. It may make certain forward looking statements. So please refer to the relevant disclosures in our press release for further information.

The company close the third quarter with sales of 2 billion when I was around 1 million.

And with GAAP and adjusted diluted EPS of 90 to 95 cents respectively.

Sales were down 1% U.S. dollars and flat in local currencies compared to the third quarter of 2018.

And from an organic standpoint, excluding both acquisitions and currency impacts.

During the third quarter decreased 6%.

Sequentially sales were up 4% newest dollars, 5% in local currencies and 3% organically.

Breaking down sales into our two segments, our cable business, which comprised 5% of our sales was down 9% U.S. dollars and down 8% in local currencies compared to third quarter of last year.

The interconnect business, which comprise 95% rest sales was down 1% U.S. dollars and flat in local currencies compared to last year.

Adam will comment further on trends by market in a few minutes.

Adjusted operating income was 414 million for the third quarter of 2019.

Adjusted operating margin was 19.7%, which is down 120 basis points compared to the third quarter of 2018.

Compared to the second quarter of 2019, adjusting operate adjusted operating margins decreased 60 basis points.

From a segment standpoint, and the cable segment margins were 10.2%, which was down compared to 13.1% in the third quarter of 2018, primarily driven by volume as well as to a lesser extent product mix.

And the interconnect segment margins were 21.7% in the third quarter of 2019, which was down compared to 22.7% in the third quarter of last year.

This reduction in <unk>.

It was primarily driven by a relatively normal downsizing conversion together with the impact of the cost of the restructuring actions taken in the quarter as well as the contribution from acquisitions, which are currently operating at the profitability level below the company average.

This quarter's performance is a direct result of the strength and commitment of the company's entrepreneurial management team, which continues to foster a high performance actually oriented culture, which each individual operating unit is able to appropriately adjust to market conditions, and thereby maximizing both growth and profitability in an uncertain market environment.

For the careful fostering a culture and the deployment of our strategies to both existing acquired companies. Our management team has achieved industry, leading operating margins are remains fully committed to driving enhanced performance in the future.

Interest expense for the quarter remained at approximately $30 million and compares to $25 million in the third quarter of last year.

As discussed in our prior earnings calls this increase is due primarily to higher average interest rates as a result of the first quarter bond issuance and higher average debt levels.

The company's adjusted effective tax rate was approximately 24.5% for the third quarter of 19.

Compared to 25.5% in the third quarter of 2018.

The adjusted effective tax rate excludes the impact of the excess tax benefits associated with stock option exercises as well as the tax effect of the refinancing related costs associated with the tender offer in the third quarter of 2019.

The company's GAAP effective tax rate for a third quarter of 2019, including the items just mentioned it was approximately 20, 424.5% compared to 23.8% in the third quarter of 2018.

Adjusted net income was a strong 14% of sales in the third quarter of 2019.

On a GAAP basis diluted EPS declined by 9% in this third quarter of two to 92 cents compared to one dollar and ones that in the third quarter 2018.

Adjusted diluted EPS declined 4% to 95 cents in the third quarter of 2019 for 99 cents in the third quarter of 2018.

Orders for the quarter were 2.091 billion, which was down 1% compare to the third quarter 2018 resulted in a book to bill ratio of one to one.

The company continues to be an excellent generator of cash cash flow from operations was $412 million in this third quarter or approximately hundred 42% of adjusted net income.

This was a very strong result.

Net of capital spending of 71 million or free cash flow was $341 million or 117% of adjusted net income.

From a working capital standpoint inventory accounts receivable and accounts payable were approximately 1.3 billion 1.7 billion and 831 million respectively. At the end of September .

And inventory days days sales outstanding payable days were 70, 970, 252 days, respectively, all within our normal range.

I wouldn't know that we're very pleased with the meaningful improvement in net working capital days compared to June .

The cash flow from operations of $412 million, along with proceeds from our recently completed bond offering offering of 900 million proceeds from the exercise of stock options of 33 million and cash cash equivalents in short term investments on hand, or approximately 13 million net of translation were used primarily to repay.

Approximately 532 million in borrowings under our commercial paper programs and other facilities.

Redeem approximately 373 million senior notes.

Repurchase approximately $150 million of the company stock.

Fund acquisitions of approximately husband $35 million.

For a net capital expenditures of $71 million and fund dividend payments of $68 million.

During the quarter their company repurchased 1.7 million shares of common stock at an average price of approximately $80 under the 2 billion dollar three year open stock repurchase plan.

At September Thirtyth cash and short term investments were approximately $987 million.

The majority of which has helped outside of the U.S.

As previously announced on September four if the company wants a 900 million dollar U.S. bond offering which has a 10 year chairman bears interest at 2.8%.

In conjunction with the U.S. senior note issuance on September 11th the company also tendered $147 million of is $375 million. During these U.S. senior notes.

In $205 million of its 500 million dollar, 4% U.S. senior notes.

The company used the proceeds from the note issuance to fund the tender offer with the remaining funds being used for general corporate purposes, including the repayment of a portion of the borrowings under the U.S. commercial paper program.

This issuance and tender offer further strengthened our capital structure by extending our average debt maturities by approximately two years, while keeping our average effective interest rate on outstanding borrowings unchanged.

At September Thirtyth, after giving effect to the new bond offering the company had issued approximately $754 million under its use in euro commercial paper programs.

The company's cash availability under our credit facilities totaling approximately $2.7 billion.

Total debt at September Thirtyth was approximately $3.9 billion, a net debt was approximately $3 billion that third quarter 2019, adjusted EBITDA was approximately $501 million. In summary, this was a very strong quarter for the company financially, especially in light of moderating demand and continued uncertainty across global markets.

I will now turn it over to Adam who will provide an overview of the business and comment on current trends.

Well Craig. Thank you very much like to extend my welcome to all of you here on the phone today. Thanks, so much for spending a few of your precious minutes with us today.

As Greg mentioned I'm going to highlight some of our achievements in the third quarter. I'll, then discuss the trends in progress across our served markets.

Finally, I'll comment on our outlook for the fourth quarter and the full year 2019 and of course will have some time for questions.

And.

Our results in the third quarter exceeded the high end of the company's guidance in both sales and earnings per share and that was despite continued elevated levels of uncertainty in the marketplace.

Sales declined by 1% in us dollars and were flat in local currencies, reaching 2 billion or just over $2.1 billion.

Sales in the quarter were down by 6% organically.

Company books, just under 2.1 billion in orders, representing a book to Bill of also just under one to one.

Adjusted diluted EPS in the quarter reached 95 cents, which while down 4% from prior year was seven cents above the high end of our guidance that we gave us at the end of last quarter.

Operating margins in the quarter were 19.7% and did come in a bit stronger than we had anticipated coming into the quarter.

Mike mentioned that the company generated very strong operating and free cash flow of 412 341 million respectively. In the quarter I just want to emphasize that this is a great reflection of the quality of the company's earnings.

Extremely proud of the amphenol team around the world in what's clearly a challenging market environment, we performed very well this quarter.

These excellent results or another clear reflection of the agility and discipline of our entrepreneurial organization around the world.

We're very pleased to have completed two additional acquisitions just the here at the end of the quarter, which together represent approximately 60 million an annual sales and which we acquired for a collective purchase price of approximately $87 million.

First cable scan, it's the manufacturer of high technology cable assemblies for the military aerospace markets.

Based in Yorkshire, and the UK cable scans products are sold into a range of military aerospace applications, including in particular land vehicles and aviation and this company represents an outstanding complement to our already broad array of value add interconnect solutions for the important military and commercial Aero.

But as markets.

Thanks, Good Guy is a manufacturer of active fiber optic interconnect products for the global Communications markets and this company, which is based incentives on China broadens, our product offering and strengthens our already industry, leading offering of high speed interconnect products for the communications infrastructure markets.

So as we welcome these outstanding new teams to the Amphenol family, we remain very confident that our acquisition program will continue to create great value for the company.

We have now acquired nine great businesses, so far here in 2019 and.

Excellent companies collectively represent annualized revenues of approximately $530 million and more importantly, they have strengthened the amphenol across nearly all of our end markets, but theyre entrepreneurial management teams that are high technology product offerings, and they're complementary market positions.

Most importantly, though these new family members create additional platforms for future expansion and performance improvement in the company.

We're pleased that our acquisition program remains a core competitive competitive advantage for amphenol.

Now turning to our progress across our served markets I would just comment that we continued to be very encouraged by the value created by the company's balanced and broad end market diversification. Once again in the third quarter no market represented more than 20% of our sales and very importantly, this diverse.

Suffocation helps to mitigate the impact of the volatility of individual end markets, while all the while exposing us to leading technologies wherever they may arise across the electronics industry.

So turning first to the military market the military market represented 12% of our sales in the quarter.

Sales grew by a better than expected and very strong 26% in both us dollars end organically.

This strong growth was very broad based but was driven in particular by growth in military vehicles naval applications Aviation and communications equipment.

Sequentially, our sales increased by a very strong 9% and what is normally a seasonally more moderate corridor.

Looking ahead, we expect sales in the fourth quarter, two again increased modestly from these third quarter levels and for the full year 2019, we now expect to achieve sales growth in the military market of just above 20%.

This improved outlook reflects our teams excellent execution in the face of higher demand from customers across the defense market.

I remain extremely proud of Amphenols team working in the military market with strong demand, that's being driven by both robust defense spending together with accelerating adoption of new technologies. Our organization. This simply done an outstanding job reacting to satisfy that demand while also expanding our overall market position.

Yeah.

The addition of cable scan this quarter further strengthens our already strong value add interconnect offering for a wide array of harsh environment applications and our broadened range of interconnect products together with the strongest and most international manufacturing footprint positions us very strongly for the future.

The commercial aerospace market represented 5% of our sales in the quarter sales in commercial air were also stronger than expected growing 15% in us dollars and 16% organically as we capitalized on continued strong demand for next generation jetliners with high electronics content.

Sequentially, our sales were up slightly from the second quarter.

Looking into the fourth quarter, we expect sales to increase modestly from these levels and for the full year 2019, we continue to expect the low double digit increase in sales from prior year.

The commercial air market continues to represent a significant opportunity for the future announce in all our customers are implementing new technologies on existing and next generation jetliner platforms, which creates increased demand for our high technology products. We look forward to benefiting from that favorable trend for many years to come.

The industrial market represented 20% of our sales in the quarter.

Sales in the third quarter increased by less than expected, 4% in us dollars and were down by 6% organically as growth in oil and gas and medical applications was more than offset by reductions in heavy equipment instrumentation and battery related products.

On a sequential basis, our sales did increase by 2% from the second quarter.

As the contributions from the chronic and burn Richter acquisitions that we announced last quarter were offset in part by slowing demand in the industrial market and that that demand was slowing in particular in Europe .

Looking into the fourth quarter, we expect sales in the industrial market to further moderate from current levels due to slowing demand, especially in Europe .

And for the full year 2019, we now expect growth in the low single digits and this represents a modest reduction from our prior expectations.

This slowdown is related to reduced demand outlooks from both our distributor and OEM customers.

Regardless of this further erosion of demand that we're now seeing we remain very encouraged by the company's leading position in the industrial markets.

Through both our successful acquisition program as well as our organic initiatives. We have developed a very broad array of interconnect sensor and antenna products across a diversified range of exciting segments within the global industrial market.

We're proud of the success and look forward to continuing to realize the benefits our efforts and industrial market into the future.

The automotive markets represented 18% of our sales in the quarter sales in the automotive market were roughly as expected in third quarter with sales increasing from prior year by 4% in us dollars, but down 2% organically.

The organic moderation of sales was related to both the European and North American markets.

Sequentially, our automotive sales decreased slightly as the addition of Gjm last quarter was offset by a moderation of demand from European automakers in particular.

Looking into the fourth quarter, we expect a slight decrease in sales from these levels and for the full year 2019, we now expect sales to be up only slightly from prior year.

Regardless of the less favorable demand environment in the automotive market. This year I will just tell you that our position in this important market as a strong as ever customers around the world are continuing to design their new vehicle platforms with a wide array of electronic functionality.

And we're working aggressively with those customers to design in our broadening portfolio of interconnect sensor and antenna products onto their next generation vehicles.

In addition, we continue to work on a wide array of advanced vehicle technologies, including next generation electrified drive trends autonomous driving systems and many others.

The mobile device market represented 15% of our sales in the quarter and our sales were much better than expected in the third quarter growing a very strong 32% sequentially from the second quarter.

On a year over year basis sales were down although by less than expected, 21% as growth in tablets in wearables was more than offset by lower sales related to smartphones and laptops.

Looking into the fourth quarter, we do expect sales to moderate from these levels for the full year 2019. However, we now expect to sales reduction in the mid 20% range, which is an improvement from our prior guidance of an approximately 30% reduction from prior year.

This upgrade and our outlook is related to increased demand for our antenna connector and mechanism products that have been designed into new mobile platforms and I can say that as we drive towards the end of the year. Our team will for sure remain poised as always to capitalize on any additional incremental demand opportunities.

That may arise.

I remain encouraged by our position in the mobile devices market. Our team is working on a wide array of next generation mobile devices, including smartphones laptops tablets wearables and many many other accessories and we're confident that in the long term. This market will continue to be a positive contributor to the come.

Revenues overall performance.

Most importantly, though our exceptional team remains the most agile reacting to the inevitable changes that occur in the mobile devices market, which allows us to thereby secure both our market position as well as the Companys financial performance.

The mobile networks market represented 8% of our sales in the quarter. Our performance was a bit better than expected in third quarter was sales decreasing only slightly in us dollars and flat in local currencies.

On an organic basis, our sales declined by 12% as the impact of the restrictions put on certain Chinese entities that we discussed last quarter more than offset growth that we did see with service providers in the quarter.

Sequentially sales were down by 10% from the second quarter largely related to the same dynamics that we discussed extensively last quarter.

Looking into the fourth quarter, we expect a further reduction of sales in the mobile networks market.

And for the full year 2019, we continue to expect sales to be flat to prior year in us dollars, but down in the high single digits organically as benefits from our acquisitions are offset by a moderation demand from both OEM and operator customers.

Regardless of the more challenging market environment here in 2019, we remain very confident in the long term outlook for our mobile networks business, our leading edge interconnect and antenna solutions have positioned the company strongly with both equipment manufacturers and operator customers around the world.

As those customers plan for Fiveg and other network upgrades, we look forward to benefiting from our robust position as their partner. This creates a significant long term expansion potential for the company.

The information technology and data communications market represented 18% of our sales in the quarter and sales were down by a bit less than expected, 9% in us dollars and 13% organically with reductions in products sold into networking servers and storage hardware.

Sequentially, our sales were down only slightly from the second quarter as demand from Oems exceeded our reduced expectations that we had coming into the quarter.

Looking into the fourth quarter, we expect sales to moderate from current levels and for the full year 2019, we now anticipate the decline in the low single digits from prior year and this represents a modest upgrade from our guidance that we discussed last quarter.

Amidst all of these current market dynamics, our OEM and service provider customers across the two datacom market are continuing to push their systems and networks to ever higher levels of performance.

Our ability to enable such performance through our next generation high speed fiber optic power and other interconnect solutions has allowed amphenol to be a leader in this market and we're confident that we will continue to maintain that position over the long term.

The addition of X Giga this quarter significantly strengthens our offering for high speed applications, adding active fiber optic interconnect to our already strong passive fiber optic and high speed copper solution.

The broadband market represented 4% of our sales in the quarter sales in the third quarter grew by 11% sequentially, which was a bit better than we had expected.

Compared to prior year, our sales declined by 5% as spending by broadband operators essentially in all geographies continued to moderate.

Looking ahead, we expect sales to moderate seasonally in the fourth quarter and for the full year 2019, we continue to expect sales to be down in the high single digits from prior year on reduced investments by broadband operators.

Irrespective of discontinued muted outlook in the broadband market. We remain encouraged by the company is still expanding range of products for this market, which together with our deep relationships with customers around the world positions Amphenol for future success.

So in summary, with respect to the third quarter I, just want to say that I'm very pleased with the company's performance in the quarter, especially given the high degree of uncertainty of that remains in the world economy.

Well, we had come into this quarter with the more muted outlook, we were able to outperform those levels through excellent execution by our teams around the world.

The ethanol organization is clearly continued to perform well in this very dynamic marketplace.

And in particular, our long term approach of growing both organically and through our successful acquisition program has resulted in us expanding our market position, while strengthening the companys financial performance.

And Thats superior financial performance is a direct reflection of the company's distinct competitive advantages are leading technology are increasing position with customers and diverse markets are broad worldwide presence, our lean and flexible cost structure are highly effective acquisition program.

And most importantly, our agile and entrepreneurial management team.

Now turning to our outlook for the fourth quarter and the full year, considering the heightened level of uncertainty in the overall economy and of course, assuming as always constant exchange rates.

We now expect the following results.

For the first quarter, we expect sales in the range of 1.960 billion to $2 billion.

And adjusted diluted EPS in the range of 89 cents to 91 cents.

This represents a sales reduction versus prior year of 10% to 12%.

And a decrease versus prior year, adjusted diluted EPS of 13% to 15%.

For the full year 2019, we now expect sales in the range of 8.035 billion to $8.075 billion and adjusted diluted EPS in the range of $3.65 to $3.67.

For the full year this new guidance represents sales and adjusted diluted EPS declines of two and 3% respectively.

Regardless of this year is more challenging market environment I, just want to assure you that the amphenol management team looks forward to driving strong results into the future.

Our team has aggressively pursuing a diverse array of growth opportunities, while reacting quickly to align costs with current levels of demand.

This is the essence of the agile amphenol in culture as embodied by that outstanding organization and is that team coupled with our deep technology position with customers across our markets and complemented by our successful acquisition program that positions the company very strongly for the long term.

And with that operator, we'd be very happy to take any questions that there may be.

Thank you and a question and answer a few years, we'll now begin our first question comes from Wamsi Mohan Your line from Bank of America. Your line is now open.

Yes. Thank you.

Two quick ones. One is just on the guidance you're not rolling forward the entire beat in Threeq you into the full year for revenues and I guess your commentary about the cautious backdrop macroeconomically, but can you bridge that delta.

Given the fact that the 120 million upside in the quarter relative to the midpoint of your guidance, but but 80 million sort of flow tools. So that delta all 40 million did you see some pull forward in the quarter or will that some other dynamic and I will follow up.

Yes, I mean at Lonza, just you've done good math here.

I'd just point out a couple of factors I mean number one currency is a drag in this guidance compared to prior guidance and not not insignificant I think somewhere to the tune of 30 plus million dollars.

Of currency impact we did have the in the positive impact of the acquisitions.

I think as well we've talked about all that given markets I won't go into to the markets I think already spent a long time to discuss those but we feel very good about this guidance in its totality. When when you think about the strength here in across many of our markets compared to what we saw last time I think there's a very strong guidance the others.

Saying I would just point out is that we had we had a.

Higher than expected mobile devices results in the third quarter and I think some of that came a little bit earlier than we would've expected and does it doesn't necessarily represent.

Full year increase I think some of that is higher for the year and Thats why weve talked about the year being down into kind of mid twentys instead of 30%, but the strength that we saw here in the quarter was was some portion of that May have also come out of the fourth quarter.

Okay. Thanks had a minute it's a quick follow up on.

On your comments on mobile devices can you give us some color on whether the incremental strength you saw was more on on the variable side or on the mobile phone side and any color that you can share around if it came from existing products versus new products or increases in content.

Well thank you.

Yes. Thank you I guess the short answer is kind of all of the above lumpy.

I think we did see strength more than expected strength in.

Smartphones, but also in Wearables.

And I would say it's on existing but also in particular on new products.

So I think we've just staying a little bit better demand from a variety of customers across a variety of products is maybe the so to answer that.

Your next question is from Jim Suva of Sidoti Your line is now.

Excuse me Jim.

We check you misunderstood your line is now.

Yes.

Hi, Jim Suva Your line is now.

Hi, its chin should be here.

You mentioned the mobile devices or is it mostly on like unit volumes was it on your design and features because I remember like six months ago, we talked about changes in designs and things like that and now we're pleased that things are better it's kind of curious about what that more volumes are designs or combination of both.

And how should we think about that because at the beginning of the year I know there are lot of questions around designs and content on the mobility side. Thank you.

Well I think Jim relative to our exceeding our outlook I'd, just say that the mobile devices, we saw strength really across platforms with a variety of customers bolt on new and existing platforms and thats a combination of new designs existing designs on things like smart.

Owns wearables and otherwise so it's not necessarily at this stage.

Change in architecture, because I think we've talked about that early in the year and I think by the third quarter. Most of those architectures are already well settled so I would credit this more with just better volumes and our ability in particular to meet those better volumes from customers, which is not the existing in the world I mean, our team.

To come into the quarter with an expectation of kind of low double digit sequential growth, but in the end to achieve a 32% sequential increase in sales and mobile devices that requires an enormous amount of agility to ramp up in the face of that demand and I just give an enormous amount of credit to our team to ramp up in the face of.

Of that and.

As usual the agility of our mobile devices team I think is really second to none.

In our company or across industry.

Thank you spent much of the clarification extremely appreciated.

Thank you.

Thank you. Our next question is from Shawn Harrison of Longbow Research. Your line is now.

Good afternoon, everybody congrats on the strong results.

Thank you Sean.

And easy one first and then a follow up that's maybe not as easy Craig what one of the actual restructuring charges taken in the quarter that I'm, assuming don't repeat here in the December quarter.

Yes, Thanks, Sean.

As you know.

We typically don't really don't call out ex restructuring expenses and.

They were included in our adjusted operating margin of 19.7% and we don't call those out as non-GAAP items and as we know we hold ourselves accountable and our general managers fully accountable for these costs. So I mean, that's why I guess why what I would say from another perspective of magnitude I'd say, even considering these incremental costs incurred in the quarter our year over year.

For year conversion on the third quarter relatively significant organic decline is still only slightly higher than the kind of normal downside conversion range and as a matter of fact as you know.

Even the answer a question in asked which is as it relates to the fourth quarter, which really doesn't have any significant costs in there related to restructuring of any magnitude I would say that we do expect the year over year conversion as we step up into the fourth quarter.

On lower sales to be very strong and actually or will have higher margins.

On a lower sequential sales amount.

Okay, It's a follow up Adam.

What are you hearing from your distributors more on the industrial side of the business, particularly given this European weakness are you going to see inventory corrections persist.

Well into 2020.

Just any updated outlook, you're seeing from your distribution partners in light of the incremental European weakness.

Yeah, I mean, Sean you are the expert on this even more than I have but I will just say that the industrial trends today and industrial is the market that is more heavily distributed for us as well.

The industrial trends are not the most favorable I think we came into the quarter with a certain expectation you'll recall last quarter, we've talked about the fact that.

In the second half we had anticipated previously a step up in both industrial and automotive markets. We then.

Came to the conclusion through the course of the second quarter that that was not going to happen, we saw that indication from our distributors and OEM customers and I think this quarter. It got maybe a little weaker on both fronts, there again and so from from the distribution prospective but.

Fusion sales in total were down on a sequential basis, we havent seen from an inventory perspective.

That kind of big spikes or changes in the inventory, but I think the end demand is really flowing through the distribution channel in that way.

What does that mean going forward, it's always very hard for me to predict that.

I think it's definitely too early to call a kind of a recovery industrial market. Thank you all see no doubt the same reports that IC and.

I don't know that anybody has really calling that recovery and I certainly wouldn't be the first to call such a recovery and so as we as we head into next year I think we're still in there is still a higher degree of uncertainty about industrial demand trends in particular in Europe , but you know not only in Europe .

The European industrial market is intimately rate related to the automotive market and I don't think it should come as any surprise that as people thought the second half would have a recovery in automotive and then that didnt come that ultimately manifests itself in less industrial equipment manufacturing.

And demand and I think Thats, that's kind of what we're seeing here in the quarter. So when does that make its way through the distribution channel what levels of inventory the distributors ultimately conclude or the appropriate levels.

I have a hard time to pin that down right now I think what is our team doing in the face of this what we're doing what we always do we're making adjustments where we have to make those adjustments and some of our industrial operations I've had the quickly react to that having had different expectations coming into the second half of the year and then we're going out there in continuing to design in products.

With customers, where there remains a very very strong amount of industrial electronics design in activities and so that level of new product innovation working on new applications with customers, enabling next generation factor is enabling the electronification of all of these and.

Estriol equipment that we work on none of that work has slowed to the contrary I would say that our industrial customers around the world are still seeking ways to create new functionalities, new capabilities with their equipment and thats something that our teams are intimately involved in around the world. So like always it's one of those times, where we got to get our.

Costs aligned we deal with what comes our way from our district distributors in our Oems, but we continue to focus on building next generation products that can enable our that can enable our customers next generation systems.

Thank you. Our next question is from Matt Sheerin Stifel. Your line is now.

Yes, Thanks, and good afternoon, just Craig a follow up question on Sean's question regarding.

The the cost cutting efforts in the margins as you pointed out you should be back over 32.

Percent gross margin in operating margin should be back over 20%. Despite a couple hundred million dollar decline in revenue due to those efforts as you look forward and Adam talked about some areas of incremental weakness in some units should we expect continued cost cutting efforts to assay operating level.

As we get into 2020 and given as you said those acquisitions totaling $500 million in revenue run rate typically come in below the operating.

Levels of the company are there plans to see that are those margins improve as you get into next year.

Yes, or no. Thanks for the question I think I would I would say as you know as we go for it.

Course, as if theres us significant shift into demand environment that we're going to clearly take action and our general managers as they did and the third quarter are going to clearly.

React to that and adjust to the levels of their businesses to reality of the demand environment.

We've taken the action today that we see given the current demand environment.

So I wouldn't say I would call out any current plans to make any significant changes.

In the next quarter or so but no. This could change based on the current demand environment. So you know we're guiding to what we see I'm not going to comment per se on 2020 at do you guys will talk about that in January as we see that but clearly that the game plan in terms of our playbook hasn't changed as it relates to our reaction in our adjusts.

In terms of the cost structure, but we feel pretty good about the actions that are taking today. We've we've done a good job under general managers. They really did an outstanding job of reacting to that reduced demand expectations and we do look forward to certainly realizing the benefits of those restructuring actions given the current demand environment and protecting.

The margins that we have and just the one thing I would add to the Matt is we don't talk about this as you know very often.

I think the reason we did make some mention of it last quarter is there was a real sudden change in the third quarter outlook from what we had anticipated coming into it not required a quicker and more magnified reactivity from our teams we talked extensively 90 days ago about.

Why we were reducing our outlook at that point because of the variety of factors related to the trade war related to the automotive industrial markets distribution and otherwise and that did result in a significant reduction demand for some of our operations, which didn't require them to take very quick actions, which they all did.

These are tough things and we don't take lightly the actions that that everybody took that dislocated people that caused disruption, but I give a lot of credit to our organizations around the world who face to that that they were able to make it happen in the amphenol way to take out the costs and to get out.

Reallocating resources, so that we can continue to drive strong progress for the company going forward.

Okay, Great Thats very helpful and just a quick follow up Adam just regarding the mobile network space, where it which was a little bit better still still down you're guiding down sequentially I know theres been no supplier issues, obviously trade issues. What's your take on on the Fiveg ramp as we head into next year I know recently you've Shannon.

A little bit more cautious in terms of the new return opportunity.

Yes, I mean look I think we're very excited for the long term with Fiveg. Our teams have done a great job of designing in a wide array of products into five two systems with with really the whole range of of equipment manufacturers working with operators around the world to ensure that when that spending does happen we would be.

And for it and I feel very good about the position that we have put ourselves and what I am not so expert at is saying when is that spending going to come there is already some five to spending no doubt about it there are networks test networks being put in place Theres drips of spending happening in a variety of places no doubt.

Got it.

When will it have that overall impact that will be truly meaningful to the capital spending of service providers around the world I think thats hard to say I think a lot of it is really resting on the underlying economics of these networks what are people going to be willing to pay more for.

And thereby support wireless operators to increase their capital spending that dynamic is probably above my pay grade to determine when when that happens, but all I can tell you is we will be ready when it does.

Our next question is from Mark Delaney of Goldman Sachs. Your line is now.

Hi, good afternoon, thanks, very much for taking the questions first question for me was on the automotive market.

Yeah, I mean, you talked about the view for automotive for the full year sales being up slightly and I think the old do you have been up low single digits.

Just trying to understand is that a down ticket. So where are you seeing seeing its and any impact up front from the GM strike at eight that may have impacted the automotive business.

Yes, thanks, very much Mark I'll, just address the GM strike first I mean, it was not a meaningful impact we obviously prefer for our customers to be producing stuff instead of being on strike. So happy to hear that there are the or resolutions and side, but it was not a meaningful impact on our performance in the quarter I think the automotive.

Out of market, if we looked at it in the quarter as it trended it was very clear that across the three regions. The most negative trending was in Europe .

Where we were down sequentially.

On a year over year basis organically down, but but really that trending in Europe seem to be the weakest of the regions I.

I will say the North America, the trending was maybe even a little bit tick up in the quarter and that's despite.

We just mentioned.

In Asia It was essentially on par.

With with the prior year quarter.

So so I guess of all the regions, we would feel a little less comfortable with the prospects in Europe right now.

And then the other two we would feel a roughly similar confidence across the two of them.

Not an enormous change in our outlook care for automotive I think last quarter, we took down that outlook more significantly I would just say on the margin. It's a bit worse here as we look into the finish of the year and as we look into next year, you know remains to be saying, how how that will come we came into this year thinking the second.

Half would be a step up and that everybody was kind of calling a bottom.

I don't know really whether that is the whether that is the bottom or what that overall trend is going to be going forward, but I think it's probably still too early to tell.

How that industry really evolves over the coming quarters.

Yes, that's that's helpful and my follow up question is on other mobile devices segment tend to not looking for any 2020, a revenue guidance, but just trying to think through the opportunity set for the company and.

Technology inflections like Fiveg are good opportunities for taking the technical leaders like ethanol to innovate and.

You talked about some of the headwind in architectural changes this year, but as you think about 2020, how are we thinking about that opportunity set in terms of some of the architectural design changes, maybe becoming tailwind to sort of headwinds as it relates to fiveg and.

As you as Youre looking at that potential opportunity set is there any opportunity for a much more diversified set of material customers in mobile devices for amphenol in the Fiveg World and Forgie. The revenue had been at times concentrated to large OEM and curious if it can be a bit more broad based in the Fiveg world. Thanks.

Sure. Thanks, Marc I mean look mobile devices market.

Asking me to talk about 2020, and I have a hard time talking about November .

This is the this is an inherently very difficult market to give an outlook on as you know I am dreadfully bad at it over a number of years.

I guess as a as we head into the end of this year and we look into next year.

Would we would never get out in front of our ski is in terms of of an outlook for that market.

To be at a much more than a a kind of a flattish outlook, it's very hard to very hard to to give a prognosis of that but in terms of the long term trends.

You talked about whether thats fiveg, whether that's the higher mechanical complexity of devices, whether that is the different architectures are being put into the phones. We still feel very good about the long term prognosis for the mobile devices market and thats coming off of a year here, where we expected to be down.

The mid 20% range.

And why do we feel good about that is because we continue to see our customers driving to equip their mobile devices whatever they may be with more functionality for the customers and we've talked about this for a long long time that are positioned the mobile devices.

Yes on the presumption that our customers are going to want to make their products better that these are not just kind of empty carriers have a standard software, but rather than the ability to sell a phone to a demanding customer does depend in part on the customer's ability to on our customer the manufacture.

For his abilities to equip those products with new features and solve those features ultimately created demand for our unique high technology products and if our products can help make those ultimately devices more saleable more functional having more use for the end customer that our customers are going to share with us some of the value.

That we ultimately create and that that's the underlying philosophy of how we work in that market and so as I think about the long term with things like Fiveg with more complex devices.

I feel very good about the long term for that but it doesn't take away from the inherent volatility of the market and so as we come into next year I'm going to tried really hard to give an outlook that dependable and.

I, probably won't do a very good job of it based on my track record of it.

We have guided the market to be flat roughly and we've been wrong every time, Luckily we have been wrong to the good side of that.

More times than not but this year, we were obviously wrong to the bed side of that being down as we are in the in the kind of mid 20% range relative to the customer set I mean, there are only so many people who make these devices around the world and we work with all of them.

And we will work with whoever that is that is driving the next successful range of products. We've been successful in this market for such a long time I remember when the leader in the market where people who today don't even make mobile devices and we were a leader then as that cycled through the variety of different companies.

Who led the innovation and thereby captured the hearts and minds and while its of their end customers. We were able to create a vibrant business that grew over the long term and so regardless of which customers are successful in next generation systems and we felt we feel very good about our position.

Thank you. Our next question comes from Steven Fox, That's Cross Research. Your line is now open.

Hi, Good afternoon, just one question for me Adam just over the past 90 days, if you could sort of given some sense how.

Perceptions on demand in China has changed your not change and also your ability to operate in the region. If that theres been any changes are you concerned about any changes. Thank you.

Thanks, So much Steve I mean.

Last time at our last call. We had very extensive discussions as you know about China with respect to the department of Commerce restrictions that were put in place on hallway and other entities.

And I think we said at the time that it was still very early and we were dealing with that as we always do by having a very very strong local team and I will just tell you that some of our outperformance. This quarter was the result relieved that local team stepping up and really doing a great job to satisfy.

Some demand that was a bit higher than we had anticipated coming into the quarter in particular in IC datacom and to a lesser extent.

In mobile networks.

The fact of us having a complete organization everywhere around the world and including in China, where we have real leaders of the company who have every function under their under their supervision.

Totally accountable for everything that they do designing products, ensuring the quality of those products manufacturing those products automating those products interfacing with the customer all on a local basis.

Positioned us it on a relative basis stronger than maybe some of our international peers, who have more reliance on on western resources and I think that that has allowed us in the quarter to continue to reinforce to our customers whomever there may be that amphenol will be there when you need us.

Most obviously, we comply with every restriction in every law, but our nature of our organization is such that we're able to serve customers, where maybe others would not.

On the overall situation in China like we have set for a long time that we don't believe that these trade wars are positive thing for for anybody.

We continue to look forward to productive resolution to the trade war and we continued to be very happy that our business is very localized around the world.

We talked last quarter about this sort of sea change that may or may not be happening in the world between going from a global world through a local world to this kind of new World order as summer talking about it and I will just say that we remain very very happy with our kind of purpose built organization here of local management with.

Local authority will work on a real local basis with customers and so I think as we go forward in China. Our local team will continue to service the heck out of their customers.

And make sure that those customers know that they're going to get the best of the best here from from those individuals who don't have to necessarily rely on.

Resources overseas to help them solve the problems that they need solved.

What will happen long term again, I'm optimistic for a peaceful and productive resolution of all these things, but we are prepared either way.

Great I appreciate that color. Thank you.

Thank you Steve.

Our next question is from Craig.

Of Morgan Stanley Your line.

Great. Thank you, yes, Adam so and the I.T. Datacom business can you talk about what you're seeing in cloud I know kind of cloud, which was strong for a number of years kind of wobbled a little bit early in the air but just what you're seeing from those customers on and if there's anything noticeable by region.

Yes, I mean look we still are very happy with our position among all of these web service providers or cloud providers. I mean was there a little bit of wobble as your term. It I mean, I guess I guess, there was a little bit of a wobble I mean, but thats not abnormal.

We've talked about the dynamic being so different between the service provider and an OEM that OEM. They are in the business of kind of keeping a relatively steady.

Manufacturing process going and that can insulate the volatility of the end demand, whereas when you're dealing with the service provider they want the stuff when they need it and they don't want it when they don't need it and that can create a level of volatility that were very accustomed to we were accustomed to it early on with our exposure to the broadband market our expire.

Versions of mobile networks market. So as the ITC Datacom market has has evolved to include a significant component of of these service providers. Our teams have really been able to react very quickly to those demands and that reacting quickly. It doesn't just mean that sometimes they don't need the product and you have to adjust your costs.

Cost. It also means that you've got to ramp up really quickly because sometimes they call you and the need to lot more stuff than than you expected or that they expected because they've decided they are going to build a new data center and the work crews are ready that day and the weather is good and they're ready to build and the better get them the parts.

And so that reactivity is something that I think our team has done a really great job on now how does that market look right now I I'd say that it's relatively normal as it is today maybe early into your it was a little bit again your term wobble.

But I think that we see we see good demand from that market. It is on a regional basis I would say it is more dominated by North America, just the more famous.

Cloud providers all tend to be the ones, who are spending the most on capex and whatnot. So those companies do tend to be North American and then followed closely behind maybe in Asia.

In particular in China, but I would say our business tends to be.

Probably more heavily weighted in North America, which is not inconsistent with the weighting of where the money is being spent.

Got it thanks that and if I could just ask a follow up on the military business I mean phenomenal growth this year at 20%.

I mean, certainly that it'd be tough to sustain at that level, but even if it would have decelerate from here can you talk about maybe some of the dollar content drivers and visibility you have into military.

Yes, well I think you said it well I mean, it's a it's a phenomenal performance here and I just can't Kent credit enough our team around the world working in the military market not this is not an easy market to achieve 26% year over year growth and these are very complex products very complex long manufacturing process.

This is heavy degrees of.

Manufacturing vertical integration.

The quality requirements the technology associated with this products does not necessarily lend itself well to quick ramp ups of production and just give our team an enormous amount of credit.

For for managing through this and really executing when the demand is there I mean in terms of looking looking ahead, I, 20% year over year growth as very strong.

We achieved that last year, we expect to achieve that here. This year I wouldn't expect that in perpetuity. I mean. These are these are very very strong years, we're dealing with a lot of expansion both of the budgets, but also of the content of electronics and as you talk about that content to your question, we see increase.

Content really across the board in the military so when you talk about a land vehicle and you look at all the systems Communications electronic warfare defense systems that go into a vehicle of today I mean, I've had the good opportunity to walk into some of these vehicles instead of them and.

Do you feel like you're sitting in a data center or not and not in a tag are enormous personnel carrier. When you look at the airplanes have today. The next generation fighter Jets in the upgrades to prior generation fighter Jets again, just an incredible array of electronic systems that are being integrated into these entities.

Next generation platforms in order to create functionalities that didn't exist, we see a lot of growth in the naval for example, another area that I highlighted in my prepared remarks, again, putting hi, Def high speed data transfer into enable applications, where in the past you would not necessarily have had.

So I wouldn't.

Say that there's any one part of the military market, which is disproportionately.

Increasing and its content, we think the military is around the world have woken up and said the electronics can help them do their jobs better and I think ultimately that creates a good long term opportunity for us.

Thank you. Our next question is from wheel.

Andrew Your line is now open.

Great. Thanks for taking my questions to first Adam you referred to the acquisitions you did this quarter as platforms and I know that the companies at the company as a long history of M&A and and.

Maybe if you use this term before but I wonder if theres any significance to that or are they are different from either a geo or customer or market perspective that would make these somewhat different from others that you've done last couple of years.

Yeah actually it's not a new word for me to term our acquisitions and in fact, it's a real criteria for us because if we're going to make an acquisition. We worked very hard to generate the cash that we generate and we were happy to generate a lot of at this last quarter.

The to put that money to work in an acquisition you don't do it just to bring the size of revenues in at the time that you bought it.

That seems like a lot of work just to add revenues, we look for acquisitions that have great people great products in great position, all of which help you to build a platform for that company to perform better as part of Amphenol and so I use that term platform very broadly because it is a necessary precondition for us we're not going to buy occur.

Company, if we don't think it can become a platform to grow better its performance as part as part of the Amphenol family and again that can come through opening up new markets, New geography is new customers through the attachment of different technologies in the collaboration with other operations in the company or.

Were also a platform for profitability expansion by gaining access to amphenols ability and experienced in low cost areas access to supply chain and otherwise all of that can be a platform for accelerating growth and driving increased profitability and that's what we always look for I mean at the time these companies come in sometimes they are.

Maybe even often times at lower margins than we are today and I think Craig talked about that.

In terms of the impact on the conversion margins.

The quarter to quarter year over year basis, but we always look for companies that have potential far beyond where they perform today and that's to me the real essence of a platform.

Great that helps I, just I I didnt recall, the word being used before but I understand that and I. Appreciate the clarification, one more if I can it it seems pretty clear that the trade conflict is.

Meaningful maybe maybe the majority you maybe all of the sort of problems, we're facing now in need.

In the macro and as it influences your business.

In your view, if we were to get a resolution on.

The trade conflict in the near term would you expect demand to rebound strongly based on what you were seeing in let's say within the following year like 2020.

Or do you perceive maybe the tariffs have.

Maybe damage demand conditions for for a more protracted period.

Yes, I mean look this is a big question, but I will say a couple of things here number one I mean, you referred to the fact that the trade conflict is really the root of all the problems I don't know if I would 100% agree with that I mean, you can have an academic argument over whether the investigation of the trade War alone.

Really led to uncertainty, which led to than other markets unrelated to the trade war to have.

Some changes in their demand I mean, I don't know that the European automotive market as one example, or the industrial market in Europe , I don't think that that's directly related to the trade where could it have a secondary or tertiary impact I mean sure I mean trade wars have lots of impacts that you don't normally anticipate at the time that you launched them.

And that that could very well be the case, but I don't know that those are directly correlated and linked.

To the to the U.S., China tread situation or to other tread situations that exist and thus if there was you know a a sort of grand bargain a grand deal that resolved everything.

No that that is kind of the elixir that solves all the uncertainties in the world economy and to that extent I mean, it when you think about tariffs.

Tariffs have been a real hassle theres no doubt about it and I think our team has done a fabulous job.

Of managing through those tariffs since they were put in place what more than a year ago.

And I give just an enormous amount of credit to our team to manage through that we manage through that and the various sort of amphenol in way just case by case partner by partner operation by operation.

Those were a hassle and a diversion and a lot of work that that created stress and relationships and otherwise things like that but I don't know that the tariffs themselves were the cause of overall changes in demand now we've talked a lot last quarter about the restrictions that were put in play.

Good afternoon.

Yes, I mean, the level of visibility the military has a little bit longer visibility than other markets as as you know lead times are a little bit longer.

Programs are a little bit more stable.

All that being said I can tell you that you're always just one spending cycle away on a budgets get passed and then they don't have necessarily the same degree of allocations to certain programs that can always happen.

So, but but I think from our customers, we do get a little bit more visibility.

Than than we would certainly than in the market like like mobile devices. I look if you look over the last three years I mean last year, we grew 20% the year before we grew 13% this year, we're going to grow.

I think 90 days from now we'll try to give you our best estimate of what next year is going to look like I would not expect it to be three years in a row growing at 20% I guess I can go out on the limb and that's something like that right now, but we still think it long term is as a very favorable trend.

And then Craig.

Maybe just quick embedded in your current guidance on the margin side, how much if any is a tailwind from lower incentive comp there is.

Disbursements than we had over the last year and.

Laws Fargo security.

Mobile devices, 80, and defense alone coming in better intra quarter explain why you did better than the high end of your guide or was there a meaningful conservatism also.

Look I mean, we know the but we try every 90 days to give give you and your colleagues the best estimate that we can on the basis of what we know at the time and obviously last quarter, we came into the quarter on the heels of those significant changes that happened during the course.

And that impacted to some lesser extent automotive and industrial and those were really the markets last quarter that we saw as a much more negative than we had seen coming into the second corridor.

The fact that we outperformed here in the third quarter and mobile devices.

I think we had taken you know I don't know if you want to call. It a conservative view, but we would call. It a realistic view of our sales in especially to some of the customers in China that we've talked about and we did a little bit better than that and I think we didnt. It was hard to get a read at the time on what demand those customers with.

I have because they had a real complex array of problems that they had to deal with in terms of availability of components and otherwise and I. Thank our local team just did a great job when they're when they when they realize that there was more demand to satisfy that demand and a moment's notice and so I don't.

My follow up is.

Today extend you're able to share based on your conversations with your customers and how they're planning ahead, which of these end markets you apply in planning for weakness to extend well beyond the CR and which are the ones the planning for it to get better.

Yes, I mean, I think I've talked about a few of the markets already and again.

The last thing I want to do right now after especially on a year like 2019 is get ahead of myself in giving a guidance for 2020 190 days from now we're going to try to do our best to give you a guidance for 2020, but I think thats hard to do in the current environment, but I did I think already mentioned the fact that.

We would anticipate you know still continued strong demand and military, albeit maybe not at the levels that we've talked about hard to say in the market like industrial and automotive.

What what really those trends are a you know if I had to say right now I'd say that the relatively modest outlook right now I think in in a mobile devices I wouldn't expect our business to be down as we expected. This year by so much but also wouldn't ever get ahead of my skis on that market.

To say that that's going to be up by any measure.

And I think I've talked about many of the other markets are already but look 90 days from now we're gonna tried really hard to give you a good outlook. There is still remaining a lot of uncertainty in the marketplace and we're going to we're going to be very thoughtful about that as we as we go through the quarter collecting as much information as we can through our deep engagements with customers.

Across all of our markets and then well given our best shot in January .

Thank you next we have Michaels Fisher.

Question on behalf of.

Of Evercore. Your line is now open.

Thank you. So just wondering could you touch on gross margins in the quarter I think was down about 60 basis points, where just wondering or some of the drivers and if there was any of that.

Kind of restructuring or cost savings plan items that hit the gross margin line.

Yeah. Thanks, Mike I think that as it relates to gross margins are we eat yet you know our you know I'm not sure how long you can covering the company, but we don't usually talk specifically about gross margins because we do measure ourselves really at the operating margin level, which really ensures attention. We believed to all aspects of cost and certainly very pleased at the operating margin before.

Pharmacists, and 19.7%, which I did mentioned earlier that we did have from restructuring items that did impact that performance in the third quarter I would note that most of those restructuring items are vast majority certainly were impacting the gross margin line. So you know there has some impact at the gross margin line as it relates result of those restructuring actions.

So I guess I would not point out I guess anything specifically, that's driving that other than maybe that and and certainly you know I also have mentioned the acquisitions.

In the impact on the margin operating margin percentage.

Ultimately also the gross margin percentage on a on a year over year basis, which also is would have some impact even though there was certainly are accretive at the EPS level. There. They are having some impact at the at the margin there for gross margin level, but I did I do want to stress that we clearly you know try that drive all aspects of cost and ultimately drive operating margin.

Yeah, It was versus just gross margin arrest DNA.

Okay, great. Thanks, and then just one more the weakness on the industrial side can you maybe talk about kind of a when they already have the trends we're seeing there and then.

You know.

Maybe what was the delta between the trends from Oems worse distributors you mentioned there was some.

No different dynamics there.

Yes, well I think between Oems and distributors I wouldn't say that there were necessarily material differences to the dynamics in the quarter.

In terms of linear already I mean, I guess, you mean through the course of the quarter.

I wouldn't say that there was anything notable on the linearity of our industrial business. During the course of the quarter did weaken over the course of the quarter I mean, I guess, so we we talk to 90 days ago, which was close to the end of the first month of the corridor and we thought of certain thing and by the end of the quarter. It was a bit worse than that so I guess, one would say that.

There was a little bit.

Of linear lack of linear study that has got a little bit works through the course of the quarter.

Thus here, we are changing our outlook in that market here again, but I wouldn't say anything real meaningful to either of those.

Thank you. Our last question is from Sami Chatterji JP Morgan Your line is now.

Hi, Thanks for taking the question I just wanted to.

Start off on the gum, then growth on the automotive side.

Just trying to commence on the automotive end market due to being a total just looking at kind of your organic guidance for this fuel you probably guiding to more like a 3% revenue decline organically, if I compare that to the global production outlook on say expect outperform until content gains seems to be a bit more moderate moderate data to what we've seen a little less.

Couple of fields. So just wanted to understand if you're seeing any kind of push out of launches. That's maybe impacting all you gain and this yielded us the volumes a little or is there something as simple stuff like the mix of geographies et cetera, that's going on there.

Well, thank you very much and I should extend a welcome to you to our call. It I think just picked up coverage yesterday.

Look I think content growth in automotive continues to be very robust, we still see a lot of opportunities with customers, who are pushing new electronics into their cars.

Of all types of platforms and you know I mentioned some of those areas things like you know like new electronic drive train some of those real far out things like autonomous driving an otherwise, but but even more near term. There's just so much electronics, whether that's passenger infotainment, whether that's emissions control engine control.

Whether that is different safety mechanisms that go into cars I mean, you name. It I'd tell you every car I get into and I I rents a lot of cars because I travel a lot and everyone of these cars. It takes me a long time to figure out how to do a lot of different stuff because there's so many different features that go into these cars I mean, Craig and I were just a few weeks back we were in Europe and.

We ended up or renting a car and we were in that car for wait too long driving around Europe to lots of different operations and I mean, there was about a two or three hour ramp up time to learn all the different feature sets in that car and each one of those things you learning is a new electronic system that requires a certain degree of interconnect sensor and antennas in order to.

Enabled that so I would not say that we have seen any slowdown in the adoption of new electronics and thus the content in among automakers around the world I mean, I think you know the fact that we're down this year organically roughly to the levels that you talked about which is certainly better than.

The overall units is a reflection of that content, but you should also bear in mind that whenever you have a reduction the whole supply chain has to react to that reduction I think there's been lots of lots of various companies talking about the whole automotive supply chain, it's a big supply chain, it's the supply chain thats been working.

And you know really going up into the right for close of close to a decade and so you know sometimes the impact can be a little bit more magnified on someone like us who is a little bit farther down the chain in certain of those instances, but.

We feel very good about our automotive market long term I mean, when I just reflect back on the last decade. This is a market that at the beginning of 2009 was a market that represent less than 5% of our sales. It was on a run rate of less than $150 million a year and here. It is 10 times that size over a decade and I think.

That that real outsized growth that we've had in automotive has been not us taking business out of the hands of someone who already had that business rather it was us capitalizing on new developments in cars, new electronics being implemented not having new products together with the acquisitions that we've.

Good to enable those are the those next generation systems, and we don't see long term that dynamic really changing at all I think consumers still thirst for next generation functionality in their vehicles, regardless of what the drive train system of the vehicle is regardless of the size of that vehicle whether.

For the buying a sports car a minivan they want to have next generation electronics embedded in that system for per passenger use for safety for fuel economy, you name It and I think our company is very well positioned today to capitalize upon that.

Got it if I can just quickly follow up on the broadband segment I think you mentioned it did come in a bit better than you expected, although customer spending continues to feel kind of challenge there or is it that we should think about some upside to kind of customer spending coming back a little or was it more kind of design wins that greed kind of cool.

Expected revenues for you.

Yeah, I mean, I think it was just first of all the small I mean, we the it's a relatively small market 4% of sales in the quarter and yes, we did a little bit better than we expected, but we're not talking about huge numbers here.

And still on a year over year basis, it was down.

We didnt change our outlook for the year in the broadband market. So I wouldn't say that there's anything meaningfully different in our overall view of that market here as we come into the fourth quarter.

Speakers, we should no further questions at this time.

Thank you very much and again. Thank you all for all of your time today, and we wish you all a a great conclusion to the year and I shudder to say that we will talk to you all in 20 funny. Thanks very much. Thank you.

Thank you for attending today's conference have a nice day.

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